Are You New to Home Buying?

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I have been in the Real Estate industry for over 10 years.  I started out as an Office Administrator and now in addition to that role I am now a Realtor®.

Since I am in a busy office, I tend to see a lot of different scenarios involving sellers and buyers.

If you are new to the real estate market, the best starting point for you is to do a monthly budget, see how much you can budget for a down payment and research current interest rates along with loan options and what your payment would be per month.  There are a lot of resources available to estimate monthly mortgage amounts.

Once you have a good idea of how much you can spend, you can then shop the area where you would like to live in order to find what you can afford.

Your first step when you are serious about buying your dream home is to find a bank and get a pre-approval.  This will give you an idea of how much you actually can get a loan for.

Remember, a good Real Estate Agent can help to point you in the right direction if you have questions.


Why PMI Is a Good Play

For many homebuyers, putting 20 percent down on a home makes little financial sense, yet consumers resist using private mortgage insurance (PMI). Here are a few reasons why PMI is a good move.

PMI protects the lender and you. PMI protects the lender in case you default on your loan, allowing you to borrow hundreds of thousands to buy a home with as little as three percent down for a conventional loan.

Interest rates are low. With rates in the low four percent range, the borrowing costs to buy a home are ridiculously low compared with car loans and other lines of credit.

Using OPM is smart financial planning. Other people’s money is a great way to get into the game. Thanks to PMI, the bank’s insurer takes the risk. Twenty percent down on a $400K home is $80,000. Three percent down would be $12,000, which is a $68,000 difference.

PMI can be removed. You can cancel PMI when your loan balance is paid down to 78 percent of the purchase price, or if your lender appraises the home to show an increase in market value great enough to eliminate PMI.

There are other reasons to love PMI. You’ll likely lose more in equity than it would take to save such a large down payment, at today’s sales pace. And it’s tax deductible.

That said, putting less money down is going to work for you only if you can afford the higher monthly payment, or you can choose a less expensive home. At least you’ll be in the game. Please consult your financial advisor before making any home-buying decisions.

Dawn GuthreRealtor®