Local home prices are climbing, sending down payments higher, too, lenders and real estate agents say.
But that isn't stopping Fort Wayne's first-time homebuyers –when they can find an affordable house in this tight market.
“The inventory is really low,” said Lilliana Caro, a real estate agent with Coldwell Banker. A Latina, she works primarily with Spanish-speaking clients.
About half of Caro's clients come to her with enough money to make a down payment and cover closing costs. She counsels the rest to save up and come back.
For a $100,000 home, buyers typically need $3,000 to $5,000 for the down payment and another $3,000 to $4,000 for closing costs, or $6,000 to $9,000 total, she said.
Caro's clients often are competing with five or six other prospective homebuyers, she said. When it was a buyer's market, buyers could request that the sellers cover closing costs. But today's sellers accept the best offer, which usually includes closing costs, she said.
Along with having adequate savings, clients need to be pre-approved for a mortgage loan, she said.
Stephanie Hawley, a Flagstar Bank mortgage sales manager, said the Michigan-based lender offers some mortgages with zero down. Others require as little as 3% or 3.5% down payment for qualified buyers.
“These are programs that have been around for decades and do not appear to be going anywhere soon,” she said. “Homeownership is still very attainable with a smaller down payment.”
As an example, Hawley computed the price increase for a home that sold for $150,000 last year. If the price increased by 15.3%, the down payment increase cited by industry tracker Attom Data Solutions, the new amount would be $172,500. If a borrower secured a 3.5% home loan, it would translate to $787 more needed for the down payment, an amount she described as “not terribly significant.”
“The amount of down payment isn't a giant factor in whether you can or can't get a loan,” she said.
Factors that bankers consider when evaluating loan applications include credit history, savings amount and debt-to-income ratio, she said.
A home loan's interest rate isn't necessarily higher when the borrower puts less than 20% down, Hawley said. Monthly payments can be higher with less than 20% down, however, because those borrowers are required to pay for private mortgage insurance until they reach the 20% equity threshold, she added.
Hawley said the bank's mortgage loan officers are working with clients. Flagstar is among the 10 largest bank mortgage originators nationwide. “We couldn't be busier at this time,” she said.