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Question about buying a house
Posted on 1/20/15 at 8:16 pm
Posted on 1/20/15 at 8:16 pm
Is it still the generally accepted rule that you should aim to put down a 20% down payment when buying a house? Does the lower interest rates we are seeing now change this at all? What are the consequences of putting less down besides a slight increase in monthly payments?
6
Posted on 1/20/15 at 8:19 pm to UpToPar
I'm 28.got first house doing minimum down, which was like 3.5...only plan on staying in this house about 8-10yrs...then will find permanent spot
Less down, in my case meant I went FHA... Part that sucks is in stuck with PMI every month.. Its an extra 150or so I think
Eta: my rate is 4%
Less down, in my case meant I went FHA... Part that sucks is in stuck with PMI every month.. Its an extra 150or so I think
Eta: my rate is 4%
This post was edited on 1/20/15 at 8:19 pm
Posted on 1/21/15 at 7:47 am to UpToPar
quote:
Is it still the generally accepted rule that you should aim to put down a 20% down payment when buying a house?
Yes but there are several loan options out there that are subject to federal regulation and they are pretty much BS.
quote:
Does the lower interest rates we are seeing now change this at all?
Not really. see above.
quote:
What are the consequences of putting less down besides a slight increase in monthly payments?
Possibly a higher rate, PMI.
I suggest contacting a mortgage guy for pre approval and he/she can help with all of this. I'm in the midst of buying a house and selling one and the process has been enlightening once again.
Posted on 1/21/15 at 9:20 am to UpToPar
As someone who did not put 20% down, I say wait and save the 20%.
Granted I'm jaded because I bought a house that lost value in the housing crash. Other houses in the neighborhood were on the market for $195k-$210k and mine was flipped, beautiful, and spacious for $179k.
Tried to sell it five years later and couldn't get $165k. Houses around me were on the market for $160k and below.
To answer your question, it's not a slight increase in monthly payments. For one, you're paying off the loan with a higher starting number, so in the long run, you're paying a lot more money. Don't forget that for the first years of the loan, you're paying mostly interest anyway.
Two, PMI is a bitch. I'm paying $176/month in PMI. Imagine if I had put 20% down and just added $176/month onto the principal. Could easily knock out the loan in 15 years.
Granted I'm jaded because I bought a house that lost value in the housing crash. Other houses in the neighborhood were on the market for $195k-$210k and mine was flipped, beautiful, and spacious for $179k.
Tried to sell it five years later and couldn't get $165k. Houses around me were on the market for $160k and below.
To answer your question, it's not a slight increase in monthly payments. For one, you're paying off the loan with a higher starting number, so in the long run, you're paying a lot more money. Don't forget that for the first years of the loan, you're paying mostly interest anyway.
Two, PMI is a bitch. I'm paying $176/month in PMI. Imagine if I had put 20% down and just added $176/month onto the principal. Could easily knock out the loan in 15 years.
Posted on 1/21/15 at 9:35 am to UpToPar
We didn't put 20% down on the house we're in now. When we did a refi 2 years ago, our lender suggested that we pre-pay PMI at closing. It saves money in the long run, it's not an extra monthly expense, and you get to go ahead and lock in the low rate. I think it's worth it, but I'd try to put down at least 10% if possible.
Posted on 1/21/15 at 9:47 am to LSUGUMBO
Long years ago, we bought our first house with just 10% down. But prices were rising steadily and interest rates falling, so we were able to refi within 18 mos and get a better rate and get rid of PMI. Would I do that in today's market? NO. I would either save until I had 30% (down payment plus a cushion for repairs) or find a cheaper house.
Posted on 1/21/15 at 10:09 am to UpToPar
We weren't able to put down the 20% so we have PMI, but ours is lender paid PMI so it's financed in with the note.
Advantage: That PMI is now tax deductible since it's part of the mortgage.
Disadvantage: Because it's lender paid, it's financed in over entire life of loan...no dropping it after I've reached 20% equity in home. However what I intend on doing, is reaching 20% then re-financing without the PMI....
Because we have lender paid PMI, we pay a little higher interest rate (it's only 5%). But again, once I get to the 20% threshold...I plan on re-fi.
Advantage: That PMI is now tax deductible since it's part of the mortgage.
Disadvantage: Because it's lender paid, it's financed in over entire life of loan...no dropping it after I've reached 20% equity in home. However what I intend on doing, is reaching 20% then re-financing without the PMI....
Because we have lender paid PMI, we pay a little higher interest rate (it's only 5%). But again, once I get to the 20% threshold...I plan on re-fi.
Posted on 1/21/15 at 10:17 am to NASA_ISS_Tiger
Bought our house with zero down, no problems for us.
Rural development loan @ 5%.
When we go to buy our next house, I'll be putting down 20%, though.
The only negative is that, if I went to sell today, I could barely recoup the cost of the house. The house is still worth the same $, but I've been paying primarily interest for 5 years.
Rural development loan @ 5%.
When we go to buy our next house, I'll be putting down 20%, though.
The only negative is that, if I went to sell today, I could barely recoup the cost of the house. The house is still worth the same $, but I've been paying primarily interest for 5 years.
Posted on 1/21/15 at 3:28 pm to UpToPar
FHA requires only min 3.5% down - todays rate as low as 3.125%, uncle sam eff 01/26/15 is lowering pmi. pmi is for the life of the loan.
Rural development- 100% program is the best program. eff 02/02/15 - rural development is allowing more parts of baton rouge being eligible. rate around 3.5%. pmi is for the life of the loan.
conventional program, if first time buyer, can put down min 3%, rates around 3.5% pending on credit score.
if you want to know more about the 100% program for BR, call me, 291.7901 x 224
hope this helped.
good luck
Rural development- 100% program is the best program. eff 02/02/15 - rural development is allowing more parts of baton rouge being eligible. rate around 3.5%. pmi is for the life of the loan.
conventional program, if first time buyer, can put down min 3%, rates around 3.5% pending on credit score.
if you want to know more about the 100% program for BR, call me, 291.7901 x 224
hope this helped.
good luck
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