How A Down Payment Can Affect Your Purchasing Power

Down payments are a big part of purchasing a home with a mortgage  Your minimum down payment depends on the type of mortgage, the lender and your finances.

When borrowing money from a lender to purchase a home, the more cash you put down, the better your financing terms will be. It is important to understand what a down payment is and how much cash you need to have. A down payment is the cash that is put down on a large purchase such as a car or a home. The amount of the down payment is usually a percentage of the total amount of the cost. A $350,000 home with a down payment of 10% would be $35,000.

Different lenders and different loans will require a different percentage of the whole cost for the down payment. If you are obtaining a VA loan or a USDA loan you are not required to make a down payment because these are backed by the federal government. The magic number in most cases, when it comes to a down payment, is 20%. With most lenders, 20% down on the purchase of a home will give you a good mortgage rate and allow you to bypass mortgage insurance. An FHA loan that is backed by the FDA, requires a minimum of 3.5% of the purchase price. Many conventional loans (Fannie Mae HomeReady and Freddie Mac Home Possible) mortgages require as little as 3% down.

Remember, a larger down payment will get you a better mortgage interest rate, lower upfront and ongoing fees, more equity in your home from the start and a lower mortgage payment. Lenders like a larger down payment because the risk becomes lower for them. A professional lender can help you through this process. They can help you determine how much to put down and how it affects your monthly mortgage amount.

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First-Time Home Buyers Make Up Most of the New Home Market

The February 2021 National Association of Home Builders/Wells Fargo Housing Market Index (HMI) reported that 43% of homebuyers in the new home market were first-time home buyers. Two-thirds of builders with single-family starts in 2020 said that 20% of their homes were sold to first-time buyers.

The report also revealed that 15% of new single-family home sales were second homes. A second home according to the report includes homes that are used as a vacation home or investment property. According to 65% of the builders of single-family starts in 2020, 5% of the homes were sold as second homes.

The NAHB/Wells Fargo Housing Market Index is derived from a survey that is monthly given to NAHB members. This survey is designed to take the pulse of the single-family housing market. These chosen members are asked to rate the housing market on a scale of "good", "fair" or "poor" and a scale of "high to very high", "average" or "low to very low". There are three separate parts of the measurements which are Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers.

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Steps To Take Prior to Obtaining a Mortgage

Applying for a mortgage is one of the most important steps in purchasing a home unless you are lucky enough to just pay cash. Getting a mortgage is a big stress factor when it comes to buying a home. Planning can help the process run much smoother. Below are six important facts to know when it comes to mortgaging your dream home.

1. Define a realistic budget

What you can afford makes a big difference when budgeting for a home purchase. Apply for a loan that you know you will be able to pay. Your monthly mortgage payment should be 28% of your income according to most lender's standards. If you have any other monthly debt payments, those added to your monthly mortgage payment should not exceed 36% of your total income.

2. Improve Your DTI (debt-to-income) ratio

This is a very important figure to a lender. A lender will want to know your DTI ratio to determine how much they can loan you. You are in luck if your DTI is 0 - 36% because you should have no problem with your desired mortgage. If your DTI is above the desired percentage you still can obtain a mortgage by lowering your DTI. A good way to accomplish this is to reduce or pay off current debts.

3. Make a huge down payment

The higher your down-payment the better your rates will be. A high down payment can also allow you to have better terms with your mortgaging services. Your monthly DTI can be reduced if you have a lower mortgage payment due to a big down-payment usually over 20% of your borrowing amount.

4. Boost your credit score

Your credit score can also boost or hinder your loan rate. If your credit score is low, avoid debts, make your payments on time to help boost your credit score.

5. Prepare the necessary paperwork

When you are applying for a mortgage, you will need to provide a lot of paperwork. The lender will ask for things such as pay stubs from the past month, your tax returns for at least a year, and bank statements for a few months. Some lenders might also ask for credit cards, loan statements, retirement funds, and other investments.

Being prepared and having everything in line will make the mortgage application process run smoothly and will be less stressful. Remember using a mortgage lender and a Realtor is the best way to ensure a smooth transaction.

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St. Tammany Makes Recommendations To Change an Ordinance for Subdivision Development Requirements

 

March 16, 2021, an amendment was approved that added more requirements for applicants to provide when it comes to major subdivisions. The parish planning department will now require the following information at the initial, tentative phase which includes the location of all drainage, access, and utilities’ rights of way, topological contours extending at least 100 feet beyond the proposed subdivision boundary and the direction of flow of surface water in roadside ditches, canals, and drainage features.

If adopted commissioners will review and consider the drainage impact of a subdivision when it first appears on their tentative approval agenda, rather than having to wait to do so at the subdivision’s preliminary and final hearings. John Martin, Goodbee Civic Association president is excited about the amendment.

Another amendment was also discussed at the March 16th meeting which will change the current regulations where traffic and drainage impacts cannot be discussed during a rezoning hearing. The amendment would allow its members to consider the impact of a planned unit development overlay on traffic and drainage before granting the overlay request.

Developers will see the full impact of the changes in the New Directions 2040 committee’s report.

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2021 Sees A Gain in Single-Family Permits

The first month of 2021 had a 19.2% year-over-year increase over January 2020 for single-family permits. In the first month 83,921 were issued nationwide which was an increase in all four regions. Midwest reported a 21.5% increase, the Northeast saw a 20.7% increase, the South a 20.3% increase and the West saw a 15.1% increase.

From January 2020 to January 2021 46 states and the District of Columbia experienced growth in single-family permits.  The highest growth rate was seen in South Dakota with a 104% increase.  Montana was one of the four states that saw a decline with a 15.8% decline.

At the local level, below are the top 10 metro areas that issued the highest number of single-family permits.

Metropolitan Statistical Area	Single-family Permits: Jan (Units #YTD, NSA)
Dallas-Fort Worth-Arlington, TX	4,330
Houston-The Woodlands-Sugar Land, TX	4,258
Phoenix-Mesa-Scottsdale, AZ	2,656
Atlanta-Sandy Springs-Roswell, GA	2,622
Tampa-St. Petersburg-Clearwater, FL	1,954
Austin-Round Rock, TX	1,940
Charlotte-Concord-Gastonia, NC-SC	1,506
Washington-Arlington-Alexandria, DC-VA-MD-WV	1,335
Jacksonville, FL	1,275
Nashville-Davidson–Murfreesboro–Franklin, TN	1,208

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COVID-19 Has Changed the Way Builders Regard Floor Plans

 

The COVID-19 global pandemic has put a spin on the way people look at their home’s space.  The stay-at-home-orders shifted a home’s space to serve more purposes than ever before. Before the pandemic, home was a place where we returned from work, school and any daily activities but now it has become the place where we work, go to school and live out our days. Builders have now changed the way they are designing homes to incorporate these changes into the floor plans. Here are five ways home designs are changing.

Every room needs to serve multiple purposes

Working from home or remote learning demands a quiet space. According to Jennifer Pyatt of Indianapolis-based Pyatt Builders, she is seeing the use of barn or pocket sliding doors.  This feature allows for privacy in an open concept floor plan where space is still needed. Zillow design expert Kerrie Kelly believes that the whole home will be used in multi-purpose ways such as a guest room turned into a wellness studio or a dining room becoming a game room.

No home office? No thanks

If you work from home and are a parent this can be really challenging.  Parents need a dedicated space for work that is separate from their children. Zillow did a survey that revealed that two-thirds of those surveyed are working from home from an area that is not a dedicated home office space and a dedicated space is on the top of their wish list.

Designing for health and cleanliness

Now more than ever everyone is conscious of germs because of the spread of COVID-19. As of now, builders are integrating touchless faucets and self-cleaning toilets into their building plans but this is just the tip of the iceberg. “Just wait until the floor tile takes your temperature and the bathroom mirror checks your vitals,”  says Kelly.

Builders are already coming up with ways to build mudrooms with sinks off the garages so that before anyone enters they can get clean.  Other ways are by building more en suite bathrooms, using easy-clean flooring and building larger foyers for space to take off shoes before entering the home. Air quality is also a must: “Air cleaned by a UV light system in the HVAC can help minimize the risk of spreading germs,” notes Joe Klusnick, marketing director at Blue Mountain Communities in Northern California.

Yards need to be useable year-round

The previous year has been tough with having to stay at home 24/7.  Getting outdoors and enjoying nature is a great way to improve wellness. A good way to go about this is to turn part of your backyard into a functional room. Building an outdoor kitchen, a covered patio or a play area are all great ways to use your outdoor space for play, entertaining and cooking. Todd Pyatt, President of Pyatt Homes, agrees. “Motorized, retractable screens, heaters and fans, now considered luxury options, will become more essential because they allow families the freedom to be outside across the seasons.”

When everything happens at home, there’s more to store

Everyone staying at home has caused more of a footprint.  When you are eating every meal at home, your pantry space becomes a bigger issue. Builders are incorporating larger pantries in new homes. Closets can now serve as multi-purposes throughout the day. They can work as a home office, gym and even a classroom.

To make sure you find the right home that fits your wish list for a fair price, contact a Realtor in your area.

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Tips On How To Budget For Home Renovations

 

Whether it is a full renovation or just some minor updates, it is always important that you budget for your home remodel. The rule of thumb is that most upgrades or renovations increase your home’s value but this is not always the case if you do not stick to your budget and renovation plan. Here are five things to do when determining your budget for the project.

 

Estimate home renovation costs

Just like any other investment you do not want to put more money into the project than you can get in return. First, determine the value of your home.  If you are updating specific rooms, you will want to determine the percentage of worth of the room.

A kitchen accounts for 10 to 15 percent of the home’s total value. For example, if your home is worth $200,000 you will want to spend no more than $30,000 on the total kitchen project. If you are looking for the biggest bang for your buck, then a mid-range bathroom remodel will get you the best return on your investment.

Consider home remodeling loan options

It can take a lot of cash to do a big renovation and this can sometimes detour homeowners. There are many loans that are available for this specific purpose.

One option is to refinance your home. Right now mortgage rates are at an all-time low, so you have the option of refinancing for an amount higher than you currently owe. You will be able to pay off your current loan and have cash left over for your home improvements.

Another option is to Cash-out refinance by taking your existing loan and refinancing it for more than you currently owe. You will then have enough money to pay off your original mortgage and make your renovations.

Many homeowners do not want to take the refinancing option, but they still have options. A home equity line of credit (HELOC) that works like a credit card is a way to go. You are given a set limit that you can borrow against.

A home equity loan can also get you the money you need for your projects. With this option, you take out all of the cash at one time. This will be in addition to your original mortgage.

Get home renovation quotes from contractors

It is always a wise decision to go into a project with some sort of estimate on how much the project will cost. A contractor will be able to give you an estimate based on your project. You will want to allow for more cost because a project usually costs more than what the estimate states. The more information you are able to give a contractor the closer the estimate can be to the true cost.

Just like shopping around for the best price or best product, it is always wise to get several quotes from several different contractors. Never just take the lowest bid, make sure you know what materials are being used and the process the contract will take to complete your project. Lower bids tend to be a sign that the contractor cuts corners.

Stick to the home remodeling plan

Just like a trip to the grocery store, to stay on budget you have to stick to your grocery list. It is always a temptation to add little projects here and there to your current remodeling project. These last-minute additions can add up. Remember that every time you change your mind even little changes can be costly to your budget.

Account for hidden home renovation costs

As mentioned before an estimate is only an estimate. The project might look like an easy fix, but there might be other issues lurking beneath the surface. Always give yourself a cushion upfront. Every contractor can agree that most renovation projects usually cost more due to hidden imperfections. Add 10 to 20 percent to your estimated project cost.

Home improvements are in most homeowners’ reach, the trick is figuring out how to plan a home renovation that doesn’t break the bank. It is best to consult with professionals such as a mortgage lender and contractor to help with estimated cost and obtaining the money to give the go-ahead.

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