In this economy it is not wise to invest large sums of cash into an investment that can not be readily converted back to cash. In this new economy the more cash reserves you have the bigger your safety net. JMO.
20% downpayment on a new house
- Thread starter ParamedicMXr
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OP, I would look for a cheaper house or wait a few months. There will always be an amazing house for the price on the market. The reason I would wait, the economic outlook is looking bad again. This could drive the price of homes back down. In my area, the asking prices for homes are a good 10% over what they should be. I think because the housing inventory is low right now, people are just making up numbers on what they want for their home. I have been watching a couple homes for sale in the neighborhoods where I own houses because if they get some of theses ridiculous prices, I am going to boot some renters and sell some real estate. You don't want to be the one who pays too much and the market prices fall again.
You guys must all be high rollers. When you have rent, school loans, car/health insurance, car payments (though I haven't had one for 4 years), and everyday living to pay for, idk how it's possible to save up 20% for a down payment. I bought a duplex on my own but it took me years to get a 5% down payment.
Don't get me wrong, PMI is a huge waste of money, but by myself I never would have been able to buy a decent house if I had to put down a 20% down payment.
Don't get me wrong, PMI is a huge waste of money, but by myself I never would have been able to buy a decent house if I had to put down a 20% down payment.
Don't you know the SVTP standards? :shrug: It's funny how the real ballers here don't ever get involved in the financial threads. :lol:
I know for sure I won't have a 20% down payment come time to buy a house. :burn:
Going through this currently looking to buy a home.
Everybody has differing circumstances. You didn't mention how much you will be able to set aside after the mortgage closing for your savings account. Hopefully you'll be able to add to it monthly. If your finances are going to be very tight with this mortgage, then you really want to consider a smaller down payment. However, if you DO go with a smaller down payment, the last thing you want to do is spend what you're saving on things you don't need. It should remain, untouched, in your savings account should you experience an emergency that requires cash. JMO.
If you have it, do it... if you don't then don't, it's that simple.
Either way, it's not wrong unless you willingly choose the wrong choice.
If 20% is going to take all of your savings and put you in a tight situation then do a smaller down payment. If you can do 20% without having any issues following it then do it. If she just rather have the money to spend on other things for the house, consider what they are and if you really need them now.
Either way, it's not wrong unless you willingly choose the wrong choice.
If 20% is going to take all of your savings and put you in a tight situation then do a smaller down payment. If you can do 20% without having any issues following it then do it. If she just rather have the money to spend on other things for the house, consider what they are and if you really need them now.
This should make your decision even easier (or make your wife understand more): Figure out what your first monthly payments would be with and without putting 20% down. Of those monthly payments you figure out, look at how much of the monthly payment will go to INTEREST only, and not your principle amount. You're talking a couple hundred dollars each month difference, not to mention what the overall amount might be.
Seeing what your first payments will be and how much goes to interest will make you want to buy the cheapest house you can find, at least it did for us. Also do a 15 year mortgage if at all possible.
EDIT: On second thought, if this is your first house you're buying, make sure you have a lot saved up too. There is so much crap you have to buy that you won't even realize until you get into a new house. You think you might have all the basics covered (washer, dryer, lawnmower, etc) but then you have the other crap you didn't think of, and that other crap seems to be what adds up the most. I'm still saying to pay 20% down, but make sure on top of that you still have money set aside for the other stuff. Good luck!!
Seeing what your first payments will be and how much goes to interest will make you want to buy the cheapest house you can find, at least it did for us. Also do a 15 year mortgage if at all possible.
EDIT: On second thought, if this is your first house you're buying, make sure you have a lot saved up too. There is so much crap you have to buy that you won't even realize until you get into a new house. You think you might have all the basics covered (washer, dryer, lawnmower, etc) but then you have the other crap you didn't think of, and that other crap seems to be what adds up the most. I'm still saying to pay 20% down, but make sure on top of that you still have money set aside for the other stuff. Good luck!!
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My wife and I just purchased our house not too long ago and we only put 3% down. It was a short-sale and needed some work. We have probably put about 35k into it. 2 weeks ago we had the house reappraised and it is now worth more than 20% of the purchase price. We now have no PMI thanks to remodeling and real estate rebounding.
So I suggest that if you can afford to put the 20% down, do it. If you feel you can't then don't. Just get the house reappraised in a year or so when the market rebounds.
So I suggest that if you can afford to put the 20% down, do it. If you feel you can't then don't. Just get the house reappraised in a year or so when the market rebounds.
When I refi'd they told me it would be on for 5 years no matter what, even though I was very close to having 20% equity. I went conventional for that reason alone. Should be out of PMI middle of next year.
I'm in the middle of this now. We bought our first house in late '07 and closed in winter of '08.
Needless to say we lost about 35k in home value, not too bad all things considered. We're hoping to just break even when we sell this one, and I only have about 15% to put down on a new place.
The first direct lender I talked with offers a PMI buy down, $7000 "insurance" at closing for no PMI. I can do that with 3, 5, 10% down. If I do 15% down, he said just do PMI because it will be less than the buy down. My wife and I want to take advantage of the low rates, and low housing prices while they last, but we aren't going to have 20% down.
If I wait too long, then I could miss out on these rates and home prices. Thats what I'm grappling with right now.
Needless to say we lost about 35k in home value, not too bad all things considered. We're hoping to just break even when we sell this one, and I only have about 15% to put down on a new place.
The first direct lender I talked with offers a PMI buy down, $7000 "insurance" at closing for no PMI. I can do that with 3, 5, 10% down. If I do 15% down, he said just do PMI because it will be less than the buy down. My wife and I want to take advantage of the low rates, and low housing prices while they last, but we aren't going to have 20% down.
If I wait too long, then I could miss out on these rates and home prices. Thats what I'm grappling with right now.
Good to know. I'm in the process of getting one now. Got lucky as last year's income barely let me qualify even though I make double that this year.
Nice! Good luck man.
Thanks Phil. Looking in PV hopefully as that area qualifies for USDA rural and I can't really go any further from work.
I had to move out to White Township, I wish I could have moved closer to home but it's not too bad. I wish I could have gotten that USDA loan, 0% down is nice. What rates are you looking at nowadays? Mine is at 4.00%
PM sent.
I was just told by the mortgage company I'm working with that it is incorrect about USDA loans not having PMI. They said they have an annual guarantee fee of .4% of outstanding principal which is ~$33/month in 1st year per $100k on the loan. Can anyone tell me anything else?
Put 20% if you can swing it, if not, that is just a bullet you have to bite. Not everyone is going to have 20% and its not exactly a "must" but you will be tossing money away essentially.
You can even get into a conventional with 5-10% down. F those FHA loans. I think they want people shying off of them. PMI for life is absolutely ridiculous. They are supposed to be there to help people not bend them over. But people have been bending them over i guess lol.
Also remember, you can reach 20% equity in the house by not only paying it off. If you do some remodeling or the housing market jumps and you get the house reappraised, that increased value will count towards it.
Good Luck, I'm in the same boat as you!
You can even get into a conventional with 5-10% down. F those FHA loans. I think they want people shying off of them. PMI for life is absolutely ridiculous. They are supposed to be there to help people not bend them over. But people have been bending them over i guess lol.
Also remember, you can reach 20% equity in the house by not only paying it off. If you do some remodeling or the housing market jumps and you get the house reappraised, that increased value will count towards it.
Good Luck, I'm in the same boat as you!
My opinion is if you can't afford 20% down, don't buy a house. I'd rather put the money towards the house rather than paying more b.s. insurance that you won't use.
That's pretty bad advise for a 1st time home buyer in a real estate market like this, IMO.
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