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3 ways falling down payment amounts could affect US homebuyers

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Photo: Robert Clark

The US housing market is experiencing a perfect storm of affordability erosion.

Earlier this year home prices reached an all-time high, while interest rates are continuing to rise.

Many homeowners are staying in their homes longer, in order to hold onto their lower rate. As a result, there are fewer homes on the market and competition among buyers is fierce — driving prices upward, often above the listing price.

LendingTree, a leading online mortgage provider, offered potential homebuyers a glimmer of hope in a new report — the average amount of a down payment on a home is falling.

Here’s what that really means for buyers:

1. You will have to save less money to buy

Today, it takes the typical American homebuyer about seven years to save for a down payment. Saving less money for a down payment should shave off some time, which will get you into your new home faster.

Average down payment amounts decreased by nearly 10% in the third quarter of this year, falling from $52,480 to $47,265 nationwide. The savings may be just enough to turn some renters into homeowners.

“If high down payments have deterred you from buying a home in the past, now might be a good time to reconsider your options,” reads the report.

2. More buying power

Home price appreciation is slowing nationwide, even in many of the hottest markets. Many homeowners who have been on the fence about selling, may decide to sell.

“Waiting too long to sell could end up costing you, especially if this trend continues and home prices start to fall,” reads the report.

Sellers could be more agreeable about negotiating and more eager to sell quickly before interest rates rise and home values fall.

3. Less to borrow

Despite rising home prices, the average home loan amount offered to potential homebuyers fell around $28,000 from $285,903 in the second quarter of 2018 to $257,749 in the third quarter.

Borrowing less equates to a lower monthly payment, which puts money back into your pocket every month. The sooner you buy, the more money you could potentially save — interest rates are predicted to rise at least twice by the end of 2019.

“Rising rates translate to more expensive mortgage payments, which crimps affordability for would-be homebuyers. The increased rates adds to what is already a laundry list of obstacles facing buyers,” Stribling & Associates director of data and reporting Garrett Derderian tells Livabl. Stribling & Associates is a leading New York brokerage.

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New home? Prepare for the unexpected

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(NC) Buying a house, getting married or having your first baby are all major life events that are likely to affect your finances. But whether you’re in the midst of a major life event or not, it’s important to check in on your finances regularly to maintain good financial health.

Your financial health encompasses things like your spending, savings, borrowing and future financial plans. It also means dedicating a set amount of savings for unexpected future events. It can even include optional credit protection insurance, such as TD protection plans, to help cover your debt balances in case of death, a covered critical illness or total disability.

Even though it can be tough to think about the unexpected, life is unpredictable and it’s important to plan for the unexpected. Find more information at td.com.

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Mortgage pitfalls to avoid

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(NC) Throughout life, you may have moments where you’ll make a large purchase or invest in a costly item, like your family home. But whether you’re in the market for your first new property or already have a mortgage, leaving this asset unprotected can be costly.   

Insuring your housing financial debt, as well as debt for other big-ticket items like a new boat for your lakefront cottage or keepsake jewelry like an engagement ring, is a smart investment in your well-being.

To help protect your debt balances like a mortgage, your bank may have optional credit protection insurance products.

“Your home is one of your biggest assets, yet illness can happen at any stage of life. Worrying about your mortgage when the focus should be on health isn’t a situation anyone would wish for,” explains Shirley Malloy, vice president at TD. “Fortunately, we offer mortgage protection to provide coverage for your outstanding balance should you face a covered critical health event.”

Mortgage protection can be purchased whether you’re in the process of applying for a mortgage or already have a home financing solution. But what about protection options for credit card debt?

“Given the unprecedented circumstances of this year, many Canadians are trying to plan for the unexpected to protect themselves and their finances,” says Malloy. “TD balance protection plus is an optional product designed to help you deal with your credit card payment obligations in the event of a covered event, such as loss of employment.”

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Is your internet too slow? It’s probably not you

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(NC) We all know the aggravation of a school lesson that just won’t stop freezing or the family video call that looks more like a photo montage. And, as we adjust to the impact of COVID-19 on our day-to-day, that slow connection can have frustrating consequences.

Working from home and learning remotely, both need fast, stable internet, something not enough Canadians have yet. Even if you have fast devices in your home, if the infrastructure in your area is not optimal, your connection won’t be either.

Right now, cities have the infrastructure needed to ensure access. But rural and remote communities are hugely underserved, with fewer than half having high-speed internet, and fewer than a third of households on reservations have high-speed connections.

Fortunately, change is coming. The Universal Broadband Fund is backing projects across Canada right now to ensure the reliable, high-speed internet connections families need to work, study, access services online, and safely stay in touch with each other.

The fund existed before COVID, but as a response to the pandemic, its timetable has been moved up by four years to a target of 98 per cent of Canadians with high-speed internet access by 2026. With the faster pace, at least 90 per cent of us should be connected by the end of 2021.

The fund is focused on improvements in rural and remote communities across Canada to fix the disconnect between internet access for urban and rural households.  This means more remote work opportunities, better access to remote learning and safer access to healthcare, no matter where you live.

It’s not just for good connections at home, either. The improvements mean much better access to mobile networks on highways between remote communities. The result is better, safer navigation and access to emergency services for your family, even on the road in the middle of nowhere. Mobile projects will be focused on serving Indigenous communities and the roads leading to them.

The shape these improvements will take in your area will depend on where you live. Canada is huge, and its communities are hugely diverse, with diverse needs. Keep an eye out for local projects — they’re a small part of something much bigger.

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