Thinking About Buying? How Much Do You Really Need To Put Down?

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Shared By Molly @ C21 Home Matters

Recently personal finance guru Suze Orman made some comments during an interview with CNN about the current housing marketing and her advice for homebuyers. In her remarks, Orman recommended that homebuyers wait to make a purchase until they can put 20% down and they have an emergency fund in place as well.

Several CENTURY 21 System members we spoke with felt that while Orman’s advice is good, it is not feasible for many homebuyers and more importantly, it is generalizing and broad. Every homebuyer’s situation is different and for qualified buyers there are still plenty of other valid financing options.

After hearing Orman’s commentary, Todd Hetherington, CEO of CENTURY 21 New Millennium which serves the Baltimore/Washington D.C. area, said, “As an avid real estate investor and a broker/owner of a real estate firm for the past 21 years, I have to chime in with some respectful differences of opinion than those offered by Suze Orman. Suze’s comments in my opinion, though well intentioned, are far too broad and not applicable to the scenarios that we are creating day in and day out in our marketplace. A well-qualified buyer with a stable job that is going to be in our area for at least the next five or so years should most definitely purchase a home as opposed to rent one.”

Hetherington went on to say, “Rents in our area (Washington D.C.) are going up every month. Interest rates are at unprecedented lows. Housing affordability is at pre-2005 levels. We should be (and are) screaming from the rooftops- NOW IS THE PERFECT TIME TO BUY A HOME!”

Ron Clarke, CEO of CENTURY 21 Alliance which serves the greater Philadelphia market, added his opinion, “For any person who has stable employment, buying continues to be the best option. Purchasing a home with an FHA mortgage with as little as 3.5% down, keeps the American dream of home ownership alive. Real estate is an installment purchase and in many markets a mortgage payment with 3.5% down is less than a rental payment. It is the cost of monthly housing that is the most significant in any family budget, buying not only seals in that cost, it allows consistency in family financial planning.”

Clarke went on to say that even though the housing market is still recovering, buying in 2011 makes a lot of sense for many individuals and families, “Even if real estate values stay stable, or decline in the near future, buying still works. Interest is the key factor. Historically low rates mean that monthly payments are affordable. Today’s purchaser will often experience a lower real mortgage payment than those who purchased in prior years. In the Delaware Valley and Philadelphia, PA area, for instance, a new purchaser experiences a monthly cost of home ownership nearly $ 700.00 less than 6 years ago. Salaries have increased over those 6 years, so the true cost of ownership has declined nearly 1/3. An increase in rates to the average of the last 10 years to 7% would mean values would need to decline 30%, before a mortgage payment would be less. Prices in many areas of America are stabilizing, and even if prices decline, buying still makes sense.”

Clarke ended his persuasive comments with one powerful statement, “Remember, everyone in America pays a mortgage. Pay yours rather than someone else’s.”

Real estate professionals – what do you think? Weigh in on the 20% debate in the comments section below.