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Rates down, but down payments up for Pinellas County real estate (and real estate everywhere)

I’ve mentioned here a number of times how low mortgage interest rates are, and how they – along with the lowest home prices in at least a decade – make homes really affordable right now.

But to be fair, there is another side of the coin (isn’t there always?) which makes home-buying more of a challenge than it was in the rock-n-roll days.

I’m talking about down payments.

Home prices may be down, and interest rates may be at historic (or near-historic) levels, but the demand for more substantial down payments is up. It’s all part of the tougher underwriting standards; lenders want to see buyers begin the home buying process with a bigger personal stake in the transaction, and that means larger down payments.

Just a few years ago, it seemed like down payments were going to become a thing of the past. Nothing-down and little-down mortgages were all the rage, and you could buy expensive homes and finance them with big mortgages without having to come up with actual cash – or not much of it, anyway.

Great interest rates are available now, as I’ve written about in the past. But if you really want that rock-bottom rate, you’d better be ready to come up with a 20 percent down payment.  It’s still possible to get a mortgage and put less than 20 percent down, but the rates are going to be higher.

LendingTree came out with a report last week that listed state-by-state average down payments, and the average of all of them was 12.29 percent.

(I know you’re wondering what the average rate is for Pinellas County real estate. Actually, LendingTree didn’t get that fine on rates, but the company DID say what the average down payment is for the state of Florida: 13.16 percent.)

Fannie Mae and Freddie Mac want at least 10 per cent down.  If you want the very best rate, you’re going to have to also pay for private mortgage insurance – not part of the down payment, but an upfront cost you can’t avoid.

A Lending Tree spokesperson said, “The reality is when you put less than 20 percent down, you have to pay for some kind of insurance to protect the lender from the higher risk that you’ll default…but private mortgage insurers these days aren’t always willing to do business with low down payments.”

There is some speculation out there that if we are going to continue to have record low interest rates, the mortgage industry may increasingly move toward that 20 per cent down payments.

Tags: down payment, interest rates, pinellas county, Pinellas County real estate, real estate

Buy that Pinellas home with down payment dollars from the state

Florida's old state house

A few posts ago I discussed how some states were finding ways to provide that $8,000 federal home purchase tax credit BEFORE the sale of the home, so buyers could use the tax credit money as a down payment. I said that about 10 states had come up with programs to make that happen, most of them variations on bridge loans.

One state, Missouri, put several million dollars ina pot, and then advanced funds to homebuyers who qualified for the federal tax credit. The buyers could use the state’s money for the down payment, then pay it back when the tax credit check came in the mail. Other state programs were variations on that same theme.

At the end of the post, I asked if you thought the state of Florida should come up with a similar program and, if you did, that you might want to get in touch with your state legislator and say so.

Well, no sooner did I write that post but the Florida Legislature approved its own program.

The Legislature adjourned yesterday (Friday), but before it did it passed a bill providing $30.1 million that can be used for down payments by homeowners. The program goes into effect July 1, and the money will be distributed to qualifying homebuyers (that is, homebuyers who qualify for the federal $8,000 tax credit) by county housing housing administrators.

Details are still being worked out, and I’ll keep you up to speed as that process moves forward. But don’t let the lack of down payment money stand between you and the purchase of a Pinellas County home.

Tags: Add new tag, down payment, Florida, pinellas, tax credit

Five ways to find down payment money when you’re broke

What’s the biggest single obstacle to home ownership? A lot of people would answer, “The down payment — or lack of it.”

For several years now, we ‘ve had the benefit of some pretty easy no-down or little-down financing.  But with the way things are right now, we’re probably not going to see those days come back any time soon.

That means 10 percent or more down loans are much more the norm than they used to be.  But don’t worry — there are a number of easy ways (or sort of easy ways) to raise that down payment money.  Here are a few ideas:

1. SAVE THAT TAX REFUND CHECK

That annual tax refund check from Uncle Sam is always welcome, but how many of us actually earmark that money for a single purpose? Instead of using it to finance a shopping trip to the mall, or using the money for a down payment on a new car, stash it in a savings account, and then do the same thing all over again next year. In very little time you may have all the money you need to buy a new place for yourself.

2. UP YOUR WITHHOLDING

Are your tax refund checks too pitifully small to add up to very much? Or, even worse, are you getting a bill from the IRS instead of a check? There’s an answer for that — march yourself down to your Human Resources Department and ask them to withhold more money from your weekly paycheck.  If you can live with $100 less per week, that’s $5,200 dollars that will be coming your way next year. If that’s a little rich for your blood, $60 per week will give you $3,120 at the end of the year.

3. ASK YOUR RELATIVES FOR MONEY

Tell your parents that you want to buy a home, but that you don’t have enough money for the down payment.  They may surprise you — they may even applaud your maturity in wanting to own your own place. If they won’t give you the money, maybe they will LEND it to you. Be businesslike, and give them decent terms.

4. SELL SOME STUFF

Let’s face it, most of us have plenty of stuff we don’t need. If that describes you and your bulging garage, have a yard sale or a garage sale and turn those musty old items into cash. If you have some things that actually have some real value, you might try selling them on eBay.  You’d be amazed what people will pay for old car parts or 20-year-old Playboy magazines. If you have a sale and end up cleaning out your own garage, offer to sell some stuff for friends and family members, and offer to split the proceeds with them.  Who knows, you may discover a new career as a garage sale expert.

5. INVESTIGATE GOVERNMENT PROGRAMS

Did you spend time in the military? The Veterans Administration may have a no-money-down loan program for you.  Are you a first-time homebuyer?  There may be programs available for you, as well. There are still a surprising number of no-money-down programs out there; your realtor should be able to help you find them. Also, feel free to call me at 727-643-7100.

I know, I know, I said “Fives Ways…” But here’s a bonus idea for you:

SPECIAL BONUS STRATEGY

Get a second job. I know, this isn’t everybody’s idea of heaven. But do it with a short-term rather than a long-term time schedule in mind. I know someone who had a special financial need, and she financed it by signing up as a host of in-home jewelry parties. I know someone else who works every Christmas season at his local Post Office. There are all kinds of seasonal jobs out there. And if you have a special talent or ability, give some thought to who might like to pay for those skills on a part-time or occasional basis. When you get sick of working those additional hours, quit.

I’ll bet you have some make-money ideas of your own. If you do, hit the “comment” button at the top of those post and share them with us.

Tags: down payment, home financing