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I know you are not going to want to hear this, but as a seller in this market I'm no longer considering someone who cannot put 20% down.
This is becoming increasingly common at and above certain price points. Sellers want reasonable certainty that the buyers will be able to close because time is money.
I know you are not going to want to hear this, but as a seller in this market I'm no longer considering someone who cannot put 20% down. My first potential buyer was only putting 10% down, and ended up having mortgage issues (because of appraisal issues - but that's for another thread). So, the deal fell apart about 2 weeks before we were supposed to close. That was about a month ago, and now I'm in atty review with a buyer who's putting 20% down. We may still have mortgage/appraisal issues, but at least they are more financially secure (in my opinion) so if those issues happen, we may be able to work through them. It's just not that easy to obtain financing anymore, and at 10% I am extremely nervous. Once bitten, twice shy.
Forgive me if I sound ignorant but how is an appraisal issue in any way related to how much money the buyer can put down? I can put down 20%, I chose to put down 10%. I'd have walked if the sellers had insisted I put 20% down. It's my money, not theirs.
Also the amount I put down had nothing to do with the value the property appraised for. I am not seeing how the two are related???
As it relates to this situation, are these bank -owned properties?
No. In both cases the owners had already bought another house and moved out. For the first house, the owner had even put the house on the market when she moved out a year ago at nearly the same price and it did not sell.
I'm not sure of the situation on the 2nd house.
Forgive me if I sound ignorant but how is an appraisal issue in any way related to how much money the buyer can put down? I can put down 20%, I chose to put down 10%. I'd have walked if the sellers had insisted I put 20% down. It's my money, not theirs.
Also the amount I put down had nothing to do with the value the property appraised for. I am not seeing how the two are related???
Banks are more stringent in their lending, so the more that the buyer is putting down, the better the deal looks for the bank. In my opinion, banks should not even lend at less than 80% LTV anymore - that's part of the reason why our country ended up in this mess. My co-worker (from the UK) commented to me that he thought 80% LTV was too little and the norm is closer to 60% where he's from. I think most younger Americans (Gen X and Y) could never be homeowners at that rate. (I know I can't put 40% down on the house I'm considering!)
From what I've been hearing (and personally experienced once and hopefully never again) appraisers are valuing properties as if they will decline X% more so they can be ultra conservative in their estimates. They've taken a lot of heat for the mortgage problems also.
Might be different if you chose not to be 20% down, but the seller would not know that you have all of these cash reserves. The only thing that the seller knows is how much you intend to put down and how much of a mortgage you intend to get. So, I will assume that you only have the 10% available.
Because I'm a seller who also plans to buy my step-up, I'd like to have all the cards stacked to make sure that my sale actually goes through. If I just wanted to (or needed to) sell, and was planning to rent or relocate, I might feel different.
As one who's had 9 offers rejected, some below asking, some at, and some above, a hot property may garner multiple offers. One in which my offer was rejected got 14 offers the first weekend, a few of which were all-cash.
Ignore the asking price and be realistic on what the market price is, and work it from there. I'm in escrow right now, and while my price was over 10% higher than asking, it's still priced on the low side for what the area goes for. Currently, there are just 3 houses in the neighborhood that are under $400k; most are still in the low to mid-400's.
Banks are more stringent in their lending, so the more that the buyer is putting down, the better the deal looks for the bank. In my opinion, banks should not even lend at less than 80% LTV anymore - that's part of the reason why our country ended up in this mess. .
Yah, you can do that. Those 10% that the OP has will magically become 20% in no time.
Yah, you can do that. Those 10% that the OP has will magically become 20% in no time.
Yeah, assuming the $8k credit goes away or becomes non-refundable, we figured out that it should only take about 26 months if we stop saving for retirement, 57 months if we continue saving for retirement. Hence why we might just renew our lease for 2 years and come back later when we have 80% LTV. Just hurts dumping another $25k+ into renting (even with PMI our mortgage payment would only be $120 more than our rent next year) and taking the risk of prices jumping back up.
So, I've seen several posts about the concerns on a 90% LTV...
But no one answered if pre-approval offsets this at all? We're both above 750 credit scores now with documented 18%/26% debt ratios (we've been including this info with the offers).
In Austin our market is very strong in the sub-$200K range and we are dealing with a lot of multiple offers. In fact, I'm sending one in today, and these buyers have already lost out on 2 others, plus a couple that went Pending before we even made an offer.
They are not discouraged because we set the expectation from the outset that this is how it goes. If anything, losing out on a couple of properties make you a better buyer. You realize that it's not as easy as you might have assumed and you can adjust your expectations and actions accordingly.
I'd keep looking and just stick with it. Be willing to walk away and lose a few more deals. Desperation causes bad decisions and mistakes to be made. See if you can roll month-to-month on your lease, so you have flexibility on the timing.
Banks are more stringent in their lending, so the more that the buyer is putting down, the better the deal looks for the bank. In my opinion, banks should not even lend at less than 80% LTV anymore - that's part of the reason why our country ended up in this mess. My co-worker (from the UK) commented to me that he thought 80% LTV was too little and the norm is closer to 60% where he's from. I think most younger Americans (Gen X and Y) could never be homeowners at that rate. (I know I can't put 40% down on the house I'm considering!)
From what I've been hearing (and personally experienced once and hopefully never again) appraisers are valuing properties as if they will decline X% more so they can be ultra conservative in their estimates. They've taken a lot of heat for the mortgage problems also.
Might be different if you chose not to be 20% down, but the seller would not know that you have all of these cash reserves. The only thing that the seller knows is how much you intend to put down and how much of a mortgage you intend to get. So, I will assume that you only have the 10% available.
Because I'm a seller who also plans to buy my step-up, I'd like to have all the cards stacked to make sure that my sale actually goes through. If I just wanted to (or needed to) sell, and was planning to rent or relocate, I might feel different.
gotta disagree on a few points here...
First, the appraisal number isn't dependent on how much money somebody puts down... so, if the number is low, it's low. Now, maybe somebody with 20 percent down will still get a loan because the bank will do say, 15% LTV, and the buyer will put up the rest to make the difference if they want the house... but you're asking the buyer to make up the difference if the house doesn't comp out. You're house might be priced high.
I'm going to say that people putting 10% down instead of 20% down has almost NOTHING to do with the current "crisis." In fact, I'll say that people thinking that an extra 10% equity in their house can save them from ANYTHING is what makes it worse.
If houses drop 30% in value (which has happened in many areas), what does that extra 10% do for you? So now you're only 20% underwater? What might have saved a crisis would have been having another 30K in the bank in reserves to pay mortgage payments and avoid foreclosure... leaving it in the house is always a gamble... especially these days.
The "mess" that's out there now is linked, not to what people originally put down, but monthly payments they could never afford... risks they took because they counted on rising housing value as income. People took payments they couldn't afford, gambling on future equity to pull them out of the mess if they needed it.
In the meantime, those dodgy loans were sold and repackaged on Wall st, and that's how the mess got this bad.
If the OP is putting 10% down, but has the low DTI they mentioned - can afford the payments AND as a practical matter can stay in the house if the market drops... then they are a qualified buyer making a sound decision.
If somebody puts 30% down on a house but can't afford the payments... they are making a bad decision.
Shopping for a house right now, I'm taking the "equity" out of the equation when deciding if I can afford it or not.
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