South Atlanta Househounds

Do you know what down payment options and mortgages that are available before buying your first home?

Graduating from college and starting your career probably means your first mortgage is on the horizon. This is a huge financial milestone, so you should know what options you have when it comes to down payments and financing your home.

How much down payment?
First, the larger the down payment you make, the lower your monthly payments will be. Also, if you make a down payment of 20 percent or more, you can avoid having to pay private mortgage insurance (PMI).

If you don’t have a lot of money to put down on a house, you still have several options. You can simply put down what you can afford and go ahead and pay PMI if that amount is less than 20 percent of the purchase price. You can also get an 80-10-10 mortgage, also called a piggyback mortgage. This mortgage allows you put 10 percent down on a home, and then get two separate mortgages for the remaining 10 and 80 percents. This way, you borrow enough to fulfill the 20 percent down requirement, and avoid paying PMI. Some lenders even offer 100 percent mortgages, where you are not required to have any down payment at all.

How much can I afford to borrow?
Another thing to keep in mind is how paying your mortgage is going to affect your finances. There isn’t a hard and fast rule for how much you should spend on a home. Some experts will tell you that you shouldn’t spend more than two and a half times your total yearly income. Others will say that no more than 35 percent of your total monthly income should be spent on your living expenses, including utilities. Another way to determine how much you can afford is to get pre-approved. That way you will know what homes are in your price range.

Mortgage Types
Regardless of what percentage of your income you decide to spend on your first home, one of the most important things you can do is learn what the different types of mortgages mean for your finances and then choose the best mortgage for you.

• A fixed-rate mortgage lets you borrow money at an interest rate that stays the same for the life of the loan.
• An adjustable-rate mortgage, or ARM, has rates that fluctuate according to general interest rates.
• A hybrid mortgage has fixed rates for a certain period of time and then switches to adjustable rates. For instance, the 5/1 ARM lets you pay a fixed rate for five years and then adjusts your rate once a year after that.
• An interest-only mortgage is a mortgage where you are expected to pay only the interest on a loan for a certain time period. During that time period, you will not be paying any money toward principal. After that predetermined time period, full payments will kick in.

The more you research your options, the better informed you’ll be about the best decision for your new mortgage.

The Limbo is a dance from the island of Trinidad. The dancer moves to a Caribbean rhythm, then leans backward and dances under a horizontal stick seeing how low they can go. 

In many ways potential buyers are doing that same dance with the housing market here in South Atlanta.  So what is my take on the market?  Have we hit bottom yet?  Should we buy now or wait?  How low can it go?

Queue the Limbo music please… 

Many would be buyers feel they should wait until the housing market bottoms out before they buy a home, but how will you know when the housing market hits bottom?

The truth is you won’t know that the housing market has hit the bottom until prices start to go back up.  It will be difficult to be sure that the market has hit bottom for a few months.  It’s not a sudden shift, it is a slower more gradual change in market perception. 

Here is why I think we’ve hit bottom

• Affordable markets like South Atlanta don’t feel the extreme swings of higher-priced markets.
• The sheer number of people moving into the South Atlanta area coupled with low unemployment makes us one of the fastest growing areas in the US.   
• Many of our problems are the result of a bloated inventory but our sales rate is faster than most and we have a low proportion of non-conforming mortgages which means we should be able to burn off our supply glut fairly quick.   

So why buy now?

There is a major difference when buying now versus waiting and buying in a sellers market.  To buy a home during the market downturn puts you in a strong bargaining position.  You are more likely to get concessions from a seller including price reductions, repairs and possibly personal property thrown in to boot. 

If you wait until the market turns then you and every other buyer who’s been “waiting out the market” will be bidding on the same house. 

Here is a few more reasons why buying now makes sense: 

Think I’m wrong?  Think it’s heading lower still?

Let’s say you really think the housing market is going to drop another 5-6% before it bottoms out.  Take your dream house, submit an offer at 5-6% below asking price and see what it gets you. 

In both the dance and the real estate market, the one who wins the Limbo is the person who works under the line but doesn’t hit the bottom.