Have you been thinking about buying a home but you just can’t seem to save up the 20% down payment that many conventional loans require? You’re not alone! Many first-time buyers do not have large amounts of cash to spend on a down payment even though they have a stable job with good income.
Now, first-time buyers anxious for homeownership have a new option. Fannie Mae has recently announced a new loan product that only requires 3% down. For a home costing $350,000, that is still a $10,500 down payment, but this amount is far more manageable than the $70,000 down payment that would be needed if 20% down were required on that same home! According to the Federal Reserve, 45% of renters delayed buying a home because they could not afford the down payment. A lower down payment requirement would allow for more buyers to purchase their first home.
These loans, like most others, require buyers to be eligible based on verified income, debt and credit scores, among other factors. Additionally, at least one of the co-borrowers must be a first-time homebuyer. The loan product will also require private mortgage insurance, which is paid monthly with the mortgage until the buyers have paid down 20% of their loan.
Fannie Mae sees this new loan product as “a responsible option for qualified borrowers.” It allows creditworthy borrowers to access credit and receive a loan while interest rates are still at historically low levels (the U.S average mortgage rate on a 30-year fixed loan is just under 4% at the moment). Though Fannie Mae doesn’t think this will fix all the problems surrounding access to credit that currently exist, it is one step in the right direction!
2015 is looking like a great year to buy a home for other reasons as well. After home prices grew at a fairly rapid pace in both 2012 and 2013, prices have been a bit steadier, rising at a much slower pace in 2014 and this trend is expected to continue into 2015. In addition to steadier home prices, renting is getting more expensive and the vacancy rate is at an all-time low in many areas of the country. As rents increase, the cost of homeownership begins to be less expensive than renting and a better investment of your money.
This New Year’s Eve, the Tatum family made goals together, motivated to start the new year on the right foot. Instead of making the usual New Year’s resolutions, they made tangible goals together as a family to work towards becoming debt-free and purchasing a home in 2017.
After difficulty making rent payments last year, Alonzo and Tomika connected to the Virtual Counselor Network to get their finances back on track. With a family of six, the VCN made it easier for Alonzo and Tomika to connect with a financial coach, from right at home using online video chat technology.
With the support of a CHW financial coach, the Tatums began changing the way they were saving and spending their money. Alonzo says, “What’s changed the most is really our mindset, being conscious of our budget and accountable to our coach.” Alonzo and Tomika were able to pay their past due in the same month and promptly joined the Financial Health Club afterwards.
The Tatums meet with their coach, Jesse, on a consistent monthly basis to check in on progress towards their goals. Tomika says, “It has motivated us and prepared us to be accountable every month.” At their last session, the family checked in on accomplishments and challenges for the month and discussed ways to reduce spending. They made a plan to create a Vision Board with their family to ensure they are all committed to their savings goals.
Since working with a coach, Alonzo and Tomika have made significant strides toward their goals. They are now keeping a monthly budget and working together to find ways to reduce their spending. They’ve started repairing their credit using some letters their coach recommended to send to fix errors on their report.
Coaching has also impacted their family in positive ways. The Tatums have recognized a difference in their family’s attitudes towards money.
“We believe this is going to change our family’s legacy. We’ve involved our kids so that they can avoid the same pitfalls in their lives. Now they have vengeance against debt!” says Alonzo.
“I am really impressed with their motivation and truly believe that they will reach their stated goal, which is to become debt-free and purchase a home by 2017,” explains Jesse, financial coach.
The Tatum family plans to continue working with their financial coach throughout 2015, meeting on a monthly basis and regularly checking in on their progress. In order to reach their goals of becoming debt-free and purchasing a home, they have committed to repairing their credit and increasing their savings. In two months, they will have paid off their payday loan debt, allowing for a surplus in their budget and a chance to increase their savings. Before their next coaching session, they’ve committed to writing and sending letters to creditors in order to improve their credit. They have also signed up for the Financial Fitness class and plan to attend a Homebuyer Class later this year. In addition, in order to increase their monthly savings, they have planned to enroll in SDGE’s Level Pay program.
By strengthening their monthly budget, increasing their savings and improving their credit, the Tatum family will be in the best position possible when they go to apply for a home loan in the near future.
It’s easy to spend more than you plan to during the holidays. Keep your eyes on the prize. If your goal is a higher credit score, spending more than 30% of your credit limit could cause your credit score to drop. If your goal is saving money, using credit for purchases could mean finance charges in the long run. Stick to these 5 tips to avoid getting into holiday debt so that you can reach your financial goals.
- Set spending limits: Make a list and a spending plan before going shopping to avoid extra purchases.
- Don’t buy it if you can’t afford it: Seems simple enough, but some purchases can be tempting. Only charge what you can afford to pay off the next month. Otherwise, you’ll be paying financing costs well into the new year.
- Consider ways to cut back on current expenses: It’s never too late to start saving a little extra. Whether it’s giving up a morning coffee for a few weeks or cutting back on cable, small changes can help offset some holiday costs.
- Save on purchases: Check for coupons or compare online to make sure you’re getting the best deal. Apps like GeoQpons can help you save on purchases at many retailers on-the-go. You may also have unused gift cards you can cash in toward purchases.
- Share the costs: Consider doing a gift exchange instead of buying gifts for everyone on your list. Or suggest a potluck meal if you’re doing the hosting.
If you are forced to use your credit card for expenses, make a commitment to paying off that debt in the first few months of 2015, so that you can stay on track towards your goals. Remember that the best gift is often not wrapped with a bow, but is time spent with family and friends.
Housing Market News
Sergio Quero, Senior Housing and Financial Coach
In 2004, the housing market was a complete success. The process of buying a house was focused on the ability to purchase and not the financial capacity of the buyer. Buyers first sought the home of their dreams and then worried about financing. Many achieved the American dream of buying their first home, but without a down payment, with a low credit score and without proof of income. Ten years ago, the buyer also had to face disadvantages when buying a house such as high prices, the use of subprime loan programs and the pressure to buy on the spot without a defined budget. As a buyer in 2004, this cycle was interrupted by the balance of the real estate market and gave us one of our worst economic times.
Today, the buyer has the knowledge of what happened in the last 10 years. This has taught him or her things that cannot be avoided: Know the terms of financing, follow a monthly budget and be financially qualified before buying a house.
In 2014, the (home buying) process is characterized by the financial capacity of the buyer, which results in a buyer with a defined and successful plan. Through CHW, the buyer is able to purchase a home using the necessary tools to be a capable and informed buyer. Through financial classes and coaching, CHW enables today’s buyer to determine if the goal of buying a home is possible and realistic and has financial coaches working directly with buyers to achieve the same goal.
Noticias del mercado de Bienes Raíces
Consejero principal de vivienda y finanzas
En el año 2004, el mercado de bienes raíces era todo un éxito. El proceso para comprar una casa se enfocaba en la rapidez de poder adquirir y no en la capacidad financiera del comprador. Los compradores buscaban primero la casa de sus sueños y después se preocupaban por obtener financiamiento. Muchos lograron el sueño Americano al comprar su primera casa sin dar enganche, con un nivel de crédito bajo y sin comprobar ingresos. El comprador de hace 10 años tenía que enfrentarse a desventajas al comprar una casa como: precios altos, la utilización de programas de financiamiento no adecuados y la presión de comprar en el momento sin un presupuesto definido. El ciclo como comprador del 2004 fue interrumpido por el balance del Mercado de bienes raíces y nos brindó uno de nuestros peores momentos económicos.
Hoy en día, el comprador tiene el conocimiento de lo sucedido en los últimos 10 años. Esto le ha enseñado las cosas que no se pueden evitar: Conocer los términos del financiamiento, seguir un plan mensual de presupuesto y ser capacitado financieramente antes de comprar una casa.
El ciclo del comprador en el 2014 es caracterizado por la capacidad financiera del comprador, lo cual tiene como resultado un comprador con un plan definido y exitoso. Por medio de CHW, una organización sin fines de lucro, el comprador logra adquirir su casa utilizando las herramientas necesarias para ser un comprador capaz e informado. CHW capacita al comprador de hoy, por medio de clases financieras que ayudan a determinar si la meta de comprar una casa es posible y realista y cuenta con guías financieros que trabajan directamente con los compradores para lograr esa misma meta.
Most Americans spend 30-40% more than they intended to spend during the Holidays, and spend the first six months of the New Year paying off debt. Here’s some great tips to consider from our Financial Fitness team to have a stress-free holiday season…
1. Plan ahead.
Set up a holiday savings and spending plan and stick to it! Get the Holiday Savings & Spending plan
Experts recommend trying to spending less than 1.5% of your income on the holidays*. So for example, if you make $40,000 a year, it is suggested to save about $600 for the holidays. Whether you spend more of less than this amount, deciding early how much you want to spend is always a good idea to avoid overspending and stress.
*Source: Practical Money Skills
2. Budget your time (and money).
Compare prices and give yourself enough time to shop around for the best deals. Sometimes it’s the last-minute gifts that can send us over our spending limits. Shopping early will usually help you get the best deals and give you enough time to find coupons or sales for the item. Here’s some helpful website and apps that can help you save more money:
- Coupon Mom: CouponMom (not just for moms!) is a website that provides weekly shopping advice to you and more than 3 million members and shows you how to combine coupons, loyalty programs and weekly sales in your area to maximize your savings.
- Retailmenot.com: Get online coupon codes that can help you get free shipping or big discounts on your next online purchase.
- GasBuddy.com: When you’re shopping around or traveling, it’s important to find the best places to fill up in your area. Also check out their fuel-saving tips, maps, and pricing info! Available as a mobile phone app.
- The Coupons App (iPhone, Android)
- CouponSherpa (iPhone, Android)
- GeoQpons (iPhone, Android, Blackberry)
3. Get creative.
Consider a gift exchange with family and friends or a potluck to share on costs. You can even try making your own gifts this year. Pinterest is full of great homemade, DIY gift tutorials. Check out our Pinterest page for a few ideas!
4. Pay in full or pay it off.
The holidays are a time of giving and it can be very easy to overspend. Use your Savings & Spending plan to decide what you can afford to spend and try to pay it in full or in “cash” whenever possible. If using your credit card during the holidays, try to pay the credit bill in full or you may be dealing with debt in the new year.
5. Stick to the plan.
Think about your financial goals – are you hoping to one day buy your first home or are you trying to save for college? Don’t let unexpected costs creep up and hinder your savings goals. Remember that it’s really the time you share with family and friends during the holidays that means the most – not the gifts or parties.
Interested in learning more savings and financial tips? Consider taking CHW’s Financial Fitness class. Or if you’re ready to take the next step toward your financial goals, learn more about our coaching program.
IS A HOME IN YOUR FUTURE?
Learn about CHW’s one-stop homebuying shop at our Happy Homebuyer Hour at Waypoint Public! Appetizers and first drink on us. Please RSVP below.
Happy Homebuyer Hour
View the flyer or share it with friends!
Monday October 13, 2014 – Monday October 13, 2014
4352 Delta St.
Taller GRATUITO! Ven aprender los primeros pasos a la compra de una casa. Algunos temas del taller son: el proceso de comprar una casa, como estar listo/a para obtener una hipoteca, y programas de prestamos disponibles. El taller es de 1 hora y es una introducción al taller para Compradores de Casa de 8 horas que también ofrecemos.
Wednesday February 11, 2015 – Wednesday February 11, 2015
4010 Fairmount Ave
Attend our FREE, no strings attached pre-qualification event! Our loan officers will help you figure out what kind of mortgage you can afford and help you determine your next steps. For the most accurate estimation of your affordability, please bring your most recent pay stub, 2013 W-2’s, and an idea of how much you spend every month on minimum payments towards debt.
Monday December 8, 2014 – Monday December 8, 2014
4010 Fairmount Ave
FREE! Come and receive more information on FICO scores, how to establish credit, what is in a credit report, understanding credit card terms and conditions, and more credit tips.