The No Down Payment Craze

Remember the days when homebuyers – both first-time and repeat – paid a sizable down payment for a house? You may have to stretch your memory, but even two decades ago the standard home buying scenario required an average 20% down to close on a property. Some of today’s buyers pay not a penny down.

So where does this change come from and what are the consequences?

The primary reason for lower and lower down payments is obvious. Home prices have skyrocketed – even when adjusted for inflation – compared to the affordable prices of the ‘80s and early ‘90s. Swiftly rising price tags mean it’s no longer possible for young, first-time buyers with less income to pay even 10 or 5% of the home value upfront – meaning they are forced to take out close-to or the entire value the house in mortgage loans.

Okay, maybe ‘forced’ is not the right word – the second reason so many home buyers are financing the entire cost of their house is the rapid increase of no- or low-money down loans, both from public and private lenders. Often times these main mortgages cover the cost of down payments with ‘piggy back’ loans and other financing options.

Such popular loans have created a boom in home ownership in the US – currently at a record high of 69%, the NAR reports. This increase is due to the rush of first-time buyers that otherwise would not have enough ready-cash to cough up a substantial down payment.

Great news, right? Even lower-income first-time buyers can now afford to purchase high ticket-priced homes. Well, there are obviously some consequences.

One of them is stilted appreciation. Ten or fifteen years ago, taking out a low-money down loan was acceptable because high appreciation rates usually covered first-time buyers when they sold and upgraded housing. But today’s home appreciation rates vary wildly. Those who start out with no or little equity could face the same fate when they choose to sell their home years down the line.

So as much as these no- or low-money down loans are a godsend for low-income families trying to buy their first home, it can also be a slippery slope. As usual, your parents probably know best – earlier generations tended to put 20% or more of their home’s value down upfront, ensuring lower mortgage payments and quicker repay schedules.

Getting a great investment at little upfront cost can many times pay off in the short term, but make sure to invest wisely and make a decision that will pay off handsomely in the long term as well.

For more information about Seattle real estate visit UrbanTango.com or check out our innovative real estate IDX tools at XoomPad.com.

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Flip Tips 101

Following our discussion yesterday, a new guide for the art of flipping properties has just hit the bookshelves. Keller Williams Realty, one of the nation's leading realty firms, has recently put together Flip: How to Find, Fix, and Sell Houses for profit.

As one of the world's leading realty companies, there is no doubt that Keller Williams has key insight into the real estate industry and its intracacies. The guide promises to help investors understand how to find a promising investment, analyze a profit potential, and buy and sell at the optimal prices. But the question becomes, why is Keller Williams selling its 'most profitable secrets' to the public?

The answer is the flipping craze. With show like the A&E 's hit, "Flip this House", how-to guides like this latest from Keller Williams, and a plethora of guides, gurus, and gizmos - the common conception is that flipping houses is an easy and quick way to get rich. The marketing value is just too great to show the whole truth.

While the art of real estate investment is an incredibly successful way to make money, it is far from easy, far from simple, and never 100% guaranteed. As always, we suggest that you learn as much as you can before trying your hand at the flipping industry. There's no doubt that there is money to be made out there, but to be successful is to be completely informed. So check out the new guide from Keller Williams, get all the "Flip this House" episodes on DVD, and learn all you can from everyone you can, before you decide to dive in.

It can mean the difference between great flips and incredible flops.

For more information about Seattle real estate visit UrbanTango.com or check out our innovative real estate IDX tools at XoomPad.com.

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Modern Day Millionaire Club

Being a Millionaire today is not exactly what it once was, but having $10 mil stashed away can probably get you what you want. But would being a multi-millionaire change your life? Would you work less, spend more time with your family, go for longer walks, play with your kids, have more fun? If you did all this would you still accomplish as much?

Yes. I think you could, even though that didn't used to be the case. I don't know a lot of people that got rich by working their fingers to the bone. I do know a lot of them that got rich by being sharp, smart - by buying real estate, owning ingenious companies, playing with stocks and bonds. Contrary to what you father told you, working hard is not the key to getting rich.

We all know it's very possible to become a millionaire - hell, even a billionaire if you really play your cards right. Others have done it, why not you?

Why am I writing on such a subject today? Back in 1999, my wife and I bought a duplex for $286k here in Seattle. That same duplex is on the market today for $565k. So in a matter of 8 years, that property has doubled in value. So that pour soul, who would have owned that house, would have doubled their money. But would they have put in the whole $286k? No, probably not. We have only paid $56k of that mortgage. So does that mean we received a 500% return on our investment? Well, pretty close to it.

Don't get me wrong, investing in real estate is not easy. It never has been. It's a myth that you can throw some money into a property and it will just spit profits back at you. Real estate transactions are complicated and can be difficult for the average homeowner to understand. If you really wanted to get rich, and get rich quick, I would tell you to learn all you can about real estate, its market, and its history.

Yes, folks, the American Dream is alive and well. With a new 21st century twist. Notice, however, I did not say the traditional American Dream of owning a home is the way to get rich quick. Don't get home ownership and real estate prowess confused, for they are whole different animals.

But they are both animals that will gladly curl up at your feet, if you know how to pet them right.

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