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 it would take to save for a down payment in each state.
Using data from HUD, Census and Apartment List, 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 expenses.
By determining the percentage of income spent renting 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 Kansas can save for a down payment the quickest, doing so in just over 1 year (1.12). Below is a map that was created using the data for each state:
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 2 to 5 years, but becomes possible in less than a year in most states, as shown on the map below.
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’s get together to help you evaluate your ability to buy today.
For a Hassle-Free consultation on Home Refinancing, First-Time Home Buyer Mortgage, Zero-Down Mortgage, Home Construction Loan or VA Home Loan, contact DJ Riley today at 763-276-3960 or via email firstname.lastname@example.org.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
There are some people who haven’t purchased homes because they are uncomfortable taking on the obligation of a mortgage. However, everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As Entrepreneur Magazine, a premier source for small business explained in their article, “12 Practical Steps to Getting Rich”:
“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”
With home prices rising, many renters are concerned about their house-buying power. Mike Fratantoni, Chief Economist at MBA, explained:
“The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market.”
As an owner, your mortgage payment is a form of ‘forced savings,’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity.
As mentioned before, interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.46% last week.
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
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Interest rates for a 30-year fixed rate mortgage have been on the decline since November, now reaching lows last seen in January 2018. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates came in at 4.12% last week!
This is great news for anyone who is planning on buying a home this spring! Freddie Mac had this to say,
“Mortgage interest rates have been steadily declining since the start of 2019. These lower mortgage interest rates combined with a strong labor market should attract prospective home buyers this spring and could help the housing sector regain its momentum later in the year.”
To put the low rates in perspective, the average for 2018 was 4.6%! The chart below shows the recent drop, and also shows where the experts at Freddie Mac believe rates will be by the end of 2019.
If you plan on buying a home this year, let’s get together to start your home search to ensure you can lock in these historically low rates today!
Home prices have been on the rise for the last seven years, leading many housing market analysts to conclude that first-time home buyers are being shut out of the market due to affordability concerns.
The National Association of Realtors (NAR) reports on the percentage of First-Time Home Buyers (FTHB) on a monthly and yearly basis. Their latest report shows that FTHB’s made up 33% of buyers in March, which matches their reported share in 2018.
NAR uses survey data from their members to come up with this statistic, so their results do not include every transaction completed. Rather, they only show the transactions reported by members who complete the survey.
The other entity that reports on FTHB share is the American Enterprise Institute (AEI). The AEI uses data from mortgage applications that define an FTHB as “any borrower who did not have a mortgage for the preceding three years.”
This means the AEI measurement also includes former homeowners who transitioned out of a home they previously owned and re-entered the market after at least 3 years. The latest FTHB share data from AEI shows that first-time buyers made up 57.5% of all mortgages in August 2018. NAR’s data shows a 31% share for the same time period.
New research from the New York Federal Reserve shows that these traditional reports on FTHB share have been unable to give an accurate depiction of this group’s involvement in the market.
The NY Fed was able to take consumer credit data and identify when a mortgage payment entered a consumer’s credit report to determine when a first-time home purchase was made. Using this data, they were able to show that AEI’s reported FTHB share was consistently 10% higher. The NAR reports were right on par with their findings until 2010, when NAR’s share dropped to the 11% gap seen today.
First-time home buyers have not disappeared from the market as many analysts had believed. Buying a home is very much a part of the American Dream for younger generations, just like it had been for their parents and grandparents.
This also means that rising prices have not scared buyers away from the market. Many first-time buyers are making sacrifices to save their down payment and make their dream a reality.
If you are one of the many renters who is scrolling through listings on your phone every night dreaming of buying your own home, there are opportunities in every market to make that dream a reality!
If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.
Ask yourself the following three questions to help determine if now is a good time for you to buy in today’s market.
This is truly the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.
For example, a study by realtor.com found that “73% said buying in a good school district was “important” in their search.”
This report supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the top four reasons Americans buy a home have nothing to do with money. The actual reasons are:
What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the median price of homes sold in February (the latest data available) was $249,500. This is up 3.6% from last year. The increase also marks the 84th consecutive month with year-over-year gains.
Looking at home prices year over year, CoreLogic is forecasting an increase of 4.6%. In other words, a home that costs you $250,000 today will cost you an additional $11,500 if you wait until next year to buy it.
Simply put, with prices increasing, it may cost you more if you wait until next year to buy. Your down payment will also need to be higher in order to account for the higher price of the home you wish to buy.
A buyer must be concerned about more than just prices. The ‘long-term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.
Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.