Do I need to still put 20 percent down to purchase a home?

Someone once asked me: Is a 20% down payment standard?

A 20% down payment is anything but standard. Making a smaller down payment does involve some form of mortgage insurance (MI). This is a fee paid to limit the lender’s risk when there is a lower down payment.

Conventional loans are available with as little as 3% down. The cost of the mortgage insurance depends on the borrower’s credit score.

Lenders will allow borrowers to drop the monthly MI once the loan-to-value ratio reaches 80%. They will typically require an appraisal (about $500) to show the value, and the loan should have been in good standing for at least the previous 12 months. Different lenders have different procedures, though, so it is worth making a call to them to get their specifics.

Borrowers with lower credit scores may be better off with an FHA loan. The mortgage insurance for a $300,000 FHA loan will cost $216/mo, even with a credit score as low as 580. The disadvantage is that the borrower cannot cancel the MI for an FHA loan. The only way to get out of it is by refinancing into a conventional loan.

If real estate values are going up, a prospective home buyer should buy as soon as possible (even with MI) rather than waiting to save up a larger down payment. If values are going up, say, 4% per year, today’s $300,000 home will cost $312,000 a year from today, $325,000 two years from today. There is also the uncertainty about whether mortgage rates will be as low in the future as they are now. Higher rates would obviously increase the cost of owning a home.

Hope this helps!

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Trusting your brain and your heart when house-dating

For most of us, looking for the “perfect” home can be an emotional roller coaster. Like hunting online for the perfect partner in life, it’s hard to know what you’re getting even after studying the dozens of photos in any particular listing and reading all the copy contained there. A person (or a house) can look and sound so incredibly appealing on the surface, but you know better than to let the seduction of a good-looking landscape or gorgeous fireplace make you want to tie the knot without a proper courtship.

Truth be told, very seldom does everything about your proposed mate match your wish list. Things you love at first may later get on your nerves, like the bad girl/bad boy who had such a great gift of gab at first but fell flat in other ways. The key here is getting a sense of your own tolerance levels. What’s most important to you in a home? And what are the deal-breakers? If you stick to those parameters and keep these terms clearly defined, the chances are good that you’ll make smart choices.

Like dating, house-hunting takes time, during which you’ll determine the differences between your critical must-haves, the not-so-important-but-I-kind-of-want-it feeling, and the no-way-not-going-to-happen-in-this-lifetime determination. This process (like dating) can be seriously draining. There are those painful first date drills (“So, where are you from?” ; “What do you do for a living?” ; “What do you like to do in your spare time?”), which is not so different from getting in your car dozens of times to look at open houses on weekends or driving around with a Realtor who may not have your entire wishlist in mind simply because you can’t seem to articulate it until you see it.

While we try not to judge a book by its cover, like posting our profiles on a dating site, the photos we use won’t reveal how we look in the morning before we press the button on the Nespresso machine. Even the descriptions can be misleading. An “efficient” kitchen may turn out to be apartment-sized, but the photo of it was taken using a fish-eye lens. And “close to restaurants, shops, and transportation” may mean light rail cars lumber by in front of the house. Convenient, yes. But can you live with it permanently? Oftentimes we get excited about the trappings: a beautifully renovated listing with a huge backyard seems like a dream come true — until we ask what all the open space is going to be used for behind the house and the Realtor tells us a Wal-Mart is going in there. Kind of like a guy who looks like a Ken doll but asks to go dutch at Starbucks on the first date.

Then there is that “all the good ones are taken” feeling. At first, you have hope that you can find the right house because you’ve salivated over what other people somehow found all those “sold” listings look better than anything out there right now.

A good exercise is to make a list of the things you like about your current home or perhaps the one you loved growing up in. There may be features of it that you know you have to have — things like the security of a gated entry, close to places you love to walk to, a fun night scene. Oh sure — the beginning of any new adventure is exciting — decorating and organizing a new place can give you butterflies and have you watching Fixer Upper ad nauseam. But if you’ve chosen a location that is too isolated, thinking you could live with the tradeoffs of commuting (and friends and family not visiting because you are so far away), that giddy feeling can fade fast.

The gist here is that finding a home, like finding the right partner, is not for the faint of heart. It takes some savvy detective work, dedication, and a bit of risk-taking. Unfortunately, in many of today’s real estate markets you won’t have the opportunity to tour a home over and over again, seeing it at different times of the day and determining whether the initial attraction is deepening or fading away.

In that case, you just have to trust your gut, try to live with a short courtship and put a ring on it — kind of like all those World War II couples who fell in love at first sight and got married on furlough but ended up spending decades together. Timing is indeed everything.

Source: TBWS

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Observe the basics when selling your home

You know the drill when you sell a car. Research it on Kelly Blue Book or Edmunds to see what your car’s year, make, model condition and mileage might get price-wise. Get the shopping cart dents popped out and spiff up the exterior and interior, take some tasteful pictures of it, and offer a detailed description of its attributes and features.

The Forbes Real Estate Council recommends much of the same approach when selling your home, even when it remains a sellers’ market. The key is remembering the age-old basics of home selling — pricing, presentation, and negotiation.

Overpricing your home is a kiss of death in today’s market, according to Forbes’ Beatrice De Jong. “Research homes in the area that have sold recently, and make sure they are actually comparable (i.e., don’t compare a fixer-upper to a newly remodeled house). Check how long local listings are typically on the market for, and adjust your expectations accordingly. Keep your eye on what else is on the market at the same time as your listing — if there is another home that is seen as a better deal, your listing will look less desirable.”

Despite going for the highest price possible, strategically its best to list for a lower price and then let bidding buyers jockey for the final number. “Listing at a lower price is common practice in very competitive real estate markets like San Fransisco and Los Angeles. This approach often ends up getting more exposure on the listing since it will show up on more homebuyers’ online feeds,” says De Jong.

Presentation is everything, especially in these days of competitive, high-tech digital images and virtual tours. Your listing should not be the exception to that rule. De Jong advises, “Some buyers love a project, but most are hoping to have to do as little work as possible (and keep their budget as low as possible). Keeping the home clean and uncluttered and presenting clear photos will present the home at its best.”

When it comes to breaking the budget on staging, there are inexpensive ways to spruce up your house to make it look more appealing, even if it’s to place your clutter and bulkier items in storage. With a cleaner palate, it’s ever for agents to point out all the positive aspects of the home when showing it.

An open mind is a beautiful thing when selling your home. Even the most off-the-wall offers can be negotiated, and most will make an offer assuming that you plan to spar with them over price and terms. Rude rejections can result in buyers never returning to try again, even if your house languishes on the market. “Emotions run high on both the buyer and seller side of buying a home, and while it’s important for buyers to not write ridiculously low offers, it’s also key for the sellers to keep from being offended, and try to see if there is some reasoning,” says De Jong. Those magical first two weeks a home has been listed will reveal a lot, especially in more competitive markets. Make sure you observe the basics, and the chances are good that your home will magically sell. Source:, TBWS

on both the buyer and seller side of buying a home, and while it’s important for buyers to not write ridiculously low offers, it’s also key for the sellers to keep from being offended, and try to see if there is some reasoning,” says De Jong.

Those magical first two weeks a home has been listed will reveal a lot, especially in more competitive markets. Make sure you observe the basics, and the chances are good that your home will magically sell.

Source:, TBWS

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Why You Shouldn’t Worry About A Slowdown

Reading Time: 4 minutes

Geopolitical tensions have taken center stage this week with multiple incidents affecting the markets.

President Trump visited Vietnam earlier this week to meet with North Korean dictator Kim Jong-Un in an effort to de-escalate nuclear growth in the country. In a move that was a surprise to everyone, Trump did not agree to anything. Instead, Mr. Trump walked away and then canceled a pre-planned agreement signing. President Trump pointed to North Korea’s desire to lift sanctions which he said he would not be willing to do completely, noting North Korea’s lack of desire to play ball.

Meanwhile, U.S. Trade Representative Robert Lighthizer intimated in his testimony to the House Ways and Means committee that there is still a lot of work to be done to reach a trade deal with China. Lighthizer says any agreement would hinge on a lot more than just a promise from China to purchase more U.S. goods.

In addition to that, oil prices surged on Wednesday in reaction to Saudi Arabia generally ignoring a tweet from President Trump saying OPEC needed to ease up on oil production restrictions. According to the Energy Information Administration, U.S. crude stockpiles dropped by 8.6 million barrels last week.

World markets also reacted to a clash between Pakistan and India. Two Pakistani fighter jets shot down two Indian aircraft over Kashmir while India claims airstrikes killed more than 300 terrorists at a training camp. This escalation will be closely watched by the world as this is the highest strain has been between these two countries since their war in 1971.



The United States economy is still growing but not at the same pace we’ve seen over the last couple of years. Federal Reserve Chairman Jerome Powell confirmed as much this week in his testimony to the Senate Banking Committee. He does expect solid growth, just not as fast as it has been. “The baseline outlook is a good one,” said Powell, adding that the world markets slowing down might end up dragging us down in the process.

While that may send up red flags for some people, and world markets will certainly have an effect in the coming months, you have to take a look at the context of this slowdown in growth. Many analysts are expecting 2 percent growth this year, down from the 3 percent growth estimation for 2018. The chart below shows the US Gross Domestic Product, or GDP, over the last ten years. Currently, the United States is the world’s leading economy with regard to GDP.

It’s important to note that data this week showed the real GDP up by 2.6 percent, well above expectations. Consumer spending was up because of a strong labor market and tax cuts, as reported by the Wall Street Journal. Analysts from Goldman Sachs say private business investments also bolstered these numbers, increasing the odds that 2019’s expected slowdown should be manageable.

The chart below from Bloomberg clearly outlines where we are relative to the recession 10 years ago. The far left side of the chart shows the beginnings of growth after the 2008 recession. The far right shows where we are today. While our economy is slowing, you can see just how strong it still is and how far removed we are from the low of 2008.  The quarterly average over the last 10 years is 2.1 percent. There is nothing wrong with moderate growth rates. This means now is not a time to panic, rather it’s a time to potentially take advantage, especially in the mortgage industry where rates have moved significantly lower since the beginning of the year. This, couple with a weakening housing market, allows for more affordable financing.



With rates remaining low and stable, housing inventory increasing and home prices growing at their slowest pace in nearly four years, there is potential for 2019 to be a boom for the housing market.

Fed Chair Jerome Powell continues to reiterate his stance of patience with regard to the Fed’s approach on rate hikes. It’s expected that if there is a rate hike this year, it will be singular.

That stability is translating to a spike in mortgage applications as we get into the spring buying season. According to the Mortgage Bankers Association, mortgage applications were up 5.3 percent week-to-week and were 0.4 percent higher than a year ago at this time.

Home prices are still historically high right now but are also continuing their lean toward the favor of the homebuyer. According to the S&P Case-Shiller index, home prices are growing at their slowest rate since August of 2015 (4.7 percent in December 2018 down from 5.1 percent in November 2018).

The interesting part of that is, despite rates going down and home price growth slowing, that was not enough to offset the fact that homes are still not affordable for most Americans. Wage gains simply aren’t on the same level.

December’s housing start numbers were rough, down to their lowest level in two years. According to the Commerce Department’s numbers, new home construction is at its slowest pace since September of 2016. The data shows new home starts were down 11.2 percent from November. Permits to build housing were up slightly, just 0.3 percent in December.

Another thing that might help the spring buying season is a positive with regard to tax returns. Initial reports were showing frustrated people who were getting less in their return or having to pay out instead of getting a rebate. Now, after a four weeks of filing data, people are reporting better tax returns than previous years with the average tax return up 1.3 percent from a year ago according to IRS data.

About The Author – GREG RICHARDSON

Greg Richardson is Movement’s Senior Advisor of Capital Markets & Strategy and a contributing author to the Movement Blog. His weekly market update is a must-read commentary on financial markets, the mortgage industry and interest rates. Greg is an industry veteran who knows how to read the financial tea leaves and make complex industry data easy for loan officers, real estate agents and homebuyers to understand.