New Construction Upgrades That Add Value: A Guide to Personalizing Your New Home
Posted by Ben Wills in Home Buying
You might be one of many people that is ready to take that step and purchase a new home, but is stuck thinking, “I can’t afford to buy a home yet! Maybe in a couple of years.”
No time is better than the present! Forget all the common misconceptions you’ve heard around financing a new home. We will show you how you can afford to purchase that home you’ve been eyeing.
Let’s bust those myths keeping you from taking that next step so that you’ll be better educated when it comes to beginning the process.
Myth: “I need at least 20% down to buy a home.”
This myth is the one that we hear most often and that unnecessarily hampers many people from buying a new home. 3 out of 5 Americans (62%) believe that you need a down payment of 20% or more to purchase a home, based on a 2020 survey conducted by NerdWallet.
In reality, the median down payment in 2019 was 12%, and for first-time homebuyers, it was half of that, at just 6%! For repeat buyers, it was below 20%, coming in at 16%, as reported by the National Association of Realtors 2019 survey.
Through M/I Financial, LLC there are loan programs that can do as little at 3.5% down, which is quite different than the 20% you may have thought was necessary.
For example, if the purchase price of your home is $370,000, with 3.5% down, you could move in with a down payment just under $13,000!
So, don’t worry about taking years to save up 20% and missing out on the opportunity to get in the community you love.
Myth: “I have to have my entire down payment at the time of contract to buy the home.”
M/I Homes has made it simple: at the time of signing a contract, we collect a deposit that secures the home we’re building specifically for you. The amount varies by location, but in many of our communities, it’s as low as $7,000.
This deposit is credited back to you at closing. So, if your total down payment is $13,000, you’ll only need to bring an additional $6,000 to closing since you gave $7,000 at the beginning of the process.
A big advantage of building is that the process takes 6-12 months, depending on the location. During that time, you can SAVE, SAVE, SAVE! Maybe you skip Starbucks a couple of times a week, cancel a streaming service you never use, or go out to dinner one or two times less a month, and just like that, you’re able to add even more to your down payment.
Myth: “My credit score isn’t perfect, so it’s probably not good to buy until it is.”
A perfect credit score of 850 is like a unicorn. Only 1.2% of Americans have this score, so it’s not something the average buyer has. An average credit score is around 700, and the best interest rates are usually for anything above 760.
If you’re below that 760, it certainly doesn’t take you out of the game. Typically, anything above 620 is something that would be eligible for financing, provided income, debt, and other factors are where they need to be.
In the event you are around 620, or even 600, a conversation with one of our M/I Financial, LLC loan officers can provide guidance on steps needed to improve the score.
Just like a down payment, the time it takes to build the home allows you to pay off debt, clean up accounts, and work on other items to improve your credit rating. Some homeowners are able to obtain a better rate at closing because they raise their scores during the building process!
If you have any questions on where you stand with your credit score and what sort of interest rate that will award you, reach out to one of our M/I Financial, LLC loan officers. They will be able to pre-qualify you for one of our homes and answer any questions you may have.
Myth: “I don’t think I can afford a $350,000 house.”
While income, debt, and other factors play a role, the affordability of a home may weigh less than you imagined. Rather than getting focused on the purchase price of the house, we like to look at it in terms of the monthly payment amount. When you approach it this way, you’re able to compare it to what you’re currently spending in rent or what your current mortgage is. You’re also able to put together a budget based on what you bring home and other expenses.
Let’s say you’re looking at M/I Homes, and with the options and upgrades you want, the home is $350,000. In this scenario, we’ll say you have saved some money and can do 5% down ($17,500). While interest rates are always changing, 3.25% is a round number we can use as a starting point, and it will be a 30-year fixed mortgage.
- Price: $350,000
- Down Payment: $17,500
- Interest Rate: 3.25%
Monthly Principal and Interest: $1,447
Monthly PMI: $211
Payment before taxes: $1,658
Property taxes vary by location and the first year or two on a new home, but let’s use 2.2% of the purchase price as our tax estimate.
Taxes: $642
Total payment (principal, interest, PMI, taxes): $2,299
How does $2,299 compare to what you’re paying now when you consider what you would be gaining? You’ll be owning a new home in a thriving neighborhood convenient to everything, with interior design finishes that are chosen by you; a 10-Year Transferable Structural Warranty; and no extensive replacements looming over your head like a new roof, A/C, water heater, or furnace!
Additionally, there are tax benefits associated with owning a home. While you should contact a tax professional for specifics on your scenario, generally, you may deduct both mortgage interest and property tax payments, plus other expenses, from your federal income tax.
In short, the added tax benefit can save you money yearly—something that you can’t say if you’re paying rent.
Myth: “I’m too busy and don’t have time to get all the paperwork together.”
M/I can help with this! Our all-digital loan process makes it quick and easy. Your pre-approval can be completed online in less than 5 minutes! There’s no chasing down paperwork or statements from past years. By utilizing our secure technology, many of your accounts can be verified through our online portal.
If you have questions, there is always someone available to pick up the phone and talk through the details. Let us help you find your dream home and make the move today! Let us Welcome you to Better at M/I Homes.
Author
Ben Wills
Author
Ben Wills is the Mortgage Branch Training Officer for M/I Financial, LLC. Ben has been in the mortgage field for over 40 years and has assisted thousands of homeowners in financing new home construction.
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Author
Ben Wills
Author
Ben Wills is the Mortgage Branch Training Officer for M/I Financial, LLC. Ben has been in the mortgage field for over 40 years and has assisted thousands of homeowners in financing new home construction.