Real Estate Answers: Buy today with no down payment

Patrick McCarran 2015By Patrick McCarran

The primary reason to buy a home, now is mortgage rates are still at historic lows. This is driven largely by the continuing market corrections after the Fed pulled back on their bond purchases and the stock market continues to stabilize. However, unbelievable low rates will not last forever and can increase literally overnight. The Fed has made it clear that they plan to raise the Prime Rate and while this does not directly effect mortgage rates it will effect the banks’ bottom line and almost definitely trigger an increase in interest rates.

We tend to make financial plans looking backward, learning the lessons of our past experiences but ignoring the future. That’s why we don’t buy stocks at the “bottom” but instead when they are “hot”. In a similar scenario, that’s probably why people aren’t buying homes right now, despite still relatively low home prices and historically low finance rates.

Rents will continue to rise and are unpredictable, when you own you know what the payments will be and it your home not the landlord to dictate rules. Plus, mortgage interest is still the largest deduction for the middle class. Interest rates remain historically low and there is a fair amount of inventory from which to choose. Long-term home ownership continues to be one of the best ways for the typical American to build wealth.

So what’s holding you back? Down Payment? Many people are intimidated by the widely publicized 20% down payment requirement. They don’t realize that there are many federal programs designed to help homebuyers, and even those who have lost their homes to foreclosure.

For example, Freddie Mac and Fannie Mae have loans available to first-time buyers with as little as 3% down payment and the FHA has similar programs that require 3.5% down payment. If you qualify there are a number of programs and grants that can help with the down payment. With a seller credit for closing costs I’ve helped buyers into a home for as little as $1,500 out of pocket. For veterans, the VA program has no-down-payment loans available for qualifying military members and veterans that can close with almost no out of pocket money.

Why wait? What’s the worst that could happen if you buy a home, now? You’ve already seen it, the 2007 mortgage crisis. It will take generations, if ever, before the government lets the banking systems get that far out of hand again. It is far more likely that home prices will steadily climb as they have been. Americans are getting back to work and leading the global economy out of stagnation. So don’t be blinded to the future by your past experiences. The American population will continue to grow and build families of all types, creating more demand for housing. Don’t view your home as a trading vehicle or a one-way-up investment. Instead, look at the home-ownership benefits that are mostly forgotten by today’s potential homebuyers — the chance to build equity (instead of throwing rent down the drain) and the opportunity to customize your own environment.

That’s what has always motivated Americans to own their own home. It’s not going to change in the long run.

If you want to get started or have questions call me or Debra Westlund at (925) 783-2052 and we’ll help you get started with an action plan.

Patrick McCarran is a local Realtor and can be reached at (925) 899-5536, or at

© 2015 Berkshire Hathaway HomeServices Drysdale Properties, an independently owned and operated franchisee of BHHS Affiliates, LLC. Equal Housing Opportunity

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