I talk to many people who are waiting to save a downpayment before investing in their first home. With the wide variety of 100% loan programs out there currently this isn't necessary, or most times even desirable! While some people seem to think that financing the entire purchase is risky and too costly indepth analysis will prove that, in most cases, it's more costly to wait.
In Texas we have enjoyed only moderate increases in the price of homes. In my market for the last few years our appreciation has only been 3-5% per year. Last year due to the large influx of investors and first time homebuyers we've realized a probable gain of 7%. Yet, even with these modest figures in mind, we can see the true cost of "saving" for a home. Say Don and Mary start saving for a downpayment this year. Their target home is a 3 bedroom/2 bath approximately 1600 square feet with a two car garage costing around $150K. Don and Mary start saving $300 a month towards their purchase. Next year Don and Mary have saved $3600 towards their downpayment. In the meantime the target house increased in price anywhere from $4500-$7500 depending on market conditions. Our hypothetical family have incurred a loss in spending power between $900 and $2,900 in a slow market due to their savings. If they were shooting for a 10% downpayment initially they would have taken almost five years and suffered a loss of thousands of dollars in equity. Fortunately 100% loan programs are becoming more and more common, even for those with less than perfect credit. If you're a homebuyer looking to invest consult with a good agent that's knowledgable about financing options, or a good mortgage lender before deciding to wait the market out.
For more information visit my website at www.ChrisTesch.com or www.TexasHomeAnswers.com
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