Calculator for Buyers: Purchase Now or Save More?

We’ve all heard the phrase, “time is money,” right? Well, in the home buying process right now, this couldn’t be more accurate, but in this case, time may cost you money. While nearly 40 percent of aspiring homeowners believe they need to put down 20 percent on a home purchase, the truth is the average down payment was just 11 percent in 2016, according to the National Association of REALTORS®.  I found a really helpful tool for buyers the other day that I wanted to share with you…it can help people understand the strength of their current financial profile when it comes to buying a home. It’s a mortgage calculator, which are common all over the internet, but this one is different – mortgage industry blog MGIC Connects has created a Buy Now vs. Wait calculator that can show potential buyers whether they’re better off waiting and continuing to save for a bigger down payment or buying now with less money upfront. Alldid you know- you do is put in your info, and the calculator factors in information such as the current rent you’re paying, amount of your monthly savings, and creditworthiness. You can also submit other information such as desired home price, current amount of savings for a down payment, and an estimated interest rate. MGIC Connects offers the following example of how its calculator works:

A consumer has saved $10,000 of the $40,000 needed for a 20 percent down payment. She can add about $6,000 a year in savings to that. She wants to purchase a $200,000 home. The calculator allows her to see the cost of the home purchase if she did a 3 percent or 5 percent down payment. The calculator also shows that if homes prices appreciate, say, at 3 percent annually, the amount she’d need for a 20 percent down payment would be $48,552, and she would need more than 6 years of savings before she could buy.

During that time, she will have paid more than $80,000 in rent, while her home equity position would be more than $72,000 had she bought six years ago. None of this is meant to encourage prospective borrowers to buy a home before they are ready. It is in everyone’s best interest for borrowers to succeed, so borrowers need to be comfortable not only with the mortgage payment but also the other responsibilities that come with homeownership.

I tell my buyers when we first meet – knowledge is power when you’re looking to buy a home. Do your research, don’t ever hesitate to ask questions – of me or of the lender or of the title company – we’re all a team that needs to work together to make our buyer clients feel comfortable and knowledgeable about the home buying process. A calculator like this one that will show you the potential costs of waiting to buy a home versus buying a home now with a lower down payment could be a great first step in building your knowledge base to buy that home!  Questions? Give me a call, shoot me a text or email…I’m ready, willing, and able to help!

Source: “Waiting to Save for a 20% Down Payment Can Cost Homebuyers Money,” MGIC Connects (April 5, 2017)

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