64% of Millennials put Less Than 20% Down!

64.2% of Millennials Put Down Less than 20% | Keeping Current Matters

Digital Risk recently polled Millennials about the housing market. Among their findings was the fact that nearly two-thirds of the generation who have recently purchased a home, have done so with less than 20% down; with 36% putting down less than 5%!

Here is a graph detailing the results:

Millennial Down Payments | Keeping Current Matters

This means that more and more American’s between the ages of 18 and 34 stopped paying their landlord’s mortgage and started building their own family’s wealth.

Millennials aren’t the only ones taking advantage of lower down payments.

The Federal Reserve Bank of New York found that if the down payment required to purchase a home went from 20% to 5%, a renter’s Willingness To Pay (WTP) increased by 40%.

Willingness To Pay | Keeping Current Matters

The problem is that thirty-six percent of Americans still think a 20% down payment is always required when buying a home. 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.

Bottom Line

If you are one of the many renters now realizing that the home of your dreams is obtainable, contact us at 610-432-0900 or any time at www.themichaelmannteam.com to see how much house you can afford.

Where Are Mortgage Rates Headed? This Fall? Next Year?

Where Are Mortgage Rates Headed? This Fall? Next Year? | Keeping Current Matters

The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.

Below is a chart created using Freddie Mac’s July 2015 U.S. Economic & Housing Marketing Outlook. As you can see interest rates are projected to increase steadily over the course of the next 12 months.

30 Year Fixed Rate Prediction | Keeping Current Matters

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

Dr. Frank Nothaft, the SVP & Chief Economist for CoreLogic, had this to say in their latest MarketPulse:

“If you are thinking of buying a home and have the financial means to do so, this could be a good time to take a look at the neighborhoods you are interested in. We expect home prices in our national index to be up about 4.3% in the next 12 months, and mortgage rates are also likely to increase over the next year.”

If both the predictions of home price and interest rate increases become reality, families would wind up paying considerably more for their next home.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth. You might be surprised at the down payment options that are becoming available as the market stabilizes.  To see how much you and your family can afford, call us at 610-432-0900 or visit us anytime at www.themichaelmannteam.com.

Why 3% (or 0%) down isn’t risky for the Market anymore…

This Is NOT Your Parents' 3% Down Payment Plan | Keeping Current Matters

In their latest Housing Market Insight & Outlook report, Freddie Mac revealed that recent low down payment initiatives have raised concerns that we may be returning to the same lax mortgage qualifications that caused the housing crisis from which we are just now recovering.

The report went on to explain that today’s underwriting guidelines are nothing like those that existed just prior to the housing meltdown.

“Pre-crisis underwriting allowed layered risk, that is, the combination of multiple features that amplified credit risk. Low down payments often were combined with variable-payment loan structures, property-based underwriting, and questionable appraisals. These risk factors, along with the ‘irrational exuberance’ of some borrowers, led to large losses during the crisis.”

What is layered risk?

In the pre-crisis environment, many mortgage loans incorporated several additional features besides low down payments that multiplied the total risk of the loans such as: variable payment options, underwriting based on the property not the borrower, questionable appraisal processes. Borrower expectations were also overly optimistic at that time.

Freddie Mac highlights the difference between then and now by using a table in the report:

3 Percent Down Then vs. Now | Keeping Current Matters

By removing the “layered risk”, we can be confident that low down payment programs will not impact the market the way mortgage underwriting impacted the market a decade ago. And the report explains:

“Previous research has found that reduced down payments can increase the relative probability of homeownership among some groups by over 25 percent.”

Bottom Line

We believe the report’s conclusion says it all:

“As long as the underwriting process bars the return of the layered risks prevalent in the pre-crisis era, lower down payments are not a cause for concern.”

There are some great programs out there…some even with 0 down payment (USDA and VA in particular).  Give us call at 610-432-0900 or visit us anytime at www.themichaelmannteam.com to see what down payment options you may have.