We just got an email from one set of our new buyer clients thinking that they need to wait until August to buy something or to start looking. Here’s their message to us and our response…
We’ve been doing research for a few weeks now, and our conclusion is that the homes we like need a bit more down payment than we’re willing to spend currently. I think we’ll restart our search in a few months, likely around August.
And our response:
Depending on the neighborhood you’re looking in you may be able to do a less-than-20% down payment loan without having to pay costly mortgage insurance (which isn’t usually tax deductible like mortgage interest is). Here are some of the programs we’re aware of that you may want to consider:
- Citibank (though our in-house lender rep) are now running a 15% down, no mortgage insurance, up to a purchase of $1.25M,
- Citibank and other lenders will do what are called Census Tract loans, which can be done for as little as 5% down for certain areas of the City (parts of SOMA, Potrero, Mission, Bayview, a
- SoFi, the student loan people, have been and are still doing 10% down loans to up to $3M.
The reason why all of these are worth considering is that you’re leveraging your smaller down payment on an appreciating asset that will grow in value whatever your down payment percentage is. The natural background growth rate for SF real estate over the past 30 years is somewhere around 7.7% per year. This ignores you doing anything to your property other than living in it. As soon as you add value by doing such things as kitchen updates, painting, remodeling and by working with agents like us who love dressing your property up for resale with staging, updating and strong marketing you’re pushing the value-added factor up significantly. We’ve had many cases where people bought their properties two years ago who end up nearly doubling their sale price and, most certainly their down payments at minimum. Our advice is to go out and check out open houses to see what’s really important to you and to explore all of our City’s neighborhoods as you’re likely to discover a lot of places you may have never known about before.
Indeed, we’ve created a little handy-dandy infographic that shows you annual appreciation in median sale prices for San Francisco houses and condominiums. Keep in mind these are only median prices. Average price figures are much higher usually.