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Message
Is there any excuse for not having 20% dp on 2nd home purchase?
Posted on 6/25/18 at 1:52 pm
Posted on 6/25/18 at 1:52 pm
Was talking with my brother this weekend and he mentioned looking for a new house to accommodate a his growing family (2 kids with one more on the way, 2 dogs). He has been in his current house about 4 years and purchased that with an FHA loan and 3.5% down. He and his wife are both public school teachers.
He said he will have about 10% to put down on this house purchase (includes cash on hand and equity in current house based on recent appraisal).
It's crazy to me that someone would want to get into a new home and not have adequate funding to get away from PMI or to have your current house well with no real proceeds from the sale after realtor commissions.
Is this a normal practice?
He said he will have about 10% to put down on this house purchase (includes cash on hand and equity in current house based on recent appraisal).
It's crazy to me that someone would want to get into a new home and not have adequate funding to get away from PMI or to have your current house well with no real proceeds from the sale after realtor commissions.
Is this a normal practice?
16
Posted on 6/25/18 at 1:57 pm to LigerFan
Seems reasonable to me, especially with two school teacher salaries. 10% down is alot more than most people put down on a house.
Posted on 6/25/18 at 2:00 pm to LigerFan
Many people would never buy a house if required to have 20% down. In fact I bet the majority of new house buyers do not even put down 10%.
This post was edited on 6/25/18 at 2:01 pm
Posted on 6/25/18 at 2:00 pm to LigerFan
Normal practice for sure. Sometimes people have their money tied up in other areas, or they just don't have the opportunity to buy a house with much down. People don't want to rent forever and the only way they'd ever be able to afford a house is with less than 10% down. Definitely need to do everything they can to get the PMI off the note, and then can take it easy if they need to open up more liquidity.
Posted on 6/25/18 at 2:02 pm to LigerFan
Only if you use the proceeds from first house sale to eliminate you credit card debt.
Posted on 6/25/18 at 2:07 pm to LigerFan
Living in a high cost of living area? Though, I had the same opinion as you when I was living in Mississippi and Alabama.
Posted on 6/25/18 at 2:48 pm to Anfield Road
quote:
Living in a high cost of living area?
Nope, they live in Prarieville.
Didn't think it was as common as everyone is making it out to be, even with purchasing home #2
Posted on 6/25/18 at 3:19 pm to LigerFan
quote:
Is this a normal practice?
Very much normal for the past 20 or so years since Clinton did away with capital gains on sales of personal residences.
Posted on 6/25/18 at 3:21 pm to LigerFan
quote:
Didn't think it was as common as everyone is making it out to be, even with purchasing home #2
Most people are shitty with money...
Posted on 6/25/18 at 3:40 pm to FinleyStreet
I don't really see it as being shitty with money in every situation. I think it's more Americans are entitled and think because they have a couple of kids they need a 4br, 3ba house, at minimum. 10% on a $200k house is still $20k, and that's more than most Americans have saved, though some of that is in equity.
And I say that as someone with 2 kids and lives in a 5br, 4 1/2 ba house. Way more house than we need, but it was a steal on the foreclosure market and we closed with ~$50k in equity 16 years ago.
And I say that as someone with 2 kids and lives in a 5br, 4 1/2 ba house. Way more house than we need, but it was a steal on the foreclosure market and we closed with ~$50k in equity 16 years ago.
This post was edited on 6/25/18 at 3:41 pm
Posted on 6/25/18 at 3:42 pm to LigerFan
PMI can be relatively cheap. I don't really understand why it gets such a terrible stigma. It effectively prices in risk on the borrower. Ideally do you want it no, but not every situation is ideal. Coming up with 20% can be difficult especially with young families or in cases when you are buying another home and don't have your primary home sold yet.
Hell in good markets in good years that .1-2.0 (total range of PMI) can look like a great decision if your home is appreciating at or above average.
Hell in good markets in good years that .1-2.0 (total range of PMI) can look like a great decision if your home is appreciating at or above average.
Posted on 6/25/18 at 3:47 pm to FinleyStreet
I put 3% down with lender paid pmi at 4.75% 360.
Am I shitty with money?
You’re better than this Finley.
Am I shitty with money?
You’re better than this Finley.
Posted on 6/25/18 at 4:01 pm to LigerFan
i have been a loan officer for 15yrs its been the normal practice for 70% of my customers .
Posted on 6/25/18 at 4:14 pm to LigerFan
You can pre-pay it. I put 10% down and pre-paid PMI on my last house purchase. The up front lump sum was well less than what I would have paid total per month until I had an LTV low enough to have PMI removed so I viewed it as a win.
Posted on 6/25/18 at 4:26 pm to LigerFan
Great question. I would definitely argue he is not selling in the sweet spot. That is to say, he has not gained enough equity in the home likely to break-even with the sum of closing costs of the purchase of the original home and the realtors fees of selling the home.
Posted on 6/25/18 at 4:52 pm to Stuckinthe90s
In hot markets sellers are not paying any closing costs.
In hot markets with little inventory it is stupid to put down 20% if you don’t have to you can put the remaining 10% where it can grow
In hot markets where homes are appreciating at 10% to 15% per year right now pmi can be removed in a matter of two years.
You can sell after 2 years in a hot market and pay no taxes and pmi isn’t a factor really.
Several reasons to not put 20% down if you are in a desired area and are planning to sell in 2 or 3 years if the market stays strong. Most of these are in town areas in major cities not out in rural areas like I suspect many on here live in.
In hot markets with little inventory it is stupid to put down 20% if you don’t have to you can put the remaining 10% where it can grow
In hot markets where homes are appreciating at 10% to 15% per year right now pmi can be removed in a matter of two years.
You can sell after 2 years in a hot market and pay no taxes and pmi isn’t a factor really.
Several reasons to not put 20% down if you are in a desired area and are planning to sell in 2 or 3 years if the market stays strong. Most of these are in town areas in major cities not out in rural areas like I suspect many on here live in.
This post was edited on 6/25/18 at 4:54 pm
Posted on 6/25/18 at 5:01 pm to LigerFan
4 years he probably did not make much of a dent into principal with FHA loan. You would have to sell the house way above what you bought it for. Unless you get lucky, I think 20% would be hard to come by depending on the next house they are trying to purchase and your current liquidity and spending habits.
Posted on 6/25/18 at 5:13 pm to Gondor
quote:
Only if you use the proceeds from first house sale to eliminate you credit card debt.
Or for a cushion
If putting 10% down instead of 20% gives them a 30-40K cushion with some liquidity that's a lot of peace of mind
Posted on 6/25/18 at 5:15 pm to Powerman
quote:
If putting 10% down instead of 20% gives them a 30-40K cushion with some liquidity that's a lot of peace of mind
Another good point.
Posted on 6/25/18 at 9:06 pm to deeprig9
quote:
I put 3% down with lender paid pmi at 4.75% 360.
Am I shitty with money?
Maybe. I get that not everyone can fork out 20% but 3% is awfully low. You ain't even tryin.
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