One of the far-reaching consequences of the pandemic is that the 20% down payment is making a comeback.
Just to be clear: Lenders arent requiring you to put 20% down.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help…
Historically low interest rates have fueled demand.
Wealthier buyers have sought second and third homes in record numbers.
But owners are often hesitant to put their homes on the market during uncertain times.
About 50% are going for over list price.
In a red hot market, appraised values are often lower than the list price.
When this happens, buyers often have no other choice but to front the additional cash.
Did you know?
With houses going so far over list now, its the only way to make your offer stand out.
Sellers want to know that a deal will close quickly.
It makes it substantially more difficult to sell again.
A low down payment doesnt necessarily mean a buyer has shaky finances.
In many cases, the buyer is simply taking advantage of low interest rates or looking to conserve cash.
But its the perception that matters.
Its also hard for buyers with any sort of financing to compete with cash buyers in terms of speed.
A cash deal can close in a few days vs. several weeks for a financed deal.
Financed buyers are having to offer appraisal gap guarantees, inspection waivers, and faster closing times.
What About FHA and VA Loans?
In part, thats because with government-backed loans, so much is at stake with the home appraisal.
Lenders often have strict appraisal requirements for government-backed loans.
Small repairs will be scrutinized by the lender, said Peter Winscott, a Denver-based real estate agent withOrchard.
What if You Cant Afford a 20% Down Payment?
Winscott said its possible for buyers without extra cash to compete if they can uncover other seller motivations.
So offering an extended seller rent-back may ultimately be more important than top dollar to a seller.
In some cases, buyers are even offering a month or two of free occupancy to the seller.
Writing a heartfelt letter to the seller has also proved to be a winning strategy for some buyers.
But its a controversial one.
You may also be able to make your offer appealing by speeding up the process.
For example, you could bring a home inspector out right away, rather than waiting a week.
Waiving contingencies, which allow you to back out of a deal, may make your offer more appealing.
But you should only do so with extreme caution.
Many housing experts believe the housing market will start to cool off as life returns to normal.
Many workers still dont know whether theyll be able to work from home permanently.
A lot of empty-nesters who are ready to downsize or move to senior communities have put off selling.
Inventory is likely to gradually increase as uncertainty fades.
Yale economist and Case-Shiller index co-creator Robert Shillerrecently told Yahoo!
Financehe expects housing prices to come back down, not overnight, but enough to cause some pain.
That may be frustrating to hear, especially if youve already been waiting for some time.
A good rule of thumb is that your mortgage payment shouldnt be more than28% of your pre-tax income.
Having a three- to six-monthemergency fundin addition to a down payment is essential.
The bottom line: Dont let fear of missing out drive you to buy a home you cant afford.
Robin Hartill is a senior writer at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
When you log into your bank account, how do your savings look?
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
