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Mortgage 101: How are people affording downpayments for homes?
Posted on 8/14/20 at 6:39 am
Posted on 8/14/20 at 6:39 am
(no message)
This post was edited on 12/17/21 at 11:54 pm
42
Posted on 8/14/20 at 6:43 am to DiamondDog
I got a Conventional loan in July from US Bank with 3% down.
Posted on 8/14/20 at 6:44 am to DiamondDog
A "mortgage company" should be able to get you in Fannie Mae or Freddie Mac at 5% down.
Banks and credit unions are often more conservative because they arent as active on the secondary wholesale market (they dont sell loans as often).
Banks and credit unions are often more conservative because they arent as active on the secondary wholesale market (they dont sell loans as often).
Posted on 8/14/20 at 6:47 am to DiamondDog
Our first mortgage we only put down 5%. Our rate was 4.375% on a 30 year conventional. 5 years later (this past April) we refinanced down to a much better rate over 15 years once we had equity in the house. We also bought a cheap house compared to our income.
There are a lot of loan types that require little/no money down but come at a higher rate. FHA, USDA come to mind.
There are a lot of loan types that require little/no money down but come at a higher rate. FHA, USDA come to mind.
This post was edited on 8/14/20 at 6:49 am
Posted on 8/14/20 at 6:55 am to DiamondDog
Very common to just put 5-10% down on a conventional mortgage and pay PMI.
Also, you have to consider that a lot of people just like to live above their means and buy more house than they can afford.
If you and your wife have the ability to save another $45-$65k over the next 12-15 months, you are likely financially secure enough to easily afford a $400k house. So you have whatever options you want.. including buying now with a 5% down payment.
Also, you have to consider that a lot of people just like to live above their means and buy more house than they can afford.
quote:
I see all these young kids running out and buying these expensive houses in the 300-400k range...I’m just wondering what my options are here.
If you and your wife have the ability to save another $45-$65k over the next 12-15 months, you are likely financially secure enough to easily afford a $400k house. So you have whatever options you want.. including buying now with a 5% down payment.
Posted on 8/14/20 at 7:16 am to DiamondDog
quote:
most people are able to get 20% together
Posted on 8/14/20 at 7:21 am to castorinho
I work in the industry. MOST definitely don’t put down 20%. PMI is just accepted by many.
I personally think starting smaller and having 20% will set you up better later in life.
I personally think starting smaller and having 20% will set you up better later in life.
Posted on 8/14/20 at 7:26 am to DiamondDog
don’t be scared of PMI, I paid it on my first mortgage and my rate was 9% LOL. After two years I refinanced and got rid of it.
on your first house you should be buying resale value anyway
on your first house you should be buying resale value anyway
Posted on 8/14/20 at 7:44 am to DiamondDog
quote:
I just am blown away though with how most people are able to get 20% together to buy a home.
Very few people are putting 20% down.
quote:
My wife says the problem is I refuse to just “go buy something”, which is true. I don’t believe in buying property for the sake of owning it. You got to find the right property that you could resell if need be and/or make money on.
To me, key words here, it's more important to buy the right house in the right spot than get the 20% together. I think I put 10% on my first house in Atlanta years ago and paid PMI, but it was in Brookhaven near Capital City Club and was in an enclave of houses that hadn't got the wrecking ball yet. I paid $395,000 for it and it was a stretch at the time for me.
I then put hardwood floors down, painted the interior, and a year later redid the master bathroom. I did a shitload of the work myself and used my neighbor handyman for the rest. Total cost into renos was approximately $40k. But a year after finishing the bathroom, I sold it for a $76,000 profit on top of the improvements I'd made to it.
Then I took that money and the original down payment and thought it would always be that easy and I had it figured out, so I rolled them into the next house. Sold it three years later for a modest profit (think $10k), after I'd put a lot more work into it, because it was in a good spot but not a HOT spot. And it was twice the house from a layout, quality, and feature standpoint. The one thing I learned is that "deals" in real estate, and there are a lot of folks here better and more knowledgeable than I, are deals for a reason.
So have a little bit of a stank eye - it'll be worth it.
This post was edited on 8/14/20 at 7:47 am
Posted on 8/14/20 at 7:48 am to DiamondDog
Serve in the military and get a VA loan. Ok I'm just ribbing you here. But I can understand your hesitation in having to pay down 20%. I am retired military and have one house tied up in a VA loan and now I'm coming to the end of a divorce and have been looking for a new property. Now if I don't sell my house I'm kinda hand-tied because buying a second home with a VA loan has to be considered your primary home. I guess I just have to wait it out until the dust is settled.
Posted on 8/14/20 at 7:53 am to DiamondDog
I put 10% down. PMI is DIRT CHEAP. Buy a cheaper house.
Posted on 8/14/20 at 8:10 am to jimbeam
I believe my PMI on a $250k mtg is only $60/month. I'm not sure why everyone frets having PMI. This day and age I'd much rather have the 20% in the bank but to each his own.
Posted on 8/14/20 at 8:14 am to Jblac15
Mine is $25/month. No brained.
Posted on 8/14/20 at 8:15 am to DiamondDog
Where are you located? Neighbors FCU in Baton Rouge has a loan for first time home buyers where it's 4.25% with no PMI and no money down.
Posted on 8/14/20 at 8:18 am to DiamondDog
Here are my thoughts:
1) Most people don’t put down 20%. You have 6% of a 400k house now. Try telling that CU you can do 10% down and see what they offer. You will have that in 90 days at your savings rate.
2) Look for small banks and CUs. I found a first time home buyer program that a small local bank (MD) had that waived PMI on 3% loan for high quality borrowers and held the loan themselves.
3) If you are in a competitive and rapidly appreciating market, then ask yourself if the annual PMI is more than the appreciation. Would you rather pay 3k in PMI this year or 10k more in principle next?
4) Don’t do FHA. You will be stuck with the MIP and higher rates until you refi. Rates are at all time lows so your refi rate might be higher than you FHA rate.
1) Most people don’t put down 20%. You have 6% of a 400k house now. Try telling that CU you can do 10% down and see what they offer. You will have that in 90 days at your savings rate.
2) Look for small banks and CUs. I found a first time home buyer program that a small local bank (MD) had that waived PMI on 3% loan for high quality borrowers and held the loan themselves.
3) If you are in a competitive and rapidly appreciating market, then ask yourself if the annual PMI is more than the appreciation. Would you rather pay 3k in PMI this year or 10k more in principle next?
4) Don’t do FHA. You will be stuck with the MIP and higher rates until you refi. Rates are at all time lows so your refi rate might be higher than you FHA rate.
This post was edited on 8/14/20 at 8:21 am
Posted on 8/14/20 at 8:18 am to jimbeam
Live within your means.
Posted on 8/14/20 at 8:27 am to ForeverLSU5
quote:
Where are you located? Neighbors FCU in Baton Rouge has a loan for first time home buyers where it's 4.25% with no PMI and no money down.
Lake Charles. I haven’t heard of that. I might have to check this out. I do want to put some money down, but at this point, I’m targeting a flat $50,000.
I’ve been looking around in Lake Charles for about 3 months. City limits because of my wife. The market seems to be stratified in essentially three major types of housing:
1. Rental
2. Everything Pre-2000 that looks like it was built in the 70s and flooded at some point.
3. Modern homes that they all think has gold buried in the backyard. Cookie cutter homes built by a mass builder they want 300-350k for. You couldn’t get nickels out of it in 5 years.
Well built modern homes are tough to come by within the city itself. The only way I see you getting into a quality long term home in the Barbe school district is paying 400k.
This post was edited on 8/14/20 at 8:29 am
Posted on 8/14/20 at 8:33 am to DiamondDog
I would look for a response from someone who is in the industry regarding pros/cons of putting more down on a house.
PMI is one con as that is basically throwing away money that you will never get back but may be worth it to move in sooner rather than later. It isn't a huge amount but does add up over time and typically there until you have 20% equity.
I think some interest rates can be dependent on the LTV but I don't know how much of a difference they make. This is one that I would be interested to get their input.
You could be making a short term decision (move in now) that may have longer term ramifications. It sounds like in the end it won't have a huge impact on you as you make good enough money for a house in that range.
Like I said, I would look for some info from Hawkeye or ellesssuuu or some of the others in the industry.
PMI is one con as that is basically throwing away money that you will never get back but may be worth it to move in sooner rather than later. It isn't a huge amount but does add up over time and typically there until you have 20% equity.
I think some interest rates can be dependent on the LTV but I don't know how much of a difference they make. This is one that I would be interested to get their input.
You could be making a short term decision (move in now) that may have longer term ramifications. It sounds like in the end it won't have a huge impact on you as you make good enough money for a house in that range.
Like I said, I would look for some info from Hawkeye or ellesssuuu or some of the others in the industry.
Posted on 8/14/20 at 8:34 am to DiamondDog
With interest rates being what they are, I see no reason to put down 20% unless it's required by the lender.
Posted on 8/14/20 at 8:38 am to DiamondDog
quote:
Lake Charles. I haven’t heard of that. I might have to check this out. I do want to put some money down, but at this point, I’m targeting a flat $50,000.
Yeah can't hurt to check it out, they are who I do everything banking/loans with and I have never had a bad experience with them.
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