When couples these days head out to buy a Columbia SC home, often times, down payment is the biggest hurdle. Most young people starting out today have not worked long enough to save to buy a house, even if they can swing the monthly payments.
Loans from family members can cause problems however, and financial experts warn against it.
Lenders typically view a family loan as another burden that could affect a borrower's ability to make monthly payments. In fact, a loan from a parent could raise a borrower's debt-to-income ratio sufficiently to result in disqualification for a mortgage to buy a Columbia SC home.
Parental loans also fall under the category of unsecured debt, meaning that no asset is acting as collateral, which can pose a lending risk.
Gifts to Help Buy A Columbia SC Home
Gifts—with no strings attached—are a different matter. Even then, most lenders typically like to see home buyers contribute at least 10% of the loan amount to the down payment because that's an indication of their ability to manage their own finances. If someone is coming to the closing with a down payment that is all gift money, some lenders will consider it, but only on a case-by-case basis.
About one-fourth of all first-time home buyers receive some down-payment assistance from relatives, most commonly, parents, according to a National Association of Realtors survey of people who purchased homes from July 2011 to June 2012.
Rising property values are also driving more parents to pitch in on down payments, especially in high-price home markets.
A few more considerations when seeking help making a down payment to buy a Columbia SC home:
- Don't forget tax rules. An individual gift of $14,000 or less is tax-exempt, but gifts that exceed the $14,000 annual limit must be reported to the IRS. This used to be $13,000, but was raised last year. Each parent can give $14,000 to a child and his or her spouse, for a non-taxable sum of $56,000.
- Stick to close family members. Lenders generally won't allow down payment gifts from distant relatives or unrelated parties, such as a builder.
- Gift rules are looser with an FHA loan. Federal Housing Administration mortgage limits go above regular jumbo limits in some high-price areas and allow borrowers to use a gift for the full down payment.
In making a family gift to buy a Columbia SC home, the key is for the borrower to have the right documentation, including a letter that clearly states the gift amount and that the gift-giver doesn't expect repayment. In addition, lenders require written proof that the money has been transferred from the relative's bank account to the borrower's bank account or, alternatively, are given a copy of a certified or cashier's check.
Columbia SC home prices are rising at double digit rates. Inventories are at historic lows. Two out of five applicants for a mortgage don't qualify or are turned down. Yet nearly three quarters of all potential homebuyers say it's a good time to buy a Columbia SC home.
While some would argue its always a good time to buy, conditions have turned to favor sellers in most markets across the nation, including Columbia SC . Yet even though a slight majority of consumers participating in Fannie Mae's latest monthly National Housing Survey expect prices to rise over the next three months, 71 percent said it's still a good time to buy a Columbia SC home.
By contrast, the share of respondents who say now is a good time to sell climbed 4 percentage points in April but still reached only 30 percent, compared to 15 percent at the same time last year. That's not even half as many as those who said it's a good time to buy. The percentage that said it's a good time to buy stayed steady from March.
The share of respondents who say mortgage rates will go up fell 3 percentage points to 43 percent, while those who say they will go down increased slightly to 7 percent.
The share of respondents who said they would buy if they were going to move increased slightly to 65 percent.
“For the first time in the survey’s three-year history, the majority of Americans surveyed now expect home prices to increase,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Crossing the 50 percent threshold marks a significant milestone as most Americans believe a housing recovery is truly occurring throughout the country. Reflecting that increased optimism toward housing, the share of Americans who think it is a good time to sell has doubled during the last year. Many homeowners who have been underwater are gradually returning to positive equity, and selling is now becoming an available and attractive option again.” (Read the complete survey here – PDF.)
Do you agree with the majority of survey respondents who said they think now is a good time to buy a Columbia SC home? Your email address will never be displayed on our site for your security and we will never contact you via your email address unless you ask us to. We'd love to hear from you whether you agree or disagree with Fannie Mae's survey results.
Many renters can't afford to buy a Columbia SC home because they spend more than they make.
In a recent survey of 1,000 U.S. renters by Rent.com, an astonishing 61 percent said they spend more than they make every month. If you're renting and hope to someday be able to afford to buy a Columbia SC home, here are five ways you can work on curbing your spending habits.
5 Ways to Help You Buy a Columbia SC Home
Trim the Fat.
Nearly half of the renters surveyed (49 percent) said the hardest part about saving money is the fact that costs just continue to increase. While you can't do much about rising costs, you can stop spending money on things you don't need, and "doing without" is the way to eventually be able to afford to buy a Columbia SC home of your own.
For example, paying for a gym membership will burn more money than calories. Instead, create a mini home gym with some simple, inexpensive fitness equipment, like resistance bands or kettlebells, so you can stay fit without straining your wallet. If you don't watch a lot of television but you're paying for cable, consider switching to a cheaper online option, like Netflix or Hulu Plus. Instead of paying $60 to $100 per month for cable, Netflix runs about $9.00 per month. Toss the extra money into your "buy a Columbia SC home" savings account. Speaking of saving…
Learn to Save.
Life is unpredictable, but don't be one of the 26 percent of renters who said necessary-but-unbudgeted expenses are the hardest part about saving money. Put a small amount of your paycheck aside in an emergency fund until you have at least six times your monthly income. When your car breaks down or you need a root canal, you'll be glad you have the extra cash on hand.
Treat Yourself (Responsibly)
Impulse purchases were the downfall of 15 percent of the renters surveyed. Saving money doesn't mean you can't ever buy yourself anything. In fact, if you don't allow yourself some fun, you're more likely to break down and go on a spending spree. The key is to give yourself a limit by including monthly indulgences in your budget.
Find Some Free Fun
Going to bars and restaurants gets expensive. Just ask the 6 percent of renters who said socializing is the hardest part of saving money. There are plenty of things you can do with your significant other or friends for little or no money at all. Consider hosting a board game night or potluck dinner, getting active outside with a bike ride or hike, or attending a free community event. With a little creativity, you can have a good time without draining your bank account.
Find Some Budgeting Assistance
If you're just not good at budgeting, like the 4 percent of the renters reported in the survey, you're in luck. There are plenty of free online resources to help—and some even do the work for you. One good go-to budgeting helper is Mint.com, a highly-trusted, secure website where you can link your bank, credit cards, loans and investments, so you can see all of your accounts in one place. In addition to helping you stay on top of your finances, the site will also help you set and reach your financial goals of someday being able to buy a Columbia SC home of your very own.
For more tips on home buying, see our Columbia SC Home Buyer Tips section under the Columbia SC Real Estate Categories to your right.
Buy a Columbia SC Home Versus Renting One
It’s cheaper to buy a Columbia SC home than renting it. This stat holds true in most U.S. housing markets, according to the real estate site Trulia.
The reasons: Columbia SC home prices are still falling and mortgage rates have remained at or near historic lows for months – while rents are on the rise.
Trulia looked at asking prices for rentals and homes for sale, while also factoring other costs such as taxes, insurance and maintenance.
Buying a Columbia SC home is much more affordable compared to renting in some areas with low vacancy rates where rents have increased in recent years.
Your income, savings, and monthly expenses play an important role in determining how large a mortgage you can afford.
In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.
Monthly Expenses When You Buy a Columbia SC Home
Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to buy a Columbia SC home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:
- Property Taxes and Special Assessments
- Home/Hazard Insurance
- Utilities
- Maintenance
- Home Owner Association (HOA) Fee: Doesn’t apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
- Membership Fee: It may pay for recreational facilities and other services (cable TV).
Although there are many things to consider when deciding which is cheaper for you, to buy a Columbia SC home, or to rent one, we hope this article has helped you in the planning stages.