3.5% for First Time Buyers

When someone is buying their first home, I encourage them to meet with me for a one hour homebuyer education meeting.  We spend that time together talking through the process of home buying, the costs involved and the various loan options available. 

Buyers always leave this meeting better equipped to proceed with a home purchase.  Surprisingly, many of them make an offer within days of the meeting, largely because they now feel knowledgeable and confident with the path they're taking.

Last night, I had some buyers in who had a common challenge - they had found a house they loved but the payment was out of their target range.  Let me share how that problem was fixed:

$20,000 more home for the same payment??

Anyone who knows me well knows that I'm a big-old nerd.  I love math.  LOVE IT.  Math is so much fun for me that, when I had a free afternoon last month, I spent it creating an Excel spreadsheet to quickly calculate home prices for various loan types given a targeted monthly payment.  Does that sound like FUN?????

What can I say?  It really was a blast.  Even more fun for me was what the spreadsheet showed.  When I got all of the calculates in place, I saw that the swing in home prices for different loan options was bigger than I'd expected. 

Let's say a buyer is comfortable with a monthly mortgage payment of $850.  Given the current interest rates and assuming typical property taxes and home insurance, The home prices for that payment currently range from $109,720 to $128,206. 

Really?  Almost a $20,000 difference in price for the same monthly payment?  Yep!  See my handy-dandy spreadsheet below for the details:

So what does this mean to you as a Realtor?  Well, as you know, the lender approves a buyer based on the monthly payment they can handle, not based on the price of the home.  If the buyer can get more home for the same payment that 1) makes the buyer happier; and 2) makes your job of finding them the right home easier.  Win-Win!

Of course, not all lenders love math like me, so they don't share this kind of options analysis with home buyers.  I do though.  If you want happier buyers and easier house hunting, share my name.  Let's put this awesome spreadsheet to the test :-).