In the Greater Bay area a standard and competitive down payment is 20%. Generally speaking, the higher the down payment, the more competitive the offer. Sometimes, when a credit score is low or other credit worthiness factors arise, a lender may increase your downpayment requirement.Your down payment requirement is also dependent upon your income and what the lender determines your affordable monthly principal, interest, taxes, and insurance (PITI) will be. There are loan programs that provide lower down payment options, however they are not as popular in the current market due to competitive offer scenarios.
Here are 5 ways to “Get Into” the real estate market with a lower downpayment.
1. Entry Level Real Estate
Is the lowest price point in any given market. This may include small condo’s, TIC’s, fixer-uppers, properties in emerging neighborhoods. Live in this (maybe not ideal) property for the appropriate amount of time that will benefit you tax wise and then sell. Make small, but significant improvements commensurate with the areas appreciation. Have a plan.
2. Out of Area
You may want to live close to work, friends, family or the "action", however purchasing in another City, town or neighborhood that is more affordable can provide you opportunity to grow your equity and make your next purchase closer to your ideal location.
Depending upon the location, you can purchase a home that needs repair for pricing that should be at the low end of the market. Look for homes that need updating, not re-building. Check with your lender about adding a construction loan to your purchase loan. Make sure to carefully evaluate your fixer so that you don't get in over your head. Don’t buy a faller-downer.
4. Investment Group
Make your first purchase as part of a group or LLC. Bring together like-minded home investors to purchase and improve 1 or more properties together, sharing in the profit and growing the size of each project and subsequent profit with each sale. Use professionals who represent real estate investors every step of the way. Make sure to create an exit strategy so you can take your profit to use as a downpayment to buy your own home.
5. Check with your financial professional
For strategies to gather your down payment. You may have financial resources that you can tap that you haven’t thought of, like equity from credit resources, retirement funds, stock options, insurance policies, personal loans, or you may even opt to use hard money funds if you are "flipping a home".
Contact me early in the process to receive the benefit of my nearly 40 years of real estate knowledge. Through recommendations to my professional network, I'm able to strategize with them to help them gather a down payment, buy the right property in the right place and continue to work together toward future real estate investment.
Patty Rogers, Broker Associate BRE#00669968 provides next level East Bay Real Estate representation. #howtobuyahome #homesforsaleintheeastbay #Oakland #Berkeley #Rockridge #Emeryville #Piedmont #Montclair #igotyourback #modicumofcharm #insight #NoBS