Larry McDonough Jr

DRE: SA699803000


(520) 477-2239
(602) 230-7600 (Office)

Larry McDonough Jr's Blog

What Down Payment Amount is Right for You?

Posted On: July 29th, 2023 4:48PM

 

What Down Payment Amount is Right for You?


Buying a home is a major financial decision that requires careful planning. One of the biggest decisions you have to make is how much down payment to put down. The amount of money you put down can have a significant impact on your monthly mortgage payment, interest rate, and your ability to qualify for a loan. In this blog post, we’ll explore what down payment amount is right for you and what factors you should consider.

20 Percent is Ideal

The most ideal down payment amount is 20 percent of the home’s purchase price. If you can afford it, putting down 20 percent can help you avoid Private Mortgage Insurance (PMI) and make you more attractive to lenders. PMI is a type of insurance that lenders require borrowers who put down less than 20 percent on their home purchase. It protects the lender in case the borrower defaults on their loan.

5-10 Percent is Fine For First-Time Buyers

If you’re a first-time homebuyer, you may not have enough savings to put down 20 percent. That’s okay. Most lenders offer loans that require a minimum down payment of 5 percent, and some even offer loans with zero down payment. However, keep in mind that if you put down less than 20 percent, you will likely have to pay PMI.

Don’t forget PMI

PMI can add significantly to your monthly mortgage payment, so it’s important to factor it into your budget. It typically costs between 0.3 to 1.5 percent of your loan amount each year, depending on your credit score, loan-to-value ratio, and other factors. PMI can be removed once you have at least 20 percent equity in your home.

Look For Alternatives to Fund Down Payment

If you don’t have enough savings for a down payment, consider other options for funding. You can ask your family for a gift or loan, borrow from your retirement account, or explore down payment assistance programs in your area. Keep in mind that borrowing from your retirement account can have tax consequences and impact your retirement savings.

Think About Long-Term Goals

Finally, before you decide on a down payment amount, think about your long-term goals. Do you plan to stay in your home for the long haul, or do you see yourself moving in a few years? If you plan to stay in your home for a long time, it might make sense to put down more money upfront to reduce your monthly mortgage payment and pay less in interest over the life of the loan.

Deciding on a down payment amount can be challenging, but it’s an essential part of the home buying process. Keep in mind that the right down payment amount for you will depend on your financial situation, goals, and preferences. Consider working with a financial advisor or mortgage professional to help you make an informed decision. With the right knowledge and planning, you can find a down payment amount that fits your needs and sets you up for long-term financial success.

Add Comment

Why Interest Rates Effect Inventory Levels

Posted On: July 16th, 2023 2:26AM

Why are home inventories remaining so low in 2023? The interest rate is partially to blame. As you probably already know, your existing mortgage interest rate doesn’t travel with you when you purchase a new home. Many homeowners don’t want to give up their lower rates by jumping houses. As a result, “home hoppers” who usually free up inventory are staying put instead of moving on. This is creating an especially painful situation for buyers looking for classic “starter homes” that represent the smallest and cheapest properties.

 

The Math Behind High Interest Rates and Low Inventory

 

While soaring prices make the idea of cashing in tempting for many homeowners, those gains can quickly be eaten up by interest rates that could be as much as double compared to just two to three years ago. Higher mortgage rates can easily add hundreds of dollars a month for buyers on top of what are already record home prices.

 

When current owners don’t sell, both first-time buyers and “upgraders” have fewer homes to choose from on the market. As the 2023 summer buying season heats up, the interest rate on a 30-year mortgage stands at 6.67%. While this represents a month-to-month slide, rates are still significantly elevated compared to this time last year.

 

In addition to the generic answer of “high interest rates” to explain the thin housing inventory, it’s important to look closely at the nuanced reasons behind the continuously dwindling supply. First, many older Americans are making the decision to age in place instead of giving up their homes. This is driven by a rise in home-based healthcare and assisted-living services. It’s also being fueled by the fact that people who have paid off their homes are reluctant to risk those high home prices and interest rates that are making homeownership so difficult for younger buyers today.

 

“While the overall housing market has cooled nationally, the housing supply gap from slow construction that followed the Great Recession continues to influence a potential homeowner’s ability to buy a home,” according to Realtor.com. With national inventory below the “comfortable spot” of 1 million as the market entered the busy spring buying season, it was bound to be a summer of competition for buyers. While inventory did rise 13% on a year-over-basis at the start of March, it was still down 30% compared to five years ago. By May, the national inventory had 22.7% fewer homes newly listed for sale compared to the previous year. While homes in May lingered for an average of 43 days on the market to overtake the 29-day average from 2022, this is still much shorter than the pre-pandemic average.

 

A second factor contributing to low inventory is the rise in investor activity. Many larger investors are paying cash for homes. Those that are financing homes often have the means and backing to cover higher interest rates.

 

“Investors bought 24% of all single-family houses sold nationwide last year, up from 15% to 16% annually going back to 2012,” according to one analysis. The states with the highest investor activity are Georgia (33%), Arizona (31%), Nevada (30%), California (29%), and Texas (29%). As you’ll see next, even cities that aren’t necessarily investor hot spots are still seeing the squeeze.

 

Inventories in Metro Markets Are Hitting Record Lows

 

Metro areas are experiencing greater housing shortages compared to rural areas around the country. According to a recently published report by TIME, the metro areas around the country with the lowest inventories are Rochester, Buffalo, Allentown, Grand Rapids, Worcester, Greensboro, Hartford, and Boston. While these cities may fly under the radar in terms of being hot markets, they provide great examples of how densely populated towns combined with a lack of new constructions can create serious housing crunches. A usually “cool” market like Hartford has seen a huge increase in buyers who have been priced out of markets in New York or New Jersey. This is one of the reasons why builder-friendly markets near Austin, Dallas, and Nashville are expected to cool down from a period of bidding wars as more inventory eventually hits the market.

 

The Bottom Line on Interest Rates and Inventory

 

There’s no forthright answer coming from the Federal Reserve about when interest rates are coming down. Once rates do begin dipping, the descent is likely to be slow. That means that the market may remain in an internal stalemate for quite some time until sellers feel more comfortable unloading their homes. It’s possible that sliding home prices will cause some sellers to capitulate out of a fear that they’ll miss this upswing in the market if they don’t sell before the next “crash.” However, that may not be enough to actually create the kind of inventory needed to conjure up anything resembling a buyer’s market.

 
 

Add Comment

Five reasons why Summer is the best time to buy a home

Posted On: July 7th, 2023 7:11AM

Five Reasons Why Summer Is the Best Time to Buy a Home

Is summer the best time to buy a home? It’s no secret that the market heats up when the weather does. However, some buyers shy away from sunshine browsing because they assume that a hot market means high prices. This article covers the top five reasons why it’s a good idea to buy in the summer.

 

Bigger Inventory

Most sellers time market entry with the end of the school year. Like buyers, sellers are often eager to get to their new destinations before the start of the new school year. This is one of the reasons why listings explode starting in April and May. Additionally, sellers want to move while the weather is warm in order to be fully settled in their homes by the time the holidays roll around.

This isn’t just anecdotal. The National Association of REALTORS® (NAR) has been tracking seasonality in the housing market since 1999. According to the NAR, the number of sales begins to increase significantly in the spring. In anticipation of summer moves, sales activity begins to creep up beginning in March. The NAR tracks an average increase in home sales of 34% for March. That steep increase is actually just the beginning.

“The busiest home selling months are May, June, July and August,” according to the NAR. This four-month period accounts for 40% of total annual sales volume. While all four months are hot for buyers and sellers, June is typically the peak month for selling activity.

Unsurprisingly, the NAR’s data shows that the slowest months of selling activity are November, December, January, and February. January is typically the slowest month of the year. While December is slow because people are often too caught up in the holidays to plan big moves, the sluggishness of January and February is due to the fact that many buyers are too tapped out from holiday spending to focus on taking on another major expense.

Interestingly, the NAR finds that even buyers without kids prefer to move in the summer. This is especially true of renters who prefer to take advantage of nice weather when buying their first homes.

 

“Dog Day” Deals

If homes have lingered through spring and summer without being sold, owners get antsy. That’s why the middle and later parts of summer are great for negotiating better deals. Buyers who have been hesitant to put in high offers often swoop in to snatch properties that would have been unobtainable in April or May. The lesson is that buyers who are patient enough to stick it out until the end of summer often get some of the best deals of the year while still getting into their new homes before the holidays!

 

The Ability to See a Property in Its Full Glory

In many parts of the country, shopping for homes during fall and winter can be depressing. Homes and properties can look gray while the landscaping is dormant. While seeing the “winter version” of a property can be important, the best way to judge a home is to see it while everything is blooming!

Touring homes during summer allows buyers to see the potential of gardens and landscaping. They can also get a better idea of the health and condition of a home’s green spaces. The summer landscape lets buyers evaluate the level of outdoor maintenance or repairs that will be needed. In parts of the country that routinely experience prolonged snow coverage, it can be impossible to properly inspect yards, decks, and patios during winter.

 

More Hours for House Hunting

Finding a home can feel like wedging a full-time job between your existing full-time job and life responsibilities. The longer hours of the summer provide more time for house hunting at the end of the day. During the winter, after-work tours of homes make it hard to get a good look in the dark. The buyer won’t see the way that light flows into the home during the day. It may also be impossible to take a proper yard tour. That means that the buyer just needs to hope that nobody else makes an offer before they can come back to take a look at the house on a weekend. Summer provides roughly five extra hours per day for viewing houses in full light!

 

Instant Satisfaction

When people buy homes in the fall or winter, it may be six to eight months before they actually get to enjoy all of their new home’s features. A summertime closing means you get to begin enjoying a lawn, porch, patio, or swimming pool from the first day. It’s also easier to get a jump on home improvements during the summer instead of putting projects on hold all winter.

The Bottom Line

We can’t always control when we need to buy a home. We also shouldn’t force a scenario just because we’re feeling pressured to buy by a certain date on the calendar. However, a person with the flexibility to start searching whenever they want should definitely take advantage of the summer market’s momentum to find their match.

 
 

Add Comment

What goes into a Home Evaluation

Posted On: June 13th, 2023 6:24AM

What goes into a home evaluation

Buying or selling a house is not an easy task. It requires a lot of hard work, dedication, and knowledge about the real estate market. When it comes to selling or buying a house, the first thing that comes to mind is a home evaluation. A home evaluation is a process that determines the current market value of your home. It is essential to have a home evaluation done before selling your home or buying one. 

 

Location and neighborhood:

The location and neighborhood play a significant role in a home evaluation. A house situated in a prime location in a good neighborhood will have a higher value than a house situated in a less desirable location. It is always beneficial to do thorough research on the neighborhood before buying a house.

The size of the house:

The size of the house is another factor that is taken into consideration during a home evaluation. A larger house will have a higher value than a smaller one. The square footage of the house is crucial in determining the value of the property.

Lot size:

The lot size of the property is also significant in a home evaluation. A larger lot size will have a higher value than a smaller one. The location of the lot and the privacy it offers is also essential in determining the value of the property.

The number of bedrooms and bathrooms:

The number of bedrooms and bathrooms in a house is crucial in a home evaluation. A house with more bedrooms and bathrooms will have a higher value than a house with fewer bedrooms and bathrooms.

The age and condition of the house:

The age and condition of the house are important factors that are taken into consideration during a home evaluation. A newer house will have a higher value than an older one. Similarly, a house in excellent condition will have a higher value than a house in poor condition.

Improvements and updates:

One of the essential factors in determining the value of a house is the improvements and updates made to the property. If a house has been renovated or updated, it will have a higher value than a house that has not been renovated or updated.

Condition of house and appliances:

The condition of the house and the appliances is also considered during a home evaluation. If the house is well-maintained and the appliances are in good condition, it will have a higher value than a house with poorly maintained appliances.

A home evaluation is an important process that determines the value of your property. There are several factors that are taken into consideration during a home evaluation, including the location and neighborhood, size of the house, lot size, number of bedrooms and bathrooms, age and condition of the house, improvements and updates, and the condition of the house and appliances. By understanding these factors, you can determine the current market value of your home and make informed decisions when buying or selling a house.

 
 

Add Comment