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You do realize that there is little difference between putting 3% down vs 10% right?
Either way,you would have PMI to pay.
Yeah, I do. But I figured if I told the OP to save us 20%, he/she would just roll their eyes and say "Yeah, right, like that's gonna happen). At least with 10% down, he/she could consider a 80/10/10 loan and avoid the PMI. And the upside down nature of those 3% down loans is difficult to stomach (for me AND for many lenders.)
But no question - the best approach is 20% down. With an adequate emergency fund.
Quote:
Originally Posted by atltechdude
True when just considering those items, but you do usually still come out ahead in the total picture if you factor in home value appreciation in a good area. This would only be relative to net worth and not cash flow (unless you tap the equity at some point).
True, especially in the past. How true that remains in the future is an open question. But that's a separate, different discussion than what the OP was asking.
Last edited by Jkgourmet; 06-03-2016 at 01:20 PM..
Well, actually, if you are a first time buyer and are fortunate enough to find a home inside a non income capped income area, not only could you get a below market rate, but also, reduced mortgage insurance. The program is Fannie Mae's HomeReady. This program tolerates a score as low as 620. (Price break requires 680 score).
All first time buyers (using conforming financing) should look up their dream home on this map to see if they can take advantage of this program - it can save them a bunch of pennies. My last buyer saved 3/8% in rate.
Well, actually, if you are a first time buyer and are fortunate enough to find a home inside a non income capped income area, not only could you get a below market rate, but also, reduced mortgage insurance. The program is Fannie Mae's HomeReady. This program tolerates a score as low as 620. (Price break requires 680 score).
All first time buyers (using conforming financing) should look up their dream home on this map to see if they can take advantage of this program - it can save them a bunch of pennies. My last buyer saved 3/8% in rate.
The issue isn't simply PMI, the issue is that putting only 3% down pretty much guarantees you're upside down on your mortgage and would need to bring cash to the table if circumstances suddenly changed and you needed to sell your house (say, you lost your job and had to move to another city). The more you can put down, the lower your chances of being upside-down are.
If you think $1500/month rent is bad, try $1500/month rent PLUS a partial or full mortgage payment (because you had to move and didn't have enough cash savings to be able to afford to sell your house). You may be able to rent it out, but there's no guarantee that the rent you'd receive would cover all your costs (odds are that if the renter could afford rent equal to your monthly mortgage, he'd be buying and not renting), and being a long-distance landlord is a pain.
Putting 3% down loan is simply much riskier to the buyer than putting down 15-20%. Most first-time buyers underestimate that risk, and most banks aren't eager to point it out to them. For your own financial health, save up for a decent down payment before you buy!
That does not make sense....many people in my area pay more for rent than a mortgage for the same homes in the same neighborhood. nj is unique though.
Which is why i want a mortgage instead of renting.
As to the second bolded,i almost forgot that in NJ we have to have 3 months escrow Property taxes at time of closing.Property taxes wil average about $750 per month in a cheap,almost run down town.
HomeReady replaced the 97% Fannie Mae loan. HomeReady just started in December 2015. There are income caps on some properties, while others have no income caps. Each property must be looked up.
This sounds like a program that people like me could take advantage of to buy that first home.
And no,i do not fit the typical profile of a first time homebuyer who will "fail".
I have a 780 credit score,no debt save for a car loan at $423/month and $7000 student loan that i am paying the interest on as i go,but since i am still in school,I have no student loan for now to pay.
I am only looking to buy a home for $120,000-$140,000. My salaary was 112,000 last year.
So you might ask,what is the hold up?
Well,i am "priced out" of many 3.5% down loans because of my income.
It is too much for Federal programs,even though it is actually on the moderate income for Nj standards.
I only have $12,000 savings.
You cant save much with $1500 rent each month.
So it is a cycle..i cant get a house because i cannot save,i cant save because i do not have a house,rent, and cannot get tax credits,and it goes on and on.
Your salary was 112K last year and you can't save money?
I live in NYC so I understand expensive and last year was the first year my husband and I even broke 120K combined. The years before we bought our apartment (for more than what you're looking at) we didn't even make 100K combined when we saved that money, and that included a period of unemployment for me. We still managed to put down 25% with money leftover.
We have a car but no loan because we paid for it on the spot.
BTW-With a home for 120-140K, you probably wouldn't get any tax deductions for your mortgage interest. I do not, because standard deduction wins for many people.
Oh, please. Whatever happened to delayed gratification and saving money?
that went out of the window during the 1980's with Reaganomics. Capital growth began outpacing wage growth by a mile.
Now, as a buyer, it makes perfect sense to borrow as much as possible to participate in the capital-driven gains, because interest rates are low, and wages are so low relative to asset prices.
And i think 3% downpayment will be the new normal very quickly.
With these prices 20% is very difficult to come up with.
You're right. It's supposed to be tough to buy a house. We put 20% down. But we saved over years to do it. And we stayed at our set budget. I walked away from a few nice houses because they were 20-25k over our budget. Could I spend more? Sure but we set a budget and tha was it. And the requirements aren't that stringent. Sure you gotta show proof of this and that and your credit is checked and you gotta jump through some hoops but it's understandable. The only reason everyone is complaining about how hard it is to get a loan is ecause they probably don't even meet the minimum requirements fora FHA which are laughably low. These 3% loans today IMO are the subprime of yesterday.
Think about it. Who do you think is more likely to walk when the times are tough?. A guy putting down 9,000 bucks on a 300k house or a guy putting down 60,000 on a 300k house. Everyone likes to talk about the equity in their house like its a magical number that means something. It doesn't mean crap until you sell or borrow against it
Well, I think because I don't see it as sustainable. You have a house with a set price, and then it appraises at that set price, and then there's a bidding war and the buyer ends up paying, say, $30k cash over the appraised value, and then that closed sale becomes a Comp that allows for faster-than-normal-or-sustainable appreciation of home values in that area.
This is happening not just in Portland and Seattle Metro, but unexpected areas like Battle Ground, WA, Tacoma and surrounding areas, areas that I just don't see viability for that level of appreciation as sustainable. Eventually, people are buying homes of similar size and amenity for substantially less, and so you have people who overpaid for their home, and are essentially upside down (See the 3% down/0% down threads) due to a feeding frenzy that did not last.
I don't see how that's absurd, maybe you can help me understand?
And it makes no difference. The buyer has to bring the additional amount in cash because the bank will only loan on the appraised value. So that 30k over is cash from the buyer not the bank.
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