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5 Surprising Financial Lessons I Learned About Paying For My First Home

by Amy McLeod Group


I pride myself on being pretty financially savvy—after all, I’m a personal finance writer. I’m well versed in best practices for saving and spending, the ins and outs of HSAs and IRAs, and the basics of investing.

But when it came time to buy my first house, I had to put my ego aside: I was way out of my depth as I navigated the world of mortgages, closing costs, and escrow.

While all of the Budgeting 101 basics still apply to purchasing a home—top tip: Don’t buy anything you can’t afford!—some aspects of the process can come as a surprise to first-time buyers.

Gearing up to buy a house of your own? Get acquainted with these five lessons that I learned the hard way before you start shopping. Then, you’ll be ahead of the curve when it comes time to make an offer on your ideal home.

1. Don't be fooled by your mortgage pre-approval amount

One of the first steps on the road to homeownership was requesting a mortgage pre-approval letter from a mortgage lender. I was shocked when my husband and I received a letter with a much higher number than we had ever considered spending.

The lender thought we could afford a house that cost how much?!

I quickly learned that a pre-approval letter is just assurance from a lender that the buyer is in good financial standing to take on a mortgage of a certain size. Lenders evaluate your financial history to come up with a pre-approval amount. Don’t confuse that number, though, with your actual budget for buying a house. In other words, just because you’re pre-approved for up to, say, $300,000, doesn’t mean a $300,000 mortgage will fit in your budget.

For us, we knew we didn’t want to stretch ourselves thin with a heftier mortgage, even if we were technically approved to take one out.

2. Closing costs can add up—and be complicated

Closing costs include out-of-pocket expenses like title insurance, notary fees, and the cost of the deed—and they can add up quickly. So when we made an offer on our house, we decided to ask for a credit from the sellers toward our closing costs—a common practice in which, typically, the seller advances an amount in cash that's then tacked on to the purchase price. But I was surprised when our Realtor® urged us not to ask for too much from the sellers at closing.

“Some loan programs only allow a certain percentage of the sale price to given to the buyer as a credit,” says Joe DiRosa, a real estate agent with RealtyTopia in Pennsylvania.

That means that if you’re offering $200,000 for a house and your lender only allows you to accept 2% in closing costs, you shouldn’t ask for $5,000—that would be $1,000 down the drain, since you can only accept up to $4,000 in credit. This type of limit on closing cost credits is especially common with government loans, including FHAs, DiRosa notes.

3. PMI isn’t actually the devil

Private mortgage insurance—PMI for short—is at once a blessing and a curse. Lenders typically require it of buyers who are putting down less than 20% on their mortgage. This puts homeownership within reach for more people, but it also means an additional monthly payment that doesn't add to the new owner's equity.

For that reason, PMI sometimes gets a bad rap—better to shell out the necessary down payment cash (if you can) than waste your money on insurance, right? But in some cases, it’s in your best interest to put less money down and pay the PMI.

That was the case for my husband and me. We decided to hold on to some of the cash we would have put toward a 20% down payment and use that money to renovate our home and pay off other debts with higher interest rates. Our PMI payment has been manageable—we pay about $75 a month—and it's worth it to keep our money in our bank account, where we can use it for projects like replacing the roof, renovating bathrooms, and creating a master suite.

4. You might have to make escrow payments

“Escrow” was a foreign word to me before buying a house. (Confession: I still picture a crow every time I hear it.)

Because we took out a loan with PMI, we were required to pay into an escrow account for our property taxes and home insurance. Escrow simply refers to the separate account where that money is held; basically, our lender sets aside the money for taxes and insurance, which acts as a safety net to ensure that we sock away enough money for those expenses.

While it’s nice to know we’re saving enough for taxes and insurance by paying into escrow, it’s also frustrating for control freaks like my husband and me, who would rather manage our money ourselves—preferably by putting that cash into a high-yield savings account where it can accrue interest. We’re looking forward to canceling our escrow payments as soon as we’ve built up enough equity in our home to remove PMI.

5. You need to budget for surprises (and your own mistakes)

During our home inspection, the inspector ran the dishwasher to make sure it worked—all good. Then, the day after we moved in, we loaded the dishwasher, hit “Start”—and it was dead. After flicking the electrical circuits on and off to no avail, we finally accepted that we would need to replace the dishwasher sooner than we had bargained for.

Several hundred dollars later, we learned that dishwashers are required to have their own wall switch, per local code. It turned out the old dishwasher wasn’t broken after all—the switch was just turned off.

All we could do was laugh, too slap-happy and exhausted from renovating to beat ourselves up much about the mistake. At least we planned to replace the dishwasher sooner or later, and we had enough savings to endure the blow. But the incident was a reminder that costly surprises (and stupid mistakes) are inevitable when you’re new to homeownership—and even when you’re not.

Contact The McLeod Group Network to start the search for your first home! Reach us at 971.208.5093 or [email protected] 

By: Realtor.com, Lauren Sieben

2 Myths Holding Back Home Buyers

by Amy McLeod Group


Freddie Mac
 recently released a report entitled, “Perceptions of Down Payment Consumer Research.” Their research revealed that,

“For many prospective homebuyers, saving for a down payment is the largest barrier to achieving the goal of homeownership. Part of the challenge for those planning to purchase a home is their perception of how much they will need to save for the down payment…

…Based on our recent survey of individuals planning to purchase a home in the next three years, nearly a third think they need to put more than 20% down.”

Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate the funds needed to qualify for a home loan. According to the same report:

22% of renters and 31% of homeowners believe lenders require 20% or more of a home’s sale price as a down payment for a typical mortgage today. And,

“If a 20% down payment was required, 70% of those who were planning to buy a home in the next three years said it would delay them from purchasing and nearly 30% indicated they would never be able to afford a home.”  

While many believe at least 20% down is necessary to buy the home of their dreams, they do not realize programs are available which permit as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined!

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

Many either don’t know or are misinformed concerning the FICO® score necessary to qualify, believing a ‘good’ credit score is 780 or higher.

To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

As indicated in the chart above, 52.4% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

Starting the search for your new home? Let the professionals with The McLeod Group Network help you find your dream home! 971.208.5093 or [email protected].

By: KCM Crew

Your Tax Refund Is The Key To Homeownership!

by Amy McLeod Group


According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $3,143 this year when filing their taxes. This is down slightly from the average refund of $3,436 last year.

Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals. For anyone looking to buy a home in 2019, this can be a great jump start toward a down payment!

The map below shows the average tax refund Americans received last year by state.

Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.

If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?

The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.

The darker the blue, the closer your tax refund gets you to homeownership! For those in Oklahoma looking to purchase their first homes, their tax refund could potentially get them 85% closer to that dream!

Bottom Line

Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!

Contact The McLeod Group Network to find your new home! 971.208.5093 or [email protected] 

By: KCM Crew

5 Things Every First-Time Home Buyer Needs to Know

by Amy McLeod Group


Here's what every first-time home buyer needs to know to dive into house hunting with confidence—and with as few curveballs as possible. Whether it's getting a mortgage, choosing a real estate agent, shopping for a home, or making a down payment, we lay out the must-knows of buying for the first time below.

1. How much home you can afford as a first-time home buyer

Homes cost a bundle, so odds are you'll need a home loan, aka mortgage, to foot the bill, along with a hefty down payment. Still, the question remains: What price home can you really afford? That depends on your income and other variables, so punch your info into realtor.com®'s home affordability calculator to get a ballpark figure of the type of loan you can manage.

In general, experts recommend that your house payment (which will include your mortgage, maintenance, taxes) should not exceed 28% of your gross monthly income. So, for example, if your monthly (before-tax) income is $6,000, multiply that by 0.28 and you'll see that you shouldn't pay more than $1,680 a month on your home mortgage.

But online mortgage calculators give just a ballpark figure. For a more accurate assessment, head to a lender for mortgage pre-approval. This means the bank will assess your credit history, credit score, and other factors, then tell you whether you qualify for a loan, and how much you qualify for. Mortgage pre-approval also puts home sellers at ease, since they know you have the cash for a loan to back up your offer.

You can also decide if you're going to apply for a loan through the Federal Housing Administration (FHA).

"An FHA loan is a great option for a lot of home buyers, particularly if they're buying their first home," says Todd Sheinin, mortgage lender and chief operating officer at New America Financial in Gaithersburg, MD.

An FHA loan will have looser qualification requirements than a traditional mortgage, but there are still certain prerequisites borrowers must meet like getting private mortgage insurance and having a minimum credit score of 500.

2. Pick the right real estate agent

You buy most things yourself—at most, sifting through a few online reviews before hitting the Buy button and making a payment. But a home? It's not quite so easy. Buying a home requires transfer of a deed, title search, and plenty of other paperwork. Plus there's the home itself—it may look great to you, but what if there's a termite problem inside those walls or a nuclear waste plant being built down the block?

There's also a whole lot of money involved. (You know, a down payment, loan, etc.)

All of which is to say, before you make a massive payment, you will want to have a trusted real estate agent by your side to explain the ins and outs of the process. Make sure to find an agent familiar with the area where you're planning on purchasing; to her credit, the agent will have a better idea of proper expectations and realistic prices, says Mark Moffatt, an agent with McEnearney Associates in McLean, VA.

"Finding a Realtor is not hard, but finding one that is best suited for you and your purchase is a challenge," he adds.

You can search on realtor.com/realestateagents to find agents in your area as well as information such as the number of homes sold, client reviews, and more. Make sure to interview at least a couple of agents, because once you commit, you will sign a contract barring you from working with other buyer's agents—this ensures the agent's hard work for you pays off.

3. Know there is no such thing as a perfect home

It's your first home—we understand if you've dreamed about the ideal house and don't want to settle for anything less. We've been there! But understand that real estate is about compromise. As a general rule, most buyers prioritize three main things: price, size, and location. But realistically, you can expect to achieve only two of those three things. So you may get a great deal on a huge house, but it might not be in the best neighborhood. Or you may find a nice-size house in a great neighborhood, but your down payment is a bit higher than you were hoping for. Or else you may find a home in the right neighborhood at the right price, but it's a tiny bit, um, cozy.

Such trade-offs are par for the course. Finding a home is a lot like dating: "Perfect" can be the enemy of "good," or even "great." So find something you can live with, grow into, and renovate to your taste.

4. Do your homework

Once you find a home you love and make an offer that's accepted, you may be eager to move in. But don't be hasty. Don't purchase a home or make any payments without doing your due diligence, and add some contingencies to your contract—which basically means you have the right to back out of the deal if something goes horribly wrong.

The most common contract contingency is the home inspection, which allows you to request a resolution for issues (e.g., a weak foundation or leaky roof) found by a professional.

Another important first-time home buyer addition: a financing contingency, which gives you the right to back out if the bank doesn't approve your loan. If they believe you'll have trouble making a payment, a mortgage lender will not approve your loan. A pre-approval makes the possibility of having your loan application rejected much less likely, but a pre-approval is also not a guarantee that it'll go through.

You also might want to consider an appraisal contingency, which lets you bail if the entity who is giving you a loan values the home at less than what you offered. This will mean you will have to come up with money from your own pocket to make up the difference—a tough gamble if cash is already tight.

5. Know your tax credit options

The first-time home buyer tax credit may be no more, but there are a number of tax breaks new homeowners may not be aware of. The biggie: Mortgage interest deduction is a boon for brand-new mortgages, which are typically interest-heavy. If you purchased discount points for your mortgage, essentially pre-paying your interest, these are also deductible. Some states and municipalities may offer mortgage credit certification, which allows first-time home buyers to claim a tax credit for some of the mortgage interest paid. Check with your Realtor and local government to see if this credit applies to you.

The McLeod Group Network can help you find your new home! 971.208.5093 or [email protected]

By: Realtor.com, Jamie Wiebe

3 Things You'd Better Know Before Applying for a Mortgage—or Else

by Amy McLeod Group


Unless you’re sitting on a ton of cold, hard cash, you’re going to need a mortgage to buy a home.

Unfortunately, you can’t just show up at a bank with a checkbook and a smile and get approved for a home loan—you need to qualify for a mortgage, which requires some careful planning.

So, how do you please the lending gods? It starts with arming yourself with the right knowledge about the home loan application process.

Here are three things you need to know before applying for a mortgage.

1. What is a good credit score

Ah, the all-mighty credit score. This powerful three-digit number is a key factor in whether you get approved for a mortgage. When you apply for a loan, lenders will check your score to assess whether you’re a low- or high-risk borrower. The higher your score, the better you look on paper—and the better your odds of landing a great loan. If you have a low credit score, though, you may have difficulty getting a mortgage.

So, what’s considered a good credit score in the mortgage realm? While a number of credit scores exist, the most widely used credit score is the FICO score. A perfect score is 850. However, generally a score of 760 or higher is considered excellent, meaning it will help you qualify for the best interest rate and loan terms, says Richard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.”

A good credit score is 700 to 759; a fair score is 650 to 699. If you have multiple blemishes on your credit history (e.g., late credit card payments, unpaid medical bills), your score could fall below 650, in which case you’ll likely get turned down for a conventional home loan—and will need to mend your credit in order to get approved (unless you qualify for a Federal Housing Administration loan, which requires only a 580 minimum credit score).

Before meeting with a mortgage lender, Beverly Harzog, consumer credit expert and author of “The Debt Escape Plan,” recommends obtaining your credit report. You’re entitled to a free copy of your full report at AnnualCreditReport.com. Though the report does not include your score—for that, you’ll have to pay a small fee—just perusing your report will give you a ballpark idea of how you're doing by laying out any problems such as late or missing payments.

2. What down payment you need

What’s an acceptable down payment on a house? In a recent NerdWallet study, 44% of respondents said they believe you need to put 20% (or more) down to buy a home. So, if you do the math, you'd have to plunk down $50,000 on a $250,000 house. Of course, that’s a big chunk of change for many home buyers.

The good news? That 20% figure is common, but it's not set in stone. It’s the gold standard because when you put 20% down, you won't have to pay private mortgage insurance, which can add several hundred dollars a month to your house payments. Another advantage of putting down 20% upfront is that that's often the magic number you need to get a more favorable interest rate.

But, if you’re unable to make a 20% down payment, there are many lenders that will allow you to put down less cash. And there are a number of loan products that you might qualify for that require less money down. FHA loans require as little as 3.5% down. The U.S. Department of Veterans Affairs loan program gives active or retired military personnel the opportunity to purchase a home with a $0 down payment and no mortgage insurance premium. Same with USDA loans (federally backed by the U.S. Department of Agriculture Rural Development).

Another option worth pursuing is qualifying for down payment assistance. There are 2,290 programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study. (You can find programs in your area on the National Council of State Housing Agencies website.)

There are some cases, though, where you’ll have to put more than 20% down to qualify for a mortgage. A jumbo loan is a mortgage that's above the limits for government-sponsored loans. In most parts of the country, that means loans over $417,000; in areas where the cost of living is extremely high (e.g., Manhattan and San Francisco), the threshold jumps to $625,000. Since larger loans require the lender to take on more risk, jumbo loans typically require home buyers to make a bigger down payment—up to 30% for some lenders.

3. What is your DTI ratio

To get approved for a mortgage, you need a solid debt-to-income ratio. This DTI figure compares your outstanding debts (on student loans, credit cards, car loans, and more) with your income.

For example, if you make $6,000 a month but pay $500 to debts, you’d divide $500 by $6,000 to get a DTI ratio of 0.083, or 8.3%. However, that's your DTI ratio without a monthly mortgage payment. If you factor in a monthly mortgage payment of, say, $1,000 per month, your DTI ratio increases to 25%.

Lenders like this number to be low, because evidence from studies of mortgage loans shows that borrowers with a higher DTI ratio are more likely to run into trouble making monthly payments, according to the Consumer Financial Protection Bureau.

For a conventional loan, most mortgage lenders require a borrower’s DTI to be no more than 36% (although some lenders will accept up to 43%), says Ray Rodriguez, regional mortgage sales manager at TD Bank.

The good news? If you’re above the 36% ceiling, there are ways that you can lower your DTI. The easiest would be to apply for a smaller mortgage—meaning you’ll have to lower your price range. Or, if you’re not willing to budge on price, you can lower your DTI by paying off a large chunk of your debts in a lump sum.

Let The McLeod Group Network help you with all your home-buying needs. 971.208.5093 or [email protected].

By: Realtor.com, Daniel Bortz

First-Time Home Buyers Continue to Put Down Less Than 6%!

by Amy McLeod Group

According to the Realtors Confidence Index from the National Association of Realtors, 61% of first-time homebuyers purchased their homes with down payments below 6% in 2017.

Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying, but in March, 71% of first-time buyers and 54% of all buyers put less than 20% down.

Ralph McLaughlin, Chief Economist and Founder of Veritas Urbis Economicsrecently shed light on why buyer demand has remained strong,

“The fact that we now have four consecutive quarters where owner households increased while renters households fell is a strong sign households are making the switch from renting to buying.

Households under 35 – which represent the largest potential pool of new homeowners in the U.S. – have shown some of the largest gains. While they only make up a third of all homebuyers, the steady uptick in their homeownership rate over the past year suggests their enormous purchasing power may be finally coming to [the] housing market.”

It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes.

Bottom Line

If you are one of the many first-time buyers unsure of whether or not they would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership! 971.208.5093 or [email protected].

By: KCM Crew

No… You Do Not Need 20% Down to Buy NOW!

by Amy McLeod Group
No… You Do Not Need 20% Down to Buy NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO® Scores

An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.

No… You Do Not Need 20% Down to Buy NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options. 971.208.5093 or [email protected]

By: KCM Crew

How Fast Can You Save for a Down Payment?

by Amy McLeod Group

How Fast Can You Save for a Down Payment? | Keeping Current Matters

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long would it take you to save for a down payment in each state?

Using data from the United States Census Bureau and Zillow, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting a 2-bedroom apartment in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Iowa can save for a down payment the quickest in just under 2 years (1.99). Below is a map created using the data for each state:

How Fast Can You Save for a Down Payment? | Keeping Current Matters

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3% down programs? Suddenly, saving for a down payment no longer takes 5 or 10 years, but becomes attainable in a year or two in many states as shown in the map below.

How Fast Can You Save for a Down Payment? | Keeping Current Matters

Bottom Line

Whether you have just begun to save for a down payment, or have been saving for years, you may be closer to your dream home than you think! Let The McLeod Group Network help you evaluate your ability to buy today. 971.208.5093 or [email protected] 

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Millennials Flock to Low Down Payment Programs

by Amy McLeod Group

Millennials Flock to Low Down Payment Programs | Keeping Current Matters

A recent report released by Down Payment Resource shows that 65% of first-time homebuyers purchased their homes with a down payment of 6% or less in the month of January.

The trend continued through all buyers with a mortgage, as 62% made a down payment of less than 20%, which is consistent with findings from December.

An article by DS News points to the new wave of millennial homebuyers:

“It seems that the long-awaited influx of millennial home buyers is beginning. Ellie Mae reported that mortgages to millennial borrowers for new home purchases continued their ascent in January, accounting for 84 percent of closed loans.”

Among millennials who purchased homes in January, FHA loans remained popular, making up 35% of all loans closed. Ellie Mae’s Executive Vice President of Corporate Strategy Joe Tyrrell gave some insight into why:

“It is not surprising to see Millennial borrowers leverage FHA loans because they typically offer lower down payments and lower average FICO score requirements than conventional loans. Across the board, we're continuing to see strong interest in homeownership from this younger generation.”

Bottom Line

If you are one of the many millennials who is debating a home purchase this year, let The McLeod Group Network help you understand your options and set you on the path to preapproval. 971.208.5093 or [email protected] 

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The McLeod Group Network
Keller Williams Capital City
1900 Hines St SE #220
Salem OR 97302
971-208-5093
Fax: 971-599-5229

**Disclaimer: Amy McLeod, and her team, do not initiate, process, or service mortgages.  And provide this information only as a service.  You should confirm information here with your Licensed Mortgage Lender.