Whether you are planning to put down a full 20 percent or pulling together the cash for a 3.5 percent down payment for an FHA loan, your down payment might be the biggest single cash expenditure you ever make. Some scrimp and save for years, while others can ready the cash with less difficulty, but no buyer in the history of home buying has ever said they have too much down payment money.
Here's an insider secret: many buyers have a treasure trove of down payment resources at their disposal, hidden in plain sight. Here's a map to this hidden treasure – a handful of frequently-overlooked sources of down payment funds.
Home buying is one of those push-meet-shove-type situations. If you're serious about coming up with your down payment funds, sit down and backtrack over your monthly budget or your last month's checking account statements. Isolate your top 10 budgetary line items and do an internal gut check on whether there is anything on this list that you can slash or eliminate.
If you spend $5 a workday on a bagel and coffee at breakfast and another $15 on your takeout lunch, that's $400 per month – almost $5000 a year! – you can save by simply bringing these things from home (not to mention the health and other benefits you'll gain). And those numbers are not inflated, if you work in a big city. Nor is the $100/month cable bill, the $20 yoga class, the $2,000 vacation or the premium pricing you might paying for cell service.
Redirecting the dollars you would normally spend for some of these big-ticket items back into your down payment savings account is like pressing fast forward on your home buying timeline.
2. Your stuff.
When you need to save money, there are really only two levers you can pull: you can spend less, or you can make more. Selling stuff you already own and don't actually use is a relatively painless way to make more money to go toward your down payment. If you're really serious about home buying, put everything on the table.
Things buyers-to-be often sell (usually online) include:
Don't underestimate the amount of cash you can bring in from the things you already own.
One way to make more money is to sell off the stuff you have lying around the other is to get to work! Spend your off-time, your evenings and weekends leveraging your professional skills or personal hobbies to bring in some extra cash.
Once you get serious about coming up with your down payment cash and decide to be creative about where to find that money, using your skills and your time creatively is a power-packed way to open the financial floodgates.
Consider starting out with a simple email to your circle of acquaintances outlining your skills and what kind of work you'd like to pick up. You can also list your potential services on a site like TaskRabbit. If you are crafty you might let your new felting hobby stock the virtual shelves of your shop on Etsy. Even if you aren't "creative" think creatively about what you might do to earn a little extra cash. One acquaintance of mine has earned thousands of dollars dog sitting while she works at home. You'll be surprised by how much you can earn hawking wares on the side or with small business projects, like research, bookkeeping or office organizing projects.
Many home buyers get by with a little help from their friends (and relatives). Most mortgage programs will allow for some portion of your down payment to come in the form of 'gift money,' which is exactly what it sounds like: money someone gives you to help you buy a home.
The best case scenario is to have some idea of what sort of gift money you can count on as far in advance as possible, as it will impact your own savings targets and your lender's documentation requirements. If you have a parent, sibling or auntie who has mentioned their interest in giving you this sort of gift it is important to bring the subject up, express your gratitude and let them know that you're planning to buy soon. You'll want to have a detailed conversation about logistics and go over everything from timelines to tax obligations.
Check in with your mortgage pro about how much of your down payment needs you can satisfy with gift money – guidelines vary widely based on how much of your own cash you have to put down and what loan programs you're applying for. Lenders almost always require that gift money be contributed along with a gift letter that states that the giver is a relative and that the money is a gift, not a loan. The lender may also require to see a bank account statement from the giver showing that the money was theirs to give – just to be sure they didn't go out and get some sort of loan that they expect you to help them repay.
Some retirement accounts allow you to borrow against or pull out funds, penalty-free, to apply them toward your down payment on a home. Obviously your specific circumstances will determine if it is advisable for you to tap into your 401K or IRA and plug that cash into a house. For some buyers, it may make sense to get your down payment up to 20% by borrowing a few thousand dollars from yourself!
If getting your down payment to the 20 percent mark by borrowing from your 401K gets your mortgage interest rate down and allows you to repay that cash to your own retirement account (vs. to your mortgage lender) with interest, you and your financial advisor might agree that this move is the right move for you. Or not – this is a highly personal decision that must be made strategically, but some homebuyers should at least explore whether their retirement accounts are a sensible source of some portion of their down payment funds.
Saving $100K on your next home sounds crazy, right? Savings like this are life changing and could allow you to do so much more with your future plans. Believe it or not, with a few changes in your game plan this is possible.
A strategy that will save you thousands of dollars in interest charges and cut multiple years off of your home loan, is paying extra on your mortgage monthly.
Understand that paying down the principal quicker on your home does not decrease your minimum payment each month. However, it will shorten the life of the loan and save you more money than most can save on their own.
⬇︎ Here are three ways to save you thousands on your next home ⬇︎
Some people do not know this, but the largest part of your early year payments go towards paying interest. If you pay a little extra on your principal now, this will make a significant amount of savings down the road.
The additional 1/12th of your monthly payment will decrease the balance on your current principal and likely avoid some of those interest charges.
If you get an annual bonus or a nice size tax return check, use it to pay one extra mortgage payment each year. You will cut the life of the loan significantly and save thousands in interest.
This takes a little more effort, but you could authorize an automatic transfer from your checking account to savings account bi-weekly. You will have made 26 half payments, which will become 13 full payments at the year's end. This is one extra month's payment.
In this frenzied seller's market, achieving the best possible outcome when selling your home is pretty simple. It comes down to proper pricing and ensuring it's viewed (physically and online) by as many qualified buyers as possible.
Here are the two rules to follow if you want the most money for the sale:
As you can see in the chart below, there are negative consequences for overpricing your home. Listing it for sale above market value almost ensures fewer interested buyers taking a look.
Seller's who sell their own homes receive far less money for their property than those who use an agent. The data:
FSBO Sale = $210,000
Home Sold by Agent $249,000 - $14,940 (hypothetical 6% agent commission) = $234,060
Experience matters. Hiring Galbreath Real Estate will ensure you're in the optimal position to receive the best price, terms and conditions for your transaction. (Click here to see our record of success)
Homes with professional photos sell for $19,000 more. (Our seller clients enjoy a media strategy that includes professional photos at no additional cost.)
There are 184 tasks that your seller's agent performs for you. Do you really want to take it upon yourself to perform all of them and take home less money after the sale?
When interviewing agents, beware of those who "buy listings," which happens when an agent is hired after convincing the seller their home is worth more than it really is, in order to get the business. It's unethical, but it happens a lot.
If you'd like to start the conversation about your real estate needs, click here and we'll be happy to set up a free consult at a most convenient time.
People throughout the United States have begun relying on "Zestimates" as their one and only source for getting their home's current value. Sadly, as pointed out by the mainstream media below, this information can often be drastically wrong.
In fact, in Ohio, the median error rate is 5.8%. This can absolutely raise some eyebrows when people go to enter in their home's information for an automated home valuation.
LA Times, mentions that in San Francisco, California the median home value is near $1,008,000. With "Zestimates" being inaccurate at a rate of 11.6% this equates to about $117,000. This number alone should crush the expectation that computers are going to provide you with the most accurate answer out there for the valuation of your home.
According to the LA Times, Zillow's very own CEO Spencer Rascoff answered that they're "a good starting point" but that nationwide "Zestimates" have a "median error rate" of about 8%.
Los Angeles Times:
US News Real Estate:
User inputted data does contribute to the "Zestimate", information such as how many bedrooms/bathrooms make up the home, square footage of the home, and the lot size has to be accurate! The more information Zillow already has about your home the better... if it's a newer construction or first time inputted into Zillow, be CAREFUL!
Source: Zillow Advice Thread
This is a BIG one. Property tax records are a part of the home valuation process that should not be overlooked. Just like inaccurate basic information, inaccurate date of sale or past sale prices affect your home's valuation. See the image below for an example.
Source: Seattle Bubble
To keep things simple... Zillow won't know what you don't tell Zillow. REPORT your home improvements or upgrades to the property. Something that may seem like a quick and easy fix to your home may, in fact, affect your home's value when it comes to trying to sell your home. There is a misconception that if you did, in fact, update your kitchen or remodel the inside doesn't necessarily mean it's worth $100,000 more than what Zillow says. Upgrades and additions to the home greatly depend on what other homes in your market are like.
Source: Homes Realty Group
The turnover rate for the housing market is a simple one. The hotter the market (the more homes that are selling and the more information Zillow has about the homes in your area) the more accurate the Zestimate will be!
If you are in the market to sell your home the Zillow Algorithm is something you should pay attention to. Any adjustments to this can affect the value of your home, but Zillow doesn't adjust their algorithm very often. According to Investopedia.com, Zillow's algorithm was adjusted and it brought the National average two points down from last year to a median error of 6%.
As a proud member of the Columbus area community who actually lives here, works here and sells homes here, I would be happy to send you a free report of exactly what your home is worth.
Technology is awesome, but when it comes to the value of your largest financial asset, the accuracy of your home's value matters.
Knowing the average inaccuracy of the Zestimates in your area can greatly impact your decision on whether or not to trust that number. People have become so accustomed to trusting online home valuations because they don't know where else to go.
According to a recent case, the company's controversial "Zestimate" tool repeatedly undervalued a woman's home, making her home sell slower than she would like. This is not the only case of this type of inaccuracy happening. Read more about what this woman had to say about "Zestimates" here:
Should obtain "the consent of the homeowner" before posting them online for everyone to see...
So why is this woman's case important? A number as small as 10% inaccuracy works out to be $100,000. This isn't a small sum we are talking about here, it's a $100,000 difference in your largest financial asset. As you can see below the averages across the country are spread out amount 4% to as high as 7.3% in Tennessee. This information could be the deciding factor between selling your home or waiting.
Zillow doesn't make it easy to track down "Zestimates" on their website. Sure you can easily get a "Zestimate" by clicking the box right in the middle of the home screen, but what if you had a question or wanted to learn more. This is where it gets tricky.
One statistic that is overlooked by many homeowners is that the accuracy of the Zestimates in their specific area can be drastically different than the national average.
When you visit Zillow.com ALL the way at the bottom is the small tab "Zestimates". Here you will find a bunch of FAQs about Zestimates and hyperlocal information that you've probably never seen before
This is a big red flag. Not only does this tell the public that Zillow is unhappy with how their Zestimate Home Value tool performs, but that they believe other teams can do a better job then they can.
At the moment, Zillow has announced that they are rewarding a team $1,000,000 for drastically improving the Zestimate.
As a proud member of the Columbus community who actually lives here, works here and sells homes here, I would be happy to send you a free report of exactly what your home is worth.
Technology is awesome, but when it comes to the value of your largest financial asset, the accuracy of your home's value matters.
Not everyone has the time to put major work into their home.
There are tons of DIY fixes that you can complete in a weekend if you are committed to rolling your sleeves up and getting your hands a little dirty! (not really)
We filtered through some of the trendiest DIY hacks & projects that we think will be the perfect addition to spruce up even the most dated rooms in your home!
Painting a room or wall may sound like a tough job, but it can make all the difference and can be knocked out in a day!
This one may sound too easy, but we promise it can be the thing to turn your kitchen from average to awesome!
We know this one is a little odd, but wallpaper is back in style! Pick a small room and get to work! You'll be able to conquer this task in just a couple hours.
Have a vintage chair lying around? Or pick up something eclectic from a garage sale this weekend? Pick up the sandpaper and a paintbrush and give a piece a furniture some new flare!
This one is new for us too! There is actually tile that you peel and stick! This one is great for the experimenter who wants to really try something new in their kitchen or bathroom.
With the right tools, hanging shelves can be a breeze! Bring that empty wall to life with some evenly spaced shelving for your mementos!
Pallets are usually something you can find laying around or maybe your local hardware store might even hook you up with a couple free ones! This project is great and only requires a couple basic woodworking tools to transform any patio space.
Swap the legs out on your old coffee table or end table for a new look! It's simple and will take you close to 10 minutes.
There are so many options when it comes to bathroom and kitchen sink faucets, but if yours is starting to seem a tad dated, it may be time for an upgrade!
Let us know how they come out!
It pays to sweat the small stuff. Especially when it comes to getting ready to sell your home!
Here are some quick & simple tips to maximize your curb appeal, the inside feel of your home, and a cohesive style.
Natural light can sometimes be unobtainable. Make sure to replace any burnt out bulbs and use a higher wattage light bulb to achieve the brightness buyer's desire.
Mirrors are a simple and easy way to "add" more space to a room. They look beautiful as well as give the illusion that a room is bigger than it really is.
Wash every single window in your home. You might be surprised how much light you can let in (and how much hidden dust you can get out!)
Cluttered closets, drawers, and cabinets can turn off potential buyers. Make guests envious of your organization.
Adding personal touches such as picture frames or a gallery wall can create a welcoming and inviting environment!
Moving out or moving in? Cleaning is an important part of that process!
From ceiling fans to baseboards there is so much to clean when you're moving out. We want to help make the process as easy as possible, so we made a checklist of everything you should keep in mind while cleaning.
Just one less thing you need to keep track of!
Looking for a recommendation for carpet cleaning, lawn care, a painter or anything in between?