Living • May 1, 2023

Managing Your Investment Property: DIY vs Hiring a Professional

by Elizabeth Dolton

Owning real estate is an efficient and productive addition to your investment portfolio. For an investment property that you don’t plan to live in, whether it’s your second home or you’ve done this a few times before, you’re faced with decisions about how to best use that investment for your goals.

Some investors will remodel their new property and sell it for a return. Others will use it for their vacation home, rent it to other vacationers, or both! But if your goal is to earn income over the long term from this property, you’re likely asking yourself, now what?

Renting to long-term tenants is a great strategy to build your wealth, but it is by no means a passive endeavor. From finding tenants, to managing the property, to finding new tenants again, you’ll need to weigh your options of taking on all the responsibilities or hiring a professional property manager. Managing your own rental takes time, money, and organization that can get in the way of life’s other responsibilities. Between accounting, adhering to local laws and regulations, property maintenance, and creating procedures for working with tenants, your plate will be full. If these responsibilities are too much to handle, the commission charged by a property management company may be a welcomed expense.

Your Local Landlord Tenant Laws and Regulations

The laws and regulations for rental properties differs across states, counties, and cities. Some locations are more regulated than others and whoever manages the property will need to be an expert in each.

If you decide to do it yourself, you’ll need to make sure you’re aware of the responsibilities and requirements for landlords in leasing, property maintenance, and payments. Check your local government’s website for more information and consider joining a local landlord association who provides support and updates for its members. To avoid getting into legal trouble, you’ll want to make sure your procedures are within the law, including how you tour and ask tenants to apply. It’s also recommended that you have a lawyer review your lease contract before accepting tenant applications.

Most professional property managers are aware and practiced in the local laws and regulations. They will also likely have a lease template that has been reviewed by lawyers, so they know it’s legal and enforceable. When talking with your local Windermere Property Management office, be sure to ask them about their processes for following the local laws, including their leasing procedures.

Investment Property: Managing the Money

Another important consideration is how you’ll manage the monies for your investment property. You’ll need to manage the security deposit, any fees you plan to charge, a way to take the monthly rent payment, and a savings account for property maintenance.

If you plan to manage the unit yourself, you’ll need to set up bank accounts in accordance with the local laws and keep track of the accounting for tax season. You’ll also want to make it easy for your tenants to pay rent. Check to see if your bank offers some form of ACH that you can set up or inquire about where tenants can send checks for deposit.

Professional management companies will have an accountant who manages the funds and tracks the income and expenses for property owners. You’ll likely set up a deposit and withdrawal agreement to make it easy to get your monthly check and pay any invoices. You can imagine the amount of time this saves!

When interviewing with a property manager, ask them where they hold deposits and their systems for rent payments. Oftentimes they’ll have software that makes it easy for tenants to pay online and track the monies they receive from tenants. Be sure to understand how you get paid as well and when you can expect those payments to be made each month.

A young heterosexual Hispanic couple shake hands with their property manager in the open kitchen area of their modern investment home. The kitchen has black cabinets and stainless-steel appliances. The ceiling is hardwood and there is a band of windows around the unit just below it.

Image Source: Getty Images – Image Credit: Hispanolistic

Moving In Tenants and Investment Property Maintenance

The beginning of a tenancy can set the tone for the rest of the lease. Build trust and respect with your tenants from day one; be upfront with your expectations for communication, especially about maintenance issues. It all starts with a move-in condition report.

A move-in condition report is a detailed document that notes the state of the property before the tenants have lived in it so that you can compare that to its condition when they move out. This helps you understand what damage, if any, is the tenant’s responsibility and what comes out of your pocket.

If you plan to manage the property yourself, you’ll want to find resources online or from your local landlord association about the best practices for move-in to make sure you don’t miss anything important as you inspect the exterior and interior of your rental property with the tenants.

Professional property managers have a wide range of services, which means even if you don’t hire one to handle every aspect of the rental, they may offer support with move-in. Their experience and knowledge will come in handy, along with their tried and tested procedures, leaving less to chance when the tenants move out.

Maintaining the property will differ for each investor depending on the condition of the home, the appliances, and your local laws that outline responsibilities for all parties involved. In some cases, you may never hear from a tenant about an issue or request, while other cases will require more hands-on work.

As a landlord, it’s a good practice to have a list of vendors you trust to handle common issues and emergencies. You also have the option to do the handiwork yourself if you are nearby and equipped to do so. Be sure your tenants know and understand how you’ll handle maintenance requests and work with them to schedule appointments.

Property managers usually already have a list of preferred vendors who they have worked with before. They will likely have someone at the ready for a wide range of issues which comes in handy, especially in the wake of large incidents that can book up the service providers in the area.

When interviewing professionals, be sure to ask them about their experience with moving tenants in, and their procedure and vendor list for maintenance requests. You’ll also want to know how they’ll communicate with you and manage payment for the invoices.

Which One Is Right For You?

After taking these factors into consideration, it’s up to you to determine what makes the most sense for your needs and lifestyle. If you feel comfortable managing your investment property and you know you have the time and ability to handle maintenance requests in a timely manner (especially emergencies), then being a landlord is right for you.

However, if you prefer to be more hands off and use the property for passive income with less effort on your part, hiring a professional for a commission might be worth it.

Originally posted by Meaghan McGlynn

Living • Selling • April 20, 2023

5 Green Upgrades that Increase Your Home Value

by Elizabeth Dolton

Selling a home begins with understanding how much it’s worth. After an initial assessment, you may want to make some updates to increase the value of your property. There are several ways to do that, including boosting your curb appeal or making renovations with significant ROI potential. As you research potential projects, keep in mind that making your home more sustainable can boost its value to potential buyers. Talk with your agent to identify which of these five upgrades makes sense for your home before it hits the market.

Five Green Upgrades that Increase Your Home Value

1. Energy-Efficient Appliances

It’s no secret that appliances use a significant amount of energy, which means there is plenty of opportunity to cut back on their output. Installing energy-efficient appliances can do wonders for creating a more eco-friendly home, while appealing to buyers who value sustainability. When shopping around, look for appliances with high-efficiency or Energy Star certifications. They may cost more to purchase, but their ability to generate long-term savings is a concrete selling point.

2. Tankless Water Heater

As the shift toward eco-friendly appliances has picked up steamed, so too has the preference for tankless water heaters. Whereas standard storage tank water heaters keep a reservoir of hot water at the ready, tankless water heaters heat your home’s water supply on-demand. It’s similar to a new car that shuts off its engine when sitting idle, as opposed to an older car whose engine is running all the time. Tankless water heaters don’t come without their share of costs. An upfront investment will be required for purchase and installation, but it will deliver immediate savings on energy bills.

3. Solar Panels

There are many benefits to going solar, but for sellers, the positive effect solar energy has on home values is chief among them. A solar-capable home is a surefire way to drum up buyer interest. By taking care of the upfront installation costs, you allow the buyer to focus on the benefits of solar energy, i.e. the long-term energy savings, the reduced utility bills, and the reduction in the property’s carbon footprint. Work closely with your real estate agent to understand how solar energy has affected home prices in your area to get an idea of the project’s ROI potential.

A man installs solar panels on the roof of a house.

Image Source: Getty Images

4. Water Filtration

Installing a home water filtration system is one of the best ways to cut down on your home’s waste while increasing its value. These filtration systems appeal to buyers for a variety of reasons. Of course, there are an array of health benefits to having filtered water running through the entire house. Buyers can be assured that the water is safe to drink, they will be bathing and showering in clean water, and there is a reduced risk of plumbing issues due to contaminated water. Beyond the personal health benefits, it can also cut down on bottled water costs and the amount of landfill waste produced within the home.

5. Energy-Efficient Windows

Alternatives to traditional windows have become more popular in recent years. Energy-efficient windows are better insulated, which helps to regulate temperatures inside the home and protects against harmful ultraviolet rays. Their ability to help regulate your home’s heating and cooling leads to energy savings and reduced carbon emissions. Energy-saving windows can be highly valuable to potential buyers, especially if you live in a climate with extreme temperatures.

Originally posted by Sandy Dodge

Buying • Selling • March 13, 2023

Selling Your Home in a Balanced Market

by Elizabeth Dolton

Your local market conditions dictate the real estate climate around you. Where things are on the buyer’s/seller’s market spectrum will impact how you and your Windermere real estate agent approach selling your home. As a part of this process, it’s important to understand the different types of markets and how their conditions play into accurately pricing your home.

See the latest data on home sales, home prices, mortgage rates and more for your area here:

Regional Market Updates

What is a seller’s market?

The housing market is categorized as a seller’s market when demand for homes is greater than the supply on the market. With limited inventory, competition is high amongst buyers. This drives home prices up, decreases days on market, and often leads to multiple offers from buyers. These are ideal conditions for selling your home, given that buyers are forced to continually sweeten their offers to win out. For example, buyers are often more apt to remove contingencies from their offers in a seller’s market.

Common Real Estate Contingencies

What is a buyer’s market?

A buyer’s market is on the opposite end of the real estate market spectrum. It is usually defined as having six or more months of available inventory—meaning if no new homes were listed, it would take six (or more) months for all available listings to sell.

Because there’s greater supply than demand, there’s less competition among buyers, and it’s the buyer’s agents who often have the leverage during negotiations. Selling in these conditions emphasizes the importance of investing in improving your home before putting it on the market.

High ROI Remodeling Projects to Increase Home Value

A Black heterosexual couple meet with their real estate agent to sell their home. They sit at a coffee table. The agent is a young Black man. He carries a notebook filled with paperwork, a laptop, and real estate paperwork.

Image Source: Getty Images – Image Credit: kate_sept2004

Selling Your Home in a Balanced Market

A balanced market exists in equilibrium between a seller’s market and a buyer’s market. It is the middle part of the Venn diagram between the two; it shares certain aspects of each, but only dips its toes into both.

When your local real estate market is balanced, it’s important to approach the selling process with a realistic mindset. In a balanced market, bidding wars are less likely and the chances of buyers having complete leverage are slim. These conditions, however, are all the more reason to make your home stand out amongst competing listings. Making repairs, remodeling, and boosting curb appeal can all help attract buyers while increasing the value of your home.

When coming out of a seller’s market, it’s important not to panic when your local real estate market experiences a cool-down or a return toward balance. In a balanced market, there are still plenty of buyers actively seeking homes, albeit at a lesser pace. Even as aggregate home sales decline and days on market increase, these market conditions should not be confused with more extreme situations like the housing market crash of the late 2000s.

Our Chief Economist Matthew Gardner covers recent housing marketing conditions as they compare to the Great Recession. Read his analysis in two recent articles:

Working With an Agent to Sell Your Home

All these factors highlight the importance of working with your agent to accurately price your home in a balanced market. Real estate agents have access to the Multiple Listing Service (MLS), which gives them access to a huge network of data on available homes both present and historical. They’ll use this data to conduct a Comparative Market Analysis (CMA) to competitively price your home.

Originally posted by Sandy Dodge

Buying • February 6, 2023

How to Reduce Your Interest Rate: Mortgage Buydowns

by Elizabeth Dolton

When mortgage rates are up, prospective buyers can often feel like they’re at a disadvantage as they go about securing a home loan. Fortunately, there are ways to lower your interest rate to make your monthly mortgage payments more affordable.

What are mortgage buydowns?

A mortgage rate buydown is a form of financing that allows you to secure a lower interest rate on your mortgage by paying more money upfront in the form of discount points, also known as mortgage points, at closing. Each discount point is equal to one percent of your total loan amount. Especially attractive in times of high mortgage rates, buydowns are offered by sellers, builders, or lenders depending on the transaction. There are two main types of mortgage interest rate buydowns: permanent and temporary.

Permanent Mortgage Buydowns

With a permanent interest rate buydown, typically the borrower, seller, or builder will contribute to the cost of buying down the rate permanently. In this situation, the borrower qualifies at the bought-down rate for the life of the loan.

Temporary Mortgage Buydowns

A temporary interest rate buydown provides cash flow for the borrower during the temporary period, but they still qualify at the higher note rate. Typically, the seller or builder will contribute to the cost of buying the rate down temporarily.

Use our Home Monthly Payment Calculator to experiment with different down payments, principal amounts, interest rates, taxes, and more for any listing price.

How do temporary mortgage buydowns work?

Temporary mortgage interest rate buydowns have their own unique structure. Below are three common types:

1-0 Buydown Mortgage: The borrower gets a 1% discounted interest rate for the first year.
2-1 Buydown Mortgage: The borrower gets a discounted interest rate for the first two years of the loan. The first year, the interest rate is 2% lower, decreasing to 1% lower the second year.
3-2-1 Buydown Mortgage: The borrower gets a 3% discounted rate the first year, dropping to 2% in the second year and 1% in the third year.

Although they share certain characteristics with adjustable-rate mortgages (ARMs), temporary mortgage buydowns are slightly different. ARMs initially have a fixed interest rate period. Once the adjustable-rate period kicks in, both the interest rate and monthly payments are subject to change. With buydowns, the buyer’s interest rate doesn’t change; either the seller or lender covers part of the interest payments as outlined by the buydown’s structure.

A man and woman homeowner couple discuss the terms of a mortgage buydown program with their mortgage broker in a modern office setting.

Image Source: Getty Images – Image Credit: kate_sept2004

Should I permanently buy down my mortgage?

Though buying down your mortgage interest rate permanently can make the payments more affordable, if you are contributing to this cost, make sure you can withstand the heavier financial load before proceeding. It also depends on how long you plan to live in the home. For example, if you plan to move shortly after buying, the short-term savings on your mortgage may not yet break even on your upfront costs by the time you’re ready to purchase again.

Pros of Mortgage Buydowns

Savings on monthly mortgage payments
A lower rate means you could qualify for a higher loan
Discount points = prepaid mortgage interest, which is often tax-deductible

Cons of Mortgage Buydowns

Higher upfront costs of buying a home
If payments increase, higher risk of foreclosure
Less cash available for remodeling, home improvements, etc.

A home office desk is filled with materials for a full day’s work; a full coffee cup, a smartphone, paperwork, and a laptop with a mortgage loan application form on the screen.

Image Source: Getty Images – Image Credit: cnythzl

How much can I save with a mortgage buydown?

Here’s an example of the savings you could see with a 3-2-1 temporary mortgage buydown. Let’s say you qualify for a 30-year mortgage with a $400,000 loan amount at an interest rate of 7%. With a 3-2-1 buydown, you’d pay a 4% interest rate the first year, 5% the second year, and 6% the third year. From year four on, you’d pay 7%.

Purchase Price	Down Payment	Loan Amount	Interest Rate	APR	Loan Term
$500,000	$100,000	$400,000	7%	7.125%	30 years

3-2-1 Temporary Mortgage Interest Rate Buydown

	Year 1	Year 2	Year 3	Years 4-30
Interest Rate	4%	5%	6%	7%
Number of Payments	12	12	12	336
Monthly P&I Payment	$1,909.66	$2,147.29	$2,398.20	$2,661.21
Total PITI Payment	$1,909.66	$2,147.29	$2,398.20	$2,661.21
Monthly Reduction	$751.55	$513.92	$263.01	–

Calculations provided by Penrith Home Loans
Temporary buydown cost as % of purchase price 3.67%

With this structure, you’d save $9,018.60 the first year, $6,167.04 the second, and $3,156.12 the third, for a total three-year savings of $18,341.76.

Originally posted by Sandy Dodge and this blog post contains contributions from Penrith Home Loans.

Living • January 23, 2023

What is a Rambler House?

by Elizabeth Dolton

The distinct rambler architectural style is known by several names: rambler, ranch house, California ranch, and more. Whatever you call it, it has played an important role in the evolution of the American home. From its spacious interior to its welcoming layout, these homes are tailor-made for a comfortable home life.

History of the Rambler House

It wasn’t until the 1950s and 1960s that the rambler became a staple of domestic American life as the suburban boom reached new heights. The intention behind the architecture was simple: design the perfect post-war American home. The term “rambler” was a reference to the way the single-story design sprawled—or rambled—across the landscape. This home design mirrored the landscape of the American West and allowed for expansive views of surrounding land on a level plain.

Over time, the rambler style began to take on elements of modern design and eventually evolved into split-level homes, creating variants such as “raised ranch style,” “suburban ranch style,” and “storybook rambler.” To this day, these homes are found in great numbers across the country.

Image Source: Getty Images – Image Credit: pbk-pg

5 Features of Ranch-Style Rambler Homes

1. Low-Pitched Roof and Eaves

Similar to the Craftsman style home, it’s common for ranch-style homes to have low-pitched roofs and overhanging eaves. These architectural features help to give ranch-style homes their distinct sprawling look.

2. Open Floorplan

Ramblers are known for their open interiors that allow for easy movement throughout the home’s horizontal spaces. The spacious layout is often anchored by a central area which creates a feeling a continuity between rooms, a concept that was influenced by modern architecture.

3. One-Story Buildings

Though their wide layouts make for large footprints, the majority of rambler homes are one-story structures. The terms “rambler” and “ranch house” are used interchangeably. However, raised ranch houses and split-level ranch houses will often have a basement, whereas the classic rambler home is a one-story building with a ground-level entry.

4. Attached Garage

This was one of the first architectural styles to incorporate an attached garage into the home design. This evolution in home design perfectly suited the needs of the modern American family in the 1950s and 1960s.

5. Connection to the Outdoors

In another nod to modernist homes, ramblers often prioritized outdoor spaces for entertaining and gathering. This connection to the outdoors is reinforced by large windows and easy access to back patios to create a connection between nature and the home itself.

For more information on different home designs, check out our Architectural Styles page.

Originally Posted by Sandy Dodge

Featured Image Source: Getty Images – Image Credit: JohnnyGreig

Buying • Selling • January 3, 2023

What is the Multiple Listing Service (MLS)?

by Elizabeth Dolton

In the process of buying or selling a home, you’ll frequently come across the term “MLS.” The Multiple Listing Service (MLS) is a group of regional databases of homes for sale accessible only to real estate agents and brokers. Their ability to access the MLS makes it easier for buyers to find the right home and for sellers to market their listings.

The purpose of an MLS is to facilitate real estate transactions by connecting real estate agents and making it easy for them to share information about active listings and sold home data. For buyers and sellers, your agent’s access to the MLS means you’ll be connected to the largest network of homes and listing information on the market.

Each MLS shows the homes for sale in a particular geographic area. Listing agents add their clients’ listings to the database—providing photos and detailed information about the property—so buyer’s agents can show them to their clients. The MLS allows for customizable searches, which agents use to easily identify the homes that match their clients’ criteria. The vast amount of historical data available on the MLS is what your agent will use to conduct their Comparative Market Analysis (CMA) to competitively price your home. The listing data in the MLS is fed to real estate brokerage websites, such as Windermere.com, so that buyers can search for homes on their own as well.

In a small office, a real estate agent hands the keys to a new home to their clients. The real estate contract is on the table in front of them.

Image Source: Getty Images – Image Credit: fizkes

Benefits of the Multiple Listing Service (MLS)

Selling a home is a numbers game. The more potential buyers you can reach, the more likely you are to find the right buyer in a timely manner. After your agent conducts their CMA to determine the value of your home, they’ll upload the listing to the MLS. Here they can add additional information beyond what you would find in a typical listing description, such as showing times, contact information, and more. The MLS provides maximum visibility for sellers by connecting them to buyer’s agents who are actively searching for listings. The MLS has also helped to make the industry more equitable. Small real estate brokerages have access to the same MLS info as large companies, putting everyone on a level playing field.

What is an MLS number?

An MLS number is a unique code for each home listed on the market. It makes it easier for agents to communicate regarding a specific property. To learn more about the MLS, or for answers to your buying and selling questions, connect with me, 970-396-7233.

Featured Image Source: Getty Images – Image Credit: VioletaStoimenova

Originally Posted by Sandy Dodge

Living • December 15, 2022

Home Security and Safety for the Holidays

by Elizabeth Dolton

The holidays bring joy and peace, but they can also bring package thieves, fire hazards, and the inevitable injury from trying to get the last decoration on top of the tree. From tried-and-true security methods to basic safety best practices, taking the appropriate precautionary measures will help keep your home and your loved ones safe this holiday season.

Home Security During the Holidays

Upgrade Your Locks

A poorly installed deadbolt can make it easy for an intruder to break in. Start by making sure that your door frames are in good condition and then look into getting a higher quality deadbolt. You’ll find everything from classic models with keys to digital options that require passcodes or a fingerprint.

It’s also a good idea to check all the locks on your windows. Older window locks can be easy to jimmy open with a little wiggling. For ground floor windows, you may want to consider installing double locks for added security.

Exterior and Interior Home Lighting

Having your exterior lights on timers or motion sensors is a good way to deter nighttime lurkers. Add sensor lights at your home’s key entry points including the front door, back door, and/or basement. If you have an unused side yard, consider lighting that area as well. Keeping your home well-lit makes unwanted visitors weary of being seen.

Traveling during the holidays is common. If you plan to be gone from your home for an extended period, consider using timed lighting options in your home to make it appear someone is around. You can select timers for bedrooms or living areas. Also, you can program a radio or smart home sound system to turn on and off.

Alarm Systems

You have many alarms to choose from, varying from motion detection kits you can install DIY to full-service home security systems. If you choose to do-it-yourself, you’ll want to prioritize installing motion detectors on doors and windows—especially those that can be easily accessed on the ground floor. In most cases, these kits also offer a 24-hour call service for an extra fee.

Full-service security systems can include everything from an alarm system and panic buttons to an integration with your smoke detectors/fire prevention system. These services are expensive up front but usually have a reasonable monthly rate. And keep in mind: having a home security system installed can also reduce your insurance rates.

Security Cameras

Security cameras are widely available for home installation; install them in high-visibility areas to deter burglars. You can either install DIY or purchase a professional system, many of which come with support services. Nowadays, it’s common for these products to sync with your smartphone, making it easy to monitor your home while you’re away.

Build Your Community

Online community pages, Facebook groups, and programs like Neighborhood Watch can help you build close-knit relationships with your neighbors and help a community feel safe at home knowing its members are all looking out for each other.

An open concept living and dining room area in a mid-century modern house is decorated with string lights, a star, and candles for the holidays, creating a warm and cozy ambience. The table is set for a family dinner.

Image Source: Getty Images – Image Credit: svetikd

Home Safety During the Holidays

Candle Safety Tips

Candles create the perfect ambience at home during the holidays but having more open flames in the house means you’ll want to take a few additional precautions. Test your smoke detectors and replace their batteries. Make sure you have a functioning fire extinguisher nearby, preferably in the living room or kitchen where you can access it at a moment’s notice. For more ways to prepare in case of a fire, read How to Prepare for a Fire at Home.

Lights Safety Best Practices

Before you string up your holiday lights, check all cords and outlets for signs of damage and make replacements as needed. Turn your lights off when leaving the house and before you go to bed—it’s safer and more energy efficient. You can either meter your light usage manually or with a smart home lighting device.

Safe Storage Tactics

It seems that a holiday season rarely passes without a decorating-related injury. Broken ornaments can be hazardous, especially if you have young children. Prevent accidents by securely storing your holiday decorations in easily accessible areas. Investing in high-quality containers will also extend the shelf-life of your décor.

Ladder Safety

Your holiday decorating will inevitably lead you to the hard-to-reach nooks and crannies of your home, both indoors and outdoors. Ladder safety is paramount, especially if your local winters come with freezing temperatures and icy conditions. If that old rickety ladder in the garage is on its last leg, consider investing in a newer model. When decorating trim, ceilings, and the roof, it’s best to have another person stabilizing the ladder below you.

To learn more about home safety and security best practices, smart home technology, and more, read our Home Safety and Security blog post.

Featured Image Source: Getty Images – Image Credit: AsiaVision

Originally Posted by Windermere Staff

Buying • November 14, 2022

How to Save Money to Buy a House

by Elizabeth Dolton

It’s no secret that buying a home is a serious financial undertaking, but aspiring homeowners are often left wondering what the methods behind the process actually look like. One of the telltale signs that you’re ready to buy a home is having substantial savings to use toward the purchase. The following information goes under the hood of the buying process to explain how much you need to save and some useful methods of saving money.

Making a Down Payment on a Home

The down payment is a large payment made by the buyer upfront to help fund the purchase of a home. Although a down payment of 20 percent of the home’s purchase price will avoid the need to purchase private mortgage insurance (PMI), down payments of this size are not the norm. According to the National Association of REALTORS®, in 2021, the typical down payment was seven percent for first-time home buyers and 17 percent for repeat buyers (NAR)¹.

So, how long does it take to save up for the down payment? The answer is unique to each buyer. It depends on your needs as a homeowner, whether you have a deadline, and what you’re able to afford. Your mortgage will factor into the equation, too. Different mortgage types have different down payment requirements, with certain loan products requiring as little as 3% down to qualify. Remember that in general, a higher down payment equates to a lower interest rate and lower monthly payments for your mortgage.

To get an idea of what’s affordable, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different down payment amounts to get estimates of your monthly payment for any listing price.

Adult man calculating finances in his home office as he prepares to buy a house

Image Source: Getty Images – Image Credit: damircudic

How to Save Money to Buy a House

No matter where your savings stand, these strategies can help to beef up your savings account as you prepare to buy a home.

Reduce Debt: Carrying extra debt can weigh you down throughout the home buying process. And even if you make progress on your savings, you’ll be stuck in limbo if you’re not able to qualify for a mortgage. Consider refinancing existing loans and explore ways to reduce credit card debt to set yourself up for success. This will also put you in a better position when you enter the pre-approval process for your mortgage.
Rethink Your Budget: Are your streaming subscriptions piling up? Is now the best time for that five-star vacation you had planned? Saving up to buy a home doesn’t mean you need to abandon all your leisurely expenses, but it is worth it to look at them from a new perspective to find ways you can save. It’s also a good time to examine your bills and self-audit your current living expenses.
Increase Your Savings: Once you go through your expenditures with a fine-toothed comb, you may find there’s ample opportunity to increase your savings. Regularly contributing to a high-yield savings account will put you on the fast track to pile up your extra funds and ensure that you’re setting them aside.
Additional Streams of Income: If you’ve ever thought of using your unique skills to generate some extra dollars, now is the time to act. Whether it’s teaching music lessons, offering tutoring classes, selling your handmade goodies at the local farmer’s market, etc., the extra revenue from a side hustle can help you purchase a home.

Budget for Additional Home Purchase Costs

Once you’ve got your head wrapped around the down payment and formed your saving strategy, you can shift your financial preparations toward the remaining costs of buying a home. Here are a few to keep in mind:

Closing Costs: Closing costs for buyers typically range anywhere between 2% and 6% of the home loan amount but vary by transaction.
Homeowners Insurance: Lenders will usually require that your purchase a homeowners insurance policy, which covers your home, your belongings, injury or property damage to others, and living expenses if you are unable to live in your home temporarily because of an insured disaster.
Repairs and Remodeling: The home you end up buying may very well be in need of repair, and you may have certain remodeling projects in mind. These costs can stack up quickly, so be sure to carve out ample room in your home buying budget accordingly.
Homeowners Association (HOA) Fees: If the home you’re purchasing is governed by a Homeowners Association (HOA), you will be required to pay monthly HOA fees on top of your existing mortgage monthly payment.

Originally Posted by Sandy Dodge

Buying • November 2, 2022

Making a Down Payment on a Home

by Elizabeth Dolton

Imagine the process of financing a home purchase as a relay race. From start to finish, the baton must be passed several times between interconnected transactions. The down payment plays an important role in the relay race and will help you cross the finish line, but how much money do you put down? And when do you make the down payment? Understanding its characteristics will help you see where it fits in the home buying process.

What is a down payment?

The down payment is a large payment made upfront to help fund a home purchase. Unlike the financing obtained through a mortgage loan, the down payment comes out of the buyer’s pocket, not from a lender.

For example, let’s say the house you want to buy is priced at $500,000. If you put $25,000 down, or five percent of the purchase price, that would leave $475,000 you’d need to pay for with a mortgage. If you put down $100,000, or 20 percent, that would leave a $400,000 mortgage principal. In general, a higher down payment equates to a lower interest rate since that financial structure is viewed as less risky by lenders. It also means your monthly payments will be lower since your loan balance is smaller.

However, making a large down payment isn’t feasible for everyone. In fact, according to the National Association of REALTORS® Profile of Home Buyers and Sellers¹, the typical down payment was seven percent for first-time home buyers and 17 percent for repeat buyers in 2021. If you’re not able to put down 20 percent of the home’s purchase price, your lender will typically require that you obtain Private Mortgage Insurance (PMI), which protects them against the possibility of a mortgage default. The benefit of PMI is that it creates a pathway to homeownership by allowing you to move in and start building equity right away.

Different loan products have different down payment requirements. Conventional loans have a minimum down payment requirement of three percent, while government-backed loan products like VA loans or USDA loans may allow you to purchase a home with no money down if you qualify.

Down Payment: Home Monthly Payment Calculator

As you prepare to buy a house, it’s helpful to see what you can afford. Your down payment will have a direct impact on your loan terms and your monthly mortgage payment. Use our Home Monthly Payment Calculator to experiment with different down payments, principal amounts, interest rates, taxes, and more for any listing price.

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How to Save for a Down Payment

Though your lender will need to verify that you have the funds available to make your down payment early on in the mortgage approval process, the down payment is officially due at closing. Saving up for such a payment may seem like a daunting task, but with the right planning, you’ll make steady progress. Having a strategy in place for compiling your down payment is a telltale sign that you’re ready to buy a home. Here are some methods of generating savings to consider:

Consider downsizing to reduce your living expenses and increase your savings over time.
Reduce your debt before applying for a mortgage to give yourself a better shot at favorable mortgage terms—i.e., a lower down payment requirement and reduced interest rates.
Explore down payment assistance programs to see if you qualify.
Ask family members for support.

If you’re in the process of selling your current home while looking for a new one, know that you can use the proceeds of the home sale to help finance your new home purchase.

For more information on financing a home purchase, helpful tips on the buying process from start to finish, and more, visit our Home Buying Guide.

1. National Association of REALTORS® (2021) Profile of Home Buyers and Sellers

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Originally posted by Sandy Dodge

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