You Don’t Need to Put Down 20% to Buy a Home

Gone are the days when a 20% down payment was the norm for buying a home. With the evolving real estate market and the advent of new financing options, potential homeowners now have more choices than ever before. Lenders understand the diverse financial situations of buyers and have developed alternatives that require a smaller upfront payment.

Lower Down Payment Options

01. Federal Housing Administration (FHA) Loans: Backed by the government, FHA loans offer down payments as low as 3.5%. This option is particularly advantageous for first-time homebuyers who may have limited savings or lower credit scores.

02. Conventional Loans: While conventional loans traditionally required 20% down, there are now options available that allow for as little as 3% down. Private Mortgage Insurance (PMI) may be required, but this allows buyers to enter the market sooner.

03. Veterans Affairs (VA) Loans: Exclusive to eligible military service members, VA loans often require no down payment, making homeownership more accessible to those who have served their country.

04. United States Department of Agriculture (USDA) Loans: Designed for buyers in rural areas, USDA loans offer low or zero down payment options to promote homeownership in underserved communities.

Down Payment Assistance Programs

Numerous down payment assistance programs are available across the country, providing financial support to qualified homebuyers. These programs, offered by state, local, and nonprofit organizations, can offer grants, loans, or deferred payment options to bridge the gap between what buyers can afford and the traditional 20% down payment.

All this to say, the notion that a 20% down payment is an absolute requirement for buying a home is no longer accurate. With the availability of various loan programs, down payment assistance options, and alternatives such as PMI, prospective homeowners have more flexibility in achieving their dreams of homeownership. By understanding these alternatives and working closely with lenders and real estate professionals, you can embark on your homeownership journey with a smaller down payment, making it more accessible and achievable than ever before. Remember, it’s always wise to consult with a mortgage professional to determine the best course of action based on your specific financial situation. When you’re ready to take that next step, visit us here to set up a buyer meeting!

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Learn about Mortgages for Teachers and Educators

What is down payment assistance? – Down payment assistance is a type of financial assistance that can help qualified buyers cover the upfront costs associated with purchasing a home. This assistance can come in the form of grants, loans, or other types of financial aid.

Who qualifies for down payment assistance? – Qualifications for down payment assistance programs vary depending on the specific program. However, many programs are targeted toward low- to moderate-income homebuyers, first-time homebuyers, and those who work in certain professions, such as education.

What types of down payment assistance are available for teachers? – There are a few different types of down payment assistance programs that are available specifically for teachers depending on your state. In Georgia, one of the programs is PEN with GA Dream! The Georgia Dream program was created to make homeownership possible for eligible low and moderate income Georgians by providing affordable financing options, down payment assistance, and homebuyer education. Potential homebuyers apply with participating lenders for Georgia Dream loans. The loans are secured or guaranteed by FHA, VA, USDA-RD or conventional uninsured loans. Borrowers must attend and complete either a homebuyer education workshop, individual housing counseling sessions, or an online homebuyer education course through E-Home America. As of February 23, 2023, the standard amount was increased to $10,000, and for PEN (Protectors, Educators, and Nurses) that amount has been increased to $12,500!⁠

More about Mortgages for Teachers and Educators

How do I apply for down payment assistance? – To apply for down payment assistance, you’ll need to research the specific programs that are available in your area and determine which ones you may qualify for. You’ll then need to fill out an application and provide documentation to support your eligibility. It’s important to note that down payment assistance programs often have limited funds available, so it’s best to apply as early as possible. Best place to start is with your local Realtor. They can point you towards the right lenders that offer assistance! 

Ready to start your home buying journey? Click here to connect with a Sage & Cedar agent!

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A few reasons you should hire Sage & Cedar Real Estate!

01. We have specialized knowledge of the real estate market and can help you find the best deal on a property – The agents with Sage & Cedar are well-connected in the industry and can access resources that you may not have access to, such as market insights, off-market listings, and more. 

02. We can also help you navigate the legal and financial aspects of a real estate transaction – Real Estate contracts are wordy! Sage & Cedar is all about education when it comes to working with our clients. Making sure you understand these legally binding contracts is so important. 

03. We have experience negotiating the best price for buyers and sellers and can help you determine a fair market value for a property – There are so many things that go into pricing a home for the market AND pricing a home when making an offer. Making sure we price your home right the first time and we help you make the most informed offer we can isn’t luck. It’s skill and know how!

More reasons you should hire Sage & Cedar Real Estate

04. We can provide valuable advice on everything from staging your home for sale to making sure the paperwork is in order – We cover everything from a to z. Listing your home and managing the sale is a full time job. A few examples include listing your home on the mls, managing showings, negotiating contracts, keeping up with timelines, etc.

Whether you are a buyer or seller, Sage & Cedar is the right call for you. Interested in starting your home buying journey? Click here. Getting ready to list your home? Chat with us here!

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4 can’t miss tax breaks for 2022 homebuyers

01. A HOMEOWNER’S BIGGEST TAX BREAK? MORTGAGE INTEREST! – If you’re a homeowner, being able to save on your yearly mortgage interest can be an incredibly lucrative perk. For those filing taxes jointly, it’s possible to deduct up to $750,000, while single filers get $375K.

02. DID YOU BUY MORTGAGE POINTS? DEDUCT THOSE, TOO! – Mortgage points are considered prepaid interest, so they can be added to total mortgage interest reported. This is an easy way for you to reduce what you owe to the IRS during tax season.

Your tax professional can help you take advantage of all the tax brakes you qualify for

03. MORTGAGE-INTEREST TAX CREDIT FOR NEW HOMEOWNERS – If you’ve applied for a mortgage from your state or local government, you may be eligible to receive additional tax benefits! Mortgage Credit Certificates allow qualified homeowners the chance to get back some of their hard-earned money in the form of credits against taxes they owe. These returns won’t net any extra cash — but could provide significant savings if used toward owed federal taxes.

04. DON’T FORGET TO CHECK PROPERTY TAXES, TOO! – You may be able to deduct up to $10,000 combined from your property taxes and state or local income on federal tax returns. But it’s essential for you to track all annual property tax payments in for this deduction to be used.

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Let’s take a look at the 4 items you’ll need to collect before applying for a home loan.

01. Proof of Income – Lenders want to see that you have the ability to pay for the home after closing. Because of this they will ask you to provide proof of income. This will consist of 2 years of tax returns and your latest w-2’s. Lenders do not require you to be at the same job for 2 years, but they will want to see consistent income, ideally in the same field. 

02. Proof of Assets – Supplying the lender with proof of assets help the lender decide the type of mortgages you qualify for and sometimes even the interest rate you receive. Most common assets include cash, physical assets (like cars, boats, homes), and liquid assets (like 401ks, stocks, bonds). Supplying proof of all assets will help the lender qualify you for a higher loan amount than they’d be able to without proof. Still have questions on what to include? Consult your CPA!

While the bank *may* ask you for more documentation, these are the core 4 items you need to get started!⁠

03. Good Credit – Most loans have a minimum credit score requirement to qualify. Having a good credit score suggests that you have no problem making payments on time. Usually, the better your credit – the better your interest rate. The most common loan requirements are as follows: Conventional – 620, FHA – 500, VA – 640, and USDA – 640. 

04. Employment Verification – Your lender will require verification of employment to issue a pre approval letter and again right before closing. These documents can include an employment verification letter, a recent pay stub, or anything else to prove an employment history and confirm income. 

Interested in starting your home buying journey? Click here to connect with a Sage & Cedar agent and set up a one on one buyer education meeting! 

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6 steps to buy your first investment property

01. Decide on a price point⁠ – A good rule of thumb is to use the 1% rule. For example if you purchase a home for $100,000, you’ll need a minimum monthly rent of $1,000.⁠
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02. Pick a location(s)⁠ – Airbnb guests aren’t worried about the school district and long-term renters may not need walkability 24/7. Decide which way you’d like to go and pick a location that way.⁠
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03. Determine rentability⁠ – What are your target renters looking for? Long-term renters may say creature comforts like 2-3 bedrooms, washer/dryer, dishwasher, and storage. Short-term renters usually want to be close to (or far from) the action.⁠

What are your target renters looking for?

04. Purchase the Property⁠ – This process will be similar to purchasing a primary residence. Your lender may require a higher down payment and loan requirements may be a bit different than on a primary residence, but the steps are pretty much the same: offer, escrow, closing, rent!⁠
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05. After Closing⁠ – You may want to consider hiring a property manager to take care of renting and maintaining your income property. These will typically run you 15-25%.⁠
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06. Offset Additional Mortgage⁠ – For an investment property, you will need 20% down but the great thing is that you can include rent as part of your income, so this will offset the additional mortgage!⁠
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Ready to get the ball rolling on your investment property journey? Click here to schedule a one on one buyer meeting with a Sage & Cedar agent! 

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Click “Play” to follow along!

Credit Scores and Purchasing a Home

Having a good credit score to buy a house makes the entire process easier and more affordable – the higher your credit score, the lower mortgage interest rate you’ll qualify for. Though higher credit scores are considered more favorable for lenders, it’s still possible to get a mortgage with less-than-ideal credit. It all depends on the type of loan you’re applying for!

Conventional – To qualify for a conventional loan, you’ll typically need a credit score of at least 620. But borrowers with credit scores of 740 or higher can make lower down payments and tend to get the most attractive conventional loan rates.

Higher credit scores are considered more favorable for lenders.

FHA – If you have a lower credit score you might want to consider an FHA loan. This loan is insured by the Federal Housing Administration. The minimum credit score for an FHA loan is 580. You can also put down as little as 3.5% with an FHA loan.

VA – A government-backed VA loan might be an option for you if you’re a veteran or qualified servicemember or spouse. 100% loan, different lenders can have different credit score cutoffs. But a 620 score is a pretty good barometer for many VA lenders.

Credit Score requirements all depend on the type of loan you’re applying for.

USDA – Another government backed loan is a USDA loan. This loan would work for you if you are looking to live in a rural area and your income falls below 115% of the area’s median income. Most lenders require a minimum credit score of 640 for a USDA loan.

If you’re unsure what loan is right for you, your lender can help you decide! Interested in starting your home buying process? Click here for a free consultation!

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Hiring someone who has much more knowledge and expertise to help you along the buying journey makes it much easier.

01. Improve your credit score – You’ll want to check your credit score (most larger lenders require a score of 620) and dispute any errors. If possible, pay of any debts. Be sure to make your payments on time; and remember building a credit score takes time.

02. Save up for a down payment – Start saving early, because the larger the down payment, the more competitive buying power you have. It will also affect your long-term finances such as your monthly mortgage payments, and possibly grant you lower interest rates.

03. Calculate your budget – This is where you’ll want to calculate how much you can afford on a home. Think about your income, debt, and expenses. You’ll want to make sure buying a home doesn’t dig you deep into debt, and is a payment you can comfortably afford. Get pre-approved for a mortgage if possible.

04. Hire an agent – Hiring someone who has much more knowledge and expertise to help you along the buying journey makes it much easier. Agents can help you get the best possible mortgage, as well as the perfect home for your needs. And you won’t have to bear the whole process alone.

05. House hunt/ Make an offer – Here’s the fun part; actually looking at homes! Ask for the seller’s disclosure to learn more details on the home, and consider making a list of must-haves or deal-breakers for your new home. When making an offer, be sure to try and negotiate to where both parties are getting a fair deal.

During this final walk-through, you’ll want to check that all the appliances, outlets, plumbing, etc work.

06. Home Appraisal – This is where another pair of eyes decides the home value. The appraisal protects both you, and your lender, from a bad deal. If the appraisal is lower than the price you and the seller agreed on, then you’ll either have to renegotiate or pay the difference.

07. Home inspection – This part is very important because any hidden repairs needs may become uncovered. Be sure to hire a good inspector, and that you attend the inspection. Major fixes might be a deal breaker for you, so you’ll want to discover them before closing on a home.

08. Closing costs – So you’ve decided on a home…don’t forget you’ll be paying closing costs! These are typically 3-6% of the homes purchase price and cover things like inspection fees, land and property transfer fees, etc. The cost also depends on your state, loan type, and lender.

09. The final walk through – During this final walk-through, you’ll want to check that all the appliances, outlets, plumbing, etc work. Re-address any previous issues to ensure they’ve been fixed, and make a list of things you find to report to the seller. Double-check any areas you may have missed before.

Interested in starting the home buying process? Click here to connect with a Sage & Cedar agent and set up a buyer info meeting. Talk about the process, closing costs, lenders, and the current market. 

Want to start your online search now? Start here!

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Things to consider when buying a home:

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01. Buying a home means generating equity⁠⁠: One of the coolest things about buying a home is generating equity. You can generate equity in your home by paying down your principal and/or purchasing in an up and coming neighborhood.
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02. When owning a home, each monthly payment is like putting money into a savings account: Instead of like renting, paying towards your mortgage will actually go towards paying down your principal. ⁠⁠
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03. Owning a home allows you to take advantage of major tax benefits⁠⁠: These include being able to write off your interest as well as your homestead exemption. Talk to your tax professional to find out any other benefits you can take advantage of as a homeowner.
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04. It could be a source of profit in your future⁠⁠: If you chose to upgrade down the line, your current home can become a source of income through either rental income or selling for more than you purchased for.
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Whether it’s the family home being passed down or sold to help obtain other financial goals, owning is a great way to get there.

05. It could benefit your long-term financial plan⁠⁠: Owning a home long term could help set your family up long term. Whether it’s the family home being passed down or sold to help obtain other financial goals, owning is a great way to get there.
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06. Location is an important factor for many people, a must to consider for resale value⁠⁠: When purchasing a home, it’s important to consider resale value. Things like location, layout, and size will make a difference.
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07. Appreciation can make a big difference⁠⁠: Holding on to a property for an extended period of time can mean huge gains in the appreciation. When you sell your home, you can take advantage of that appreciation.
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08. Staying on top of payments looks good on your credit⁠⁠: Paying your mortgage on time will keep you in good standing and impact your credit positively. Most loan servicers will allow you to set up an auto payment option so you do not miss a payment!

If you think it’s time to take the plunge, click here to connect with a Sage & Cedar agent. Set up a meeting with us to talk about lenders, the current market, closing costs, etc! ⁠

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