Certainly you must have heard something in the news or even around the water cooler at work about Real Estate. It’s back, goes the chatter. Case-Shiller just said home prices are rising again. As a quick down and dirty review, recall that the Case-Shiller Home Price Index is based on the work of economists Karl Case and Robert Shiller. In short, this index is used by many in the real estate world as a sort of barometer. Just the traditional barometer is used by the weather guys or gals to make their forecasts, the Case-Shiller Index is used to gauge the conditions of the real estate market.
Anyway, according to this Real Estate barometer, now is the time to get in. In short, prices are rising. At the same time, take a quick look at the mortgage rate quotes plastered all over nowadays and you will see that interest rates are at a historical low. The point is this: “they” are making a fairly good argument that now is a good time to at least think about getting out of that apartment and into your own home.
Yet, as you may be experiencing for yourself right now, just because the market conditions are right does not mean that your financial conditions are also primed for a home purchase. One hurdle that many find themselves in is the relatively large down payment amounts required nowadays before the bank will even take a look at your mortgage application.
Down Payment Hacks
If you are willing to think outside of the proverbial box, there are some very real steps you can take to put yourself in the perfect position to get into the home you want.
Hey, this one is age old wisdom but it can and does work for some borrowers. Suppose Grandpa can loan you the necessary funds and you and him are okay with that sort of arrangement. This sort of arrangement is pretty straightforward and easy to setup. One thing to be aware of though is to make sure you disclose this to your mortgage broker at the beginning of the process. It will come as no big shock to you that banks want to make sure each and every dollar is accounted for.
Another relatively painless way to save up the money is the technique of paying you. That is to say, figure out ahead of time what your projected monthly mortgage amount will be. Just Google it and you will find dozens of mortgage affordability calculators online. Make sure you include all the relevant factors: principal, interest, insurance, taxes, association fees and the like.
Now truth be told, you may not be in the position to pay both your current monthly rent and another payment on time of that. But step back a second and take a careful look at your finances. Ask yourself whether or not that is true. Especially if you are part of a dual income household. Do you even know where your money goes?
Truth be toldyou may not be in the position to pay both your current monthly rent and another payment on top of that. But step back a second and take a careful look at your finances. Ask yourself whether or not that is true. Do you even know where your money goes?
This technique is related to the Pay You technique just discussed. Downsize in this case means exactly what it says. If you currently live in a 3 or 2 bedroom apartment, ask yourself f you really need all that space. If you could tolerate living in a smaller living area for a year or two you could save anywhere from 25% to 30% of your monthly rent.
As long as you take that money and put it into your home down payment fund, you will be surprised how much money you have at the end of the year. Real world example: downsize from a two bedroom apartment in Boca Raton that currently rents for $1,600. Move right next door to the one bedroom apartment that just so happens to be available for only $1,100 per month. Ta Da! At the end of year one, you are at least $6,000.00 stashed away. A respectable amount to bring to the table by any measure.
But where do I put the money?
Great question. This is actually where far too many would be homeowners drop the ball. You have to put the money in a completely separate account. More importantly you need to do whatever it takes to make sure you don’t use this account for anything else. You could have the money automatically deposited. You could setup the account at a smaller bank with not so many branches so you can’t just get to the money when the urge to spend starts to overtake you. The point is to make it easy for you to keep building up your funds.
As you can see from the above, even though mortgage restrictions are a bit tighter and you may need more funds to get into a home, there are still ways available to you to gather the funds.
Now it’s on you. Does any of the above sound like something you could take on?