In a recentÃ‚Â press release,Ã‚Â ZillowÃ‚Â stated that the affordability of the nationÃ¢â‚¬â„¢s rental inventory is currently much worse than affordability of the countryÃ¢â‚¬â„¢s home sale inventory. The release revealed two things:
- Nationally, renterÃ¢â‚¬â„¢s signing a lease at the end of the second quarter paid 29.5% of their income to rent
- U.S. home buyers at the end of the second quarter could expect to pay 15.3% of their incomes to a mortgage on the typical home
Furthermore, renters pay more than the average of 24.9% that was paid in the pre-bubble period while buyers actually pay far less than the 22.1% share homeowners devoted to mortgages in the pre-bubble days.
DonÃ¢â‚¬â„¢t Become Trapped
If you are currently renting you could get caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment.Ã‚Â ZillowÃ‚Â Chief Economist Dr. Stan Humphries explains:
Ã¢â‚¬Å“The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest ratesÃ¢â‚¬Â¦ As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters.Ã¢â‚¬Â
Know Your Options
Perhaps you already have saved enough to buy your first home.Ã‚Â HousingWireÃ‚Â recently reportedÃ‚Â that analysts atÃ‚Â NomuraÃ‚Â believe:
Ã¢â‚¬Å“ItÃ¢â‚¬â„¢s not that Millennials and other potential homebuyers arenÃ¢â‚¬â„¢t qualified in terms of their credit scores or in how much they have saved for their down payment.
ItÃ¢â‚¬â„¢s thatÃ‚Â they thinkÃ‚Â theyÃ¢â‚¬â„¢re not qualified orÃ‚Â they thinkÃ‚Â that they donÃ¢â‚¬â„¢t have a big enough down payment.Ã¢â‚¬ÂÃ‚Â (emphasis added)
Freddie MacÃ‚Â came out withÃ‚Â commentsÃ‚Â on this exact issue:
- A person Ã¢â‚¬Å“can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)Ã¢â‚¬Â.
- Freddie MacÃ¢â‚¬â„¢s purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
- More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.
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