By Tammy Engel
Mortgage Advisor
'I'll Call You When I Have a Million Dollars'
Mortgage Matters
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She was trying to be funny when she said it, but hearing this underscores the need for clarity about financing. If you had a million dollars, maybe you wouldn’t need leverage. For the rest of us, the path to owning real estate has to do with making informed decisions about how to borrow money.
When you’re considering getting into the market, you should start with a good understanding of your financial health. Can you comfortably afford your current expenses? Is your job stable? Do you have some money put away in case of an emergency? Are you contributing to your retirement fund?
If you can answer in the affirmative, there are plenty of ways to buy a home or an investment property without having a million dollars. Remember that we’re going to be prying into your banking records, so have your earnest money deposit accounted for before you begin. In our area, the minimum deposit has usually been $1,000. Since we have a shortage of homes for sale, nowadays that figure can be higher.
Military Veteran home buyers, and those who qualify under the Rural Housing program, might be able to buy without having a down payment. Note well that doesn’t necessarily mean “no money out of pocket”. There are still closing costs to be paid. Sometimes we can find a way to offset those costs with seller credits or interest-rate credits, but it takes a savvy mortgage advisor to help you create such a plan. Pre-qualify with someone well-versed in these loan types to avoid drama later.
If you are buying a home for your family to live in, so far the FHA loan is still requiring a 3.5% down payment. On conventional loans, you can get away from monthly mortgage insurance when you bring between 5% and 20% down payment.
For those wanting to acquire investment properties, be ready to put 20% down. These scenarios also require that you have savings or retirement accounts as leftover “reserve” funds. Be sure to consult with a professional about how all this works before you meet with your Realtor. Lending guidelines are stringent and you’ll want to know before hand what to expect.
The bottom line is that cash is nice, and cash might mean a quick and easy escrow closing. We don’t all have liquidity like that, but don’t let it stop you from investigating what is possible for your family. Contact your local mortgage advisor now to get started with your personal financing plan.
Tammy Engel has been working for your best interest since 1990. Contact her about purchase, refinance, and reverse mortgage at 661/822-7325.
