The right way to take advantage of low downpayment loans.

An FHA loan is a great way for a home buyer to get into a property with a low down payment of only 3.5%. Although the initial fees are high, most of the costs can be covered by the seller at closing. This program allows many first time homebuyers who do not have a large down payment(10%-20%) to get into a home sooner. However, with any low down payment program, there are a few simple things that the homeowner should be aware of and be prepared for to ensure that they don’t run into financial problems later on when they sell since the cost of sale in MA can be anywhere from 5-7% of the sale price.

First, buying a home with a low down payment should be a long term commitment. If you are planning to stay only a few years and then selling, you should not be putting such a low down payment. I recommend buyers who put less than 5% down to stay a minimum of 5 years. This allows you time to build some equity in the home so when you are ready to sell, you are not bringing additional money to the closing table. Building equity in the home also opens you up to additional financing options which can decrease your monthly payments.

Second, when buying a home, you should never assume your property value will appreciate. It is true that real estate values go up over time, but that is calculated over 10-20 years. Based on today’s market, it is safe to assume that short term, real estate values will remain stable or decrease slightly. If you plan on moving in less than 5 years, plan your financials accordingly.

To properly plan your financials, you should pretend like you are saving to put 10% down. Open another savings account and put some extra money away each month such that when it comes time to sell, you have effectively 10% equity. For example, you buy a home today for $400,000 with 5% down. You plan on moving in 5 years. This means that you should set aside approximately $300/month to ensure there is 10% equity at the end of 5 years. The good news is that this forces you to save money and if you end up not needing these funds to sell, you are well on your way to saving for your next home or have extra money for emergencies.

Lastly, remember that low down payment loan programs are a great way to help buyers get into homes sooner and in many cases, owning is better than renting. However, owning a home does come with additional financial responsibilities and being financially prepared will help you make the transition much easier.

If you know anyone thinking of buying a home while interest rates are low and property values are low, please contact me and I will be happy to help.

More Condo Auctions in Natick

The new construction luxury condos located at 20 South Ave, Natick will be coming up for auction. Thirteen condominium units will be auctioned off on Thursday November 19th at 7:00pm. 11 of the units will be auctioned off with minimum bids of approximately 60% of recent List Price. 2 of the units will be auctioned on absolute basis where the highest bidder wins the unit regardless of how low the bid is!

These luxury 2 bed+ 2 bath+ 1500sqft-2000sqft condominiums are currently about 50% sold out and the developer has decided to auction off the remainder of the units for a quick sale. These units should sell for between $300k-$450k depending on size and unit placement.

If you are interested in taking a look at these, please contact me before the auction so we can go preview the property before auction day.

Also, I believe there will be more luxury condominium auctions coming up in Natick in the next year. Another project located at 93 E Central St(Castle Courtyard) currently has unrealistic expectations of their price and zero units have sold since they started market it over a year ago. I think this condo project will be the next one to go to auction so stay tuned!