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    If you wait until you have 20% down for a house – You may be missing something…

    Is this what it feels like trying to save for your downpayment? (Read on! Theres good news!)
    Is this what it feels like trying to save for your downpayment? (Read on! Theres good news!)

    We get it… saving money today is hard to do! Especially if you’re looking for an average priced house in Wichita ($164,312 in 2015 by the way) and trying to figure out where exactly you’re going to come up with that 20% your parents talked about. I mean… $32,000 to flop down on a house?! That’s a chunk of change. That any income level would have to think long and hard about.

    Let's face it: Most people don't have, or at least, don't want to part with that much cash.
    Let’s face it: Most people don’t have, or at least, don’t want to part with that much cash.

    Luckily, you don’t need 20% down to qualify for a mortgage. Not even close! Minimum downpayment is 5% on conventional loans and 3.5% on FHA loans! “Won’t I have to pay way more with PMI (Private Mortgage Insurance)?” is a question often asked next. Yep. You will. Now let’s talk about why when interest rates are in the low 3’s it’s still better to get in with a low fixed rate than to wait until prices and mortgage rates are up.

    Scenario #1

    You save for 3 years to pile up $32,000.

    Congratulations first of all. You’ve been a diligent money manager and you’ve done well. It’s time to turn that into a downpayment now. Turns out in the past 3 years that $165,000 house you wanted appreciated by 4% per year and is now $185,000. So… you’ve got a little more saving to do. (A few more months later…) Yay! Now you’ve saved $37,000 for your 20%. You’ve been renting the whole time so you have zero equity in what you’re leaving to transfer over. You’re payment with even a 1% bump up in interest rate (most predict they will be back in the 5s in the next year to 18 months) you’re new payment is $1000 per month.

    Scenario #2

    You call one of our agents and buy while prices are low and mortgage rates are the lowest ever. (That’s now by the way)

    At 5% of $165,000 your downpayment is $8,750 and your monthly payment including taxes, insurance, AND PMI comes to around $1,031 a month. That’s only $31 a month different than the 20% down route. Now, because you’re paying less owning than you would renting, you’re still able to save the same $37,000 in cash plus you would have paid off and additional $10,000 of loan principle while you owned!

    Here’s where you’re at after 36 months in both scenarios:

    Scenario #1: You have $37,000 equity and a $1,000 a month payment.

    Scenario #2: You have a $1,031 monthly payment $18,750 in equity and $37,000 in cash totaling $55,750!

    The choice is clear, NOW is the time to make your move!
    The choice is clear, NOW is the time to make your move!

     

     

     

     

     

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