August 2017

Saving for a down payment could be easier than you think. Here are four tips to help you get started.

Read more » Links to full article

Are you thinking about purchasing an investment property? Before you decide, make sure you understand the pros and cons.

Find out more » Links to full article

To help you make home buying decisions with confidence, here are five top questions to help you choose the right mortgage lender.

Learn more » Links to full article
 

4 tips to help you save for a down payment

Most potential homebuyers know they need to save money for the upfront costs of purchasing a home, also known as the down payment. But there's also a lot of misunderstanding about the minimum amount of money required, which may lead people to think that saving for a down payment is more difficult than it actually is.

The good news is that you can take advantage of a wide array of savings tools and resources to help you save as much as you need — easily and conveniently — for your home buying goals.

Check out these four tips and get started saving for your down payment today:

Automate your savings plan. Create a separate savings account for your down payment fund and take advantage of automatic deposits to help you put money aside on a regular basis. Bank of America customers can use our online Save for a Goal tool to automatically transfer money from their paycheck or checking account to their down payment fund each month. Sign in to Online Banking to get started.

You can also check out our Short-Term Savings Calculator to find out how much you need to save each month, and for how long, to meet your goal.

Set aside unexpected money. Did you get a tax refund or bonus this year? What about holiday or birthday money? While it's tempting to spend it right away, you can get closer to your home buying goal faster by putting unexpected income into your down payment fund.

Match your spending with a contribution to savings. Whenever you buy something you want but don't really need (known as discretionary spending), contribute a matching gift to your down payment fund.

Seek out lower down payment options. There are programs designed to help make buying a home more affordable. You can search for down payment and cost savings programs online at the Bank of America Down Payment Resource Center.footnote1 I can also help guide you through the options that may be available to you — call me with questions.

Down payment and closing cost assistance programs can also be used with the Affordable Loan Solution® mortgage, which offers a competitive rate as well as a down payment as low as 3% for modest-income buyers — with no mortgage insurance required.footnote2

Contact me for more information on how you can reach your down payment savings goals.

1Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply.

2Available for fixed-rate purchase loans with terms of 25 or 30 years and on primary residences only. Certain property types are ineligible. Borrower(s) must not have an individual or joint ownership interest in any other residential property at time of closing. Maximum purchase loan-to-value is 97% and maximum combined purchase loan-to-value is 103%. For loan-to-values >95%, any secondary financing must be from an approved Community Second Program; ask for details. Homebuyer education may be required. Restrictions apply regarding co-borrowers. Maximum income and loan amount limits apply.

Sources:
"How to save for a real estate down payment: 20 financial experts share their tips," Forbes.com

"How to save for a down payment for a house (without pinching pennies)," Forbes.com

Back to topGo back to top of newsletter

Is buying an investment property right for you?

For many people, buying an investment property to rent out is an attractive option to create a source of consistent cash flow while potentially enjoying helpful tax benefits.

But like any financial decision, the choice of whether you should buy an investment property or not is a highly personal one. Buying a property is, in some ways, the easiest part. You'll also want to weigh costs that go beyond the immediate financial impact, including time, effort, property maintenance and upgrades, and more. You should always contact your tax advisor about your particular situation.

Here are three big pros and cons to consider:

Pros:

  • As we've already mentioned, turning your investment property into a rental is an effective way to generate extra income on a regular basis. Plus, if it's a seasonal rental, you may be able to actually use it yourself for up to two weeks while still being able to deduct property maintenance expenses.
  • You may be able to deduct mortgage interest, insurance and all maintenance expenses against the income of your investment property. Consult your tax advisor about your particular situation.
  • Thanks to a rule called the 1031 Exchange, you may be able to sell a rental and invest in another of "like kind" within a limited time frame without having to pay capital gains tax. Special rules apply, so make sure you consult your tax advisor.

Cons:

  • Even with dream tenants, being a landlord can take a lot of time, effort and money. You will be responsible for maintaining the property, making repairs and upgrading as needed. A property management company can help, but if you think you'll want to hire one, don't forget to factor that into the costs of ownership.
  • Not everyone qualifies for tax deductions, and tax codes may change annually. You should always check with your tax advisor to help you make the best decision for your unique circumstances.
  • If you decide you want to sell the property at some point, it could take some months to complete the process — and whether or not you come out ahead depends on the health of the market at the time.

If you have questions about financing an investment property, I'm here to help, so feel free to contact me.

Sources:
"The pros and cons of owning rental property," Investopedia.com

"Should I buy an investment property?" Time.com

"What returns will I make on an investment house?" Time.com

Back to topGo back to top of newsletter

Better Money Habits®: Top questions to ask a mortgage lender

Choosing a mortgage lender is a big part of shopping for a new home. In addition to seeking out a competitive interest rate, you want a lender who can provide knowledgeable recommendations based on your financial situation and requirements.

The problem is that if you don't know what questions to ask, you may not get the information you need to make the home buying decisions that are right for you. Here are five key questions to help you get started:

  1. What's the interest rate?
    Ask your lender for a direct interest rate quote as well as the corresponding APR (annual percentage rate) for the loan. Don't be afraid to shop around until you find a rate and APR you're comfortable with.
  2. How many points are included in that rate?
    You may not be aware of points, which are fees paid to lenders at closing in exchange for a reduced interest rate. Ask your lender to explain how points work, how many points are included in the quoted interest rate and whether there are any benefits to buying more or fewer points.
  3. How much money do I need to put down?
    Down payment requirements may vary based on your income, the types of mortgage loan you qualify for and other factors. So don't assume you already know what your down payment has to be. Instead, ask about the minimum down payment required for your loan and how it affects any other associated costs.
  4. Are there any special requirements I should be aware of?
    Are you a first-time buyer? How about a military veteran? You may qualify for special government-sponsored mortgage programs. Ask lenders about what programs or offers you might be eligible for.
  5. What other costs and fees should I know about?
    There's more to the cost of buying a home than the down payment and monthly mortgage payments. Check with your lender about additional expenses such as loan-origination fees, appraisal fees, private mortgage insurance (PMI) and other costs. You can also ask for an estimate of your closing costs. The more you know up front, the better prepared you'll be for any expenses you run into during the home buying process.

For details and more questions to ask, read our Better Money Habits article "10 questions you should ask mortgage lenders."

Back to topGo back to top of newsletter

This publication is provided for your convenience and information only. Bank of America, N.A. assumes no liability for loss or damage as a result of your reliance on information in this publication. Photos are for illustration purposes only and are not to be construed as an endorsement of a particular product or company. Unless expressly disclosed otherwise, Bank of America, N.A. is not affiliated with or responsible for the products or services of any company that may be mentioned or depicted in this publication. Our goal is for the contents of this publication to be accurate as of the date this issue was printed. However, we do not guarantee that any content is accurate or complete.

ARWD7PKW