A few months ago Realty Trac published the results of some research they did that covered 512 counties in the U.S.
The median home price in those counties was $259,000, and a 20% down payment would require a home buyer to come up with $51,800. People entering the workforce start earning the national median salary at age 30. With the personal savings rate at 5.6% annually, this 30 year old would need 12 years – till age 42 – to accumulate the 20% down payment. This assumes no home price increases.
That’s a daunting task, which is why so many parents help their children with a home purchase. Also, Melvin Watt, Director of the Federal Housing Finance Agency, has suggested lowering the down payment for a conventional loan to 3% from 20%, with safeguards intended to avoid the meltdown we experienced just a few years ago.
You can help too if you have a property to sell. If you are comfortable offering to carry the note, just protect yourself and your buyer with strong but fair terms. Ask for 20%, and if your buyer just can’t come up with that much cash, get the absolute most he can put down. Have an interest rate of 7%+ and amortize the note over the shortest period comfortable for your buyer.
Help your buyer get into home ownership and design terms that strengthen his commitment and safeguards your decision.
www.realtormag.realtor.org
