One of the primary goals of home ownership should be the building of equity in the home. Equity is simply the difference between the current value of a property and what the balance of all mortgages. Here are two ways to build equity, or ownership, in your home. One is to pay what you owe your lender which decreases the principle owed on your mortgage, and the other is to take advantage of the market upswings which will increase the value of your home.
Putting more money down on your home you want to purchase, is one way to build equity. Lenders have gone back to the tried and true models of 'income-to-debt ratios', which requires that borrowers put more money down when they purchase a home. However, it is still possible to get zero-down loans, such as those offered by the VA, most loans with low down payments require mortgage insurance.
For a conventional loan, which is for people that are eligible for purchase on the secondary market by Fannie Mae or Freddie Mac, requirements are stricter, but there is also more ease on eligibility. The minimum down payment required is as little as 3% to 5%, under certain circumstances, including excellent credit and the willing to pay private mortgage insurance. But to make sure the loan goes through, most borrowers are putting down as much as 20%. The more you put down, the more equity you will have. This being important because you need equity in order to sell your home so you don't need to come up with additional money at closing As you make your house payments, you slowly build equity. The longer you own your home, the less you'll pay in interest and a largerr share will go toward ownership, or building equity.
Another way to build equity is to let the market to do it for you. Historically home values beat inflation by one to two percentage points, but the last 10 yeaars or so have been anything but typical. But, all markets return to the norm, so predicting a normal market is on the way, your home should appreciate at least one percent annually. But one thing is certain, you can't build equity unless you're invested. If you want to take advantage of the recovering housing market to build equity, it's time to invest in a home.
If you are in the market for a new house and would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Lang Premier Properties. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.