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How much should one save for a down payment? Is 100% financing possible?

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Before we get into the numbers, what exactly is a down payment? A down payment is a lump sum of money a home buyer puts towards the overall cost of their home. Down payments are provided upfront, and are not recurring. Essentially, a down payment is a portion of the total sales price of your home. A down payment offers an extra level of security, and often indicates to both homeowners and mortgage lenders, that a buyer is serious about making a purchase. Generally, the larger the down payment percentage, the more ideal the buyer becomes.

The industry standard for down payments is 20%. When purchasing a home, being able to provide 20% for a down payment will position you optimally. Not only does this indicate to mortgage lenders that the buyer is serious, but it demonstrates the buyer’s ability to save money strategically. In most cases, this will be your best course of action, and will be universally preferred by mortgage lenders to those who cannot provide 20%.

Money for a down payment can come from several sources. Typically, your down payment will come from your own savings, and/or money you’ve accumulated over time. Any money that you have legally procured, regardless of origin, is fair game for a down payment. This means, money you’ve received from family, employers, grants, and nonprofits can be sequestered and put towards a down payment.

Lenders will typically require 20% for a few reasons. Any time a lender takes on a new client, they are assuming a level of risk. Even if the client looks good on paper, and the risk factor is relatively minimal, lenders still need to exercise a degree of caution. However, providing 20% down does not solely benefit the lender. Putting more money down will ensure, you as the buyer, have access to better funding, and higher loan rates, on average.

While 20% down is ideal, there are other financing options available if you need them. Realistically, providing less than 20% does create roadblocks, however, there are loans available that can help bridge the gap in certain circumstances. If you are unable to make an upfront payment of 20%, you will be required to pay for private mortgage insurance (PMI). While PMI can help alleviate pressure upfront, you will still be on the hook to make payments long term. A PMI is not advisable for those looking for a quick fix, or an opportunity to bypass certain payments. You will still be required to pay reparations over time.

Is it possible to receive 100% financing? The short answer is yes, but 100% financing is only available for very specific subset of individuals. Generally, the only time one will be eligible for such financing is through government funding. This type of funding is provided through the United States Department of Agriculture (USDA) or through the VA (veterans affairs). If you are a veteran of the United States military, you will not be required to provide a down payment. While the government does not directly provide loans for veterans, private lenders will be required to honor this agreement. Before you go and make that offer on your dream home, remember there are requirements you must meet to ensure eligibility for such financing:

  • 90 days or more in wartime
  • 181 days in peacetime
  • 24 months or the full period for which you were ordered, if now separated from service.
  • 6 years, if in the national guard or reserves.

It is important to note that those who have been dishonorably discharged, will not be eligible under any circumstance for 100% funding. If you have any further questions, or are still unsure if you meet the basic requirements, speak with your lender.

If you don’t qualify for 100% financing, your best course of action is to map your finances and create a game plan. Because 100% financing is only available for a small percentage of homebuyers, most buyers will benefit from doing a thorough inventory of their finances. If you are able to put down 20% comfortably, you are likely in an ideal position to proceed in the homebuying process.

Generally, being debt free is optimal, however, having debt will not automatically disqualify you from getting decent lending. Buying a home and making mortgage payments is typically considered more lucrative than paying rent. However, this does not account for the surprise costs that come with owning a home. If you are currently financially insecure, you may want to consider postponing a home purchase. You will typically find the process of getting approval, and subsequently a decent loan, easier, if you have minimal to no debt, and a sizable chunk of savings procured. Above all else, make the choice that best benefits you financially.

Speak with your lender about further opportunities for financing. A reputable lender will often be able to provide you with opportunities for financing breaks. You may be surprised by what you qualify for. Don’t be afraid to ask questions, after all, you are your best advocate.





Home Warranties, Are They Worth It?

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Although warranties are commonplace for many major purchases, you may not be aware that they’re also available to home buyers.

What is a home warranty? First and foremost, it’s important to distinguish that a home warranty is not the same as home insurance. Home warranties usually work on the micro scale, and are centered around fixing smaller issues inside the home. Whereas home insurance policies generally cover major damage, such as a natural disaster. Home warranties are useful when it comes to issues like an appliance breakdown. Granted, home warranty policies will vary depending on the company providing them. Premiums will vary, but typically home warranty policies will be tightly focused on fixing appliances and major home systems.

What specifically will my home warranty cover? As previously mentioned, certain policies will cover different issues. Typically, most packages will cover the basics and then some, however you will generally be covered for:

  • Plumbing and electrical systems
  • Air Conditioning, Heating and duct work
  • Water Heater
  • Refrigerator
  • Dishwasher
  • Oven
  • Built in Microwaves
  • Trash Compactor/Garbage Disposal.

The aforementioned are usually covered in just about any standard package. However, if your budget allows, certain packages allow for more comprehensive coverage. You may be eligible for coverage on everything from your doorbell to your ceiling fan. Typically, homebuyers won’t pay any mind to these smaller systems until they start to fail.

While home warranties sound practical on paper, are they necessary? The answer to this question is entirely subjective, and will depend on a few factors including the size and age of the home you purchase. Basically, it’s up to your discretion as the buyer to determine if a home warranty is worth it or not.

You should be aware of potential drawbacks, before making a decision. While home warranties can offer certain buyer’s piece of mind, they’re not always lucrative depending on your specific circumstances. Policy pricing will vary, but certain warranties can be rather expensive. Premium pricing can range anywhere from $350 to $500. With potential for hundreds of dollars more, depending on how comprehensive you wish for your coverage to be. A major drawback of home warranties? They may not fully cover damage you attain to your appliances.

Assess your appliances before deciding on a package. Do you have an outdoor pool that you want to cover? Or perhaps you have a second refrigerator in the basement? This is where you’ll want to ensure you’ve done proper research on available packages. If you do choose to go the route of purchasing a home warranty, keep in mind that warranties will vary depending on what you wish to cover. Typically, the more elaborate and/or unique the appliance, the more likely you’ll need to upgrade to a premium package for said appliance to be covered.

Still on the fence? Here’s when you may want to bypass a warranty: If you’re buying a newly constructed home, or building your own from the ground up, your appliances will be brand new. New appliances often already come with their own warranties for up to 1 year. If the systems in your home have been well maintained and kept up to date, you may be sinking your money into a home warranty while your appliances remain largely functional. Assess your appliances upon move in to decipher if they need simple upgrades and repairs or large overhauls. Many policy holders are often disappointed and caught off guard, when they realize their policy won’t completely cover a brand-new appliance. In that circumstance, not only will you end up paying for a home warranty package, but you will also still be on the hook for a considerable chunk of change on new appliance purchases.

If you’ve decided to look further into home warranties, the next step is to find a reputable company to issue you one. When it comes to purchasing a home, having a good team behind you will make a significant difference. Doing the proper research into companies that offer warranties is your best course of action. Even in our digital age, word of mouth recommendations can hold a lot of weight. Ask your family and friends for recommendations. They may also be able to tell you about their experiences with home warranties, and if they feel a home warranty is worth it. When it comes to home warranty companies, be cautious. Before you sign anything, make sure you are aware of how the company operates. Do they require pre approval for any and all purchases? Do you need to request a repair order for certain and/or all appliances? Does the company have around-the-clock service? In essence, do your research.

All that said, is a home warranty ultimately worth it? The answer is entirely contingent on your set of circumstances. If you’re concerned with the status of appliances in the home, a home warranty can help ease your mind. However, because packages don’t always cover the full purchase of an appliance, it’s up to you to decide if the home warranty makes more sense than simply paying out of pocket. Home warranties are generally not advisable for new houses, or houses that have recently had major overhauls and replacements. Weigh the options carefully, and if you need to, reach out to others on your real estate team for recommendations. Often the nuances of home warranties and your specific needs, are too complex to give a universal answer. Whatever course of action you choose to take, make sure you do the proper vetting to ensure the most lucrative deal.






Pre-Approval vs. Pre-Qualification

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Now that you’ve decided to embark on the journey of purchasing your first home, let’s look into the necessary steps required to receive a mortgage. When it comes to mortgages, a good place to start is by learning about the process of pre-qualification and the process of pre-approval. In addition, how do you know when you’re ready to apply for either?

To begin, let’s talk about the pre-qualification step. Although pre-approval and pre-qualification may sound relatively similar, there are some fundamental differences as they both represent different parts of the same process. Pre-qualification begins with providing a clear financial history to give to your banker or lender. This will include your current income, and any assets you may have. It will also require you to disclose any outstanding debt. Once you’ve provided the appropriate information, your lender will decide your eligibility and a potential loan amount. Be mindful, that you may not receive any sort of rough estimation when it comes to an allotted monetary value. Your lender is simply testing your eligibility at this juncture, and is not required to give you an estimate.

Make sure you’re aware of the following when it comes to pre-qualification. Pre-qualification is a less formal process than pre-approval. In the pre-qualification stage, you will not be required to verify any of the information you provide. To be clear, you will need to do this moving forward, but it is not pertinent to getting pre-qualified. Pre-qualification is merely a predecessor to the formal process, and is usually reported using estimates.

All that being said, is pre-qualification necessary? Depending on your specific needs, pre-qualification may not be necessary, but can certainly be helpful. First time homebuyers in particular may want to take advantage of utilizing the pre-qualification process. Usually, first time homebuyers are not positioned to know what their potential mortgage may be. Going through the pre-qualification process may help you conclude whether or not your financial standing is ideal for home ownership.

Now that we’ve established the nuances of pre-qualification, let’s divulge into the pre-approval process. It is important to note that while getting pre-qualified may be useful, it is not always a necessary step to getting pre-approved. The process of pre-approval will require formal documents, and therefore, will be more time consuming. To be pre-approved, you will need to provide important documents such as tax returns and bank statements. Lenders will want to verify this information in addition to getting an accurate credit report and a history of your ability to make payments on time. This may include W-2 forms and/or paystubs. You will be required to make sure all of these documents are official and verifiable.

If you’re approved you will receive a conditional commitment from your lender or banker. This conditional commitment will contain your exact loan amount, in writing. Unlike a pre-qualified estimate, it will be a concrete number that you can guarantee will be provided should you put an offer on a home.

Without pre-approval, you will be looking at a substantially more difficult home buying process. There are various moving parts when it comes to purchasing a home. Sellers and real estate agents alike are looking to maximize their profits. This means, that pre-approved clients will almost always be the smarter choice for home sellers. If you are unable to obtain pre-approval, this will be a potential red flag if the decision comes down to you versus a more qualified buyer. Being pre-approved will showcase to sellers that you are reliable. In a numbers game, it is always best to cover your bases and maximize your appeal as much as you possibly can.

Having reviewed the information, what is the right course of action? To summarize, the pre-qualification process is helpful for determining your financial standing. First time homebuyers may want to go through pre-qual to simply determine if they’re ready to financially invest in a home. A pre-qualification does not however indicate a commitment, however, so if you’re looking for a way to solidify your standing as a reliable buyer, you will likely find pre-approval more beneficial. Pre-approval is an important step toward securing the home you fall in love with. If you’re still unsure of where to begin, reach out to a reputable lender in your area. Based on your specific needs, they will better help you with an appropriate course of action moving forward.






How To Start the Home Buying Process

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Buying your first home is an exciting milestone! First time homebuyers may find themselves rightfully overwhelmed and unsure where to begin. Here are some helpful tips to get the ball rolling on your first home purchase.

Are you in a good financial position to buy a home? When done correctly, owning and buying a home can potentially be more financially lucrative than renting. However, not everyone who wants to own a home is in an ideal position to own when they first begin looking. Review your finances and decipher if buying a home is in your best interest.

Get familiar with your credit score. Your credit will ultimately play a significant role in your loan process. A low credit score will be a red flag for reputable loan companies. A favorable credit score will not only help you in matters of homeownership, but various loans you will come across throughout your life. If you are looking to own any sort of property, work on securing a good credit score. This may mean holding off on buying a house. On the contrary, if your credit score looks ideal and you’re ready to apply for a mortgage, avoid the threats of a lowering score. Until your home loan closes, it is best to avoid any new credit card accounts or auto loans.

Get a REALTOR ®. Whether you’re a seasoned homebuyer or new to the process, going the realtor route will help ensure a seamless experience. REALTORS are well versed in the logistics of the buying process and may have quick access to homes that are about to hit the market or have just barely hit the market. If your friends or family members have recently moved, use them as a resource to get recommendations. Some REALTORS may be better suited for your needs than others, so ask around.


Let’s talk mortgages. There are several financial aspects about the homeownership process that newcomers may not fully understand. The homebuying process usually involves getting a mortgage. Mortgage payments include principal and interest, closing costs, taxes, homeowner’s insurance and possibly mortgage insurance. Some homebuyers aim to put down roughly 20% on a down payment. There are down payment options available for you to explore, including some with no down payment or low down payment. At Citywide, we will be happy to sit down with you and go over your options and get you pre-approved. You are always welcome to shop around and set up consultations with other loan officers and mortgage companies. Look for reputable companies that will help guide you efficiently through the process with a personal touch.

Do you qualify for any assistance programs? Assistance programs can make a notable difference in your payment requirements. One group who can significantly benefit from assistance programs are veterans. If you are a veteran, be sure to make note of your military status to your loan officer, or mortgage broker. In doing so, you can surpass the down payment process entirely. Additionally, there are often state or federal programs that first-time homebuyers may qualify for. Some specific counties may even have first-time homebuyer programs. Speak with your loan officer to find out your options.

A pre-approval letter may be in your best interest. With any sort of large investment, it never hurts to get things in writing. In certain circumstances it is possible to get a letter of pre-approval by your lender. A pre-approval letter is written by the lender, where they outline the terms and conditions of your loan, and exactly how much they are willing to invest. If you bring the letter to certain sellers, they may take your offer more seriously.

Once you have your ducks in a row financially, you can begin the search for a home. What are you looking for? Common considerations are as follows:

  • Number of bedrooms and bathrooms
  • Style of the home
  • Size of the yard
  • Do you want pets?
  • Space for a family or plans to start a family in the future.
  • Proximity to hospitals and good schools (even if you don’t have children, schools effect home value)
  • Overall culture of the neighborhood (noise level, activity level, median age of residents)

Looking online can help you find areas that are typically in your price range, and offer the amenities you are looking for in a house. Just like the area you live in, you want to make sure your potential house checks most of your boxes. Being flexible never hurts, but it’s advisable to make a list of things you will not compromise on.

The second phase will involve more research. These tips are mostly preliminary for safeguarding that you are in a lucrative position to own a home. Remember to reach out to your real estate or mortgage professional if you have any questions or concerns. Buying a home for the first time can be a stressful and emotional process and communication with those helping you is key.