5 vs 20 percent down for primary residence home? (insurance, real estate, credit)
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I think 5% is too little unless you have substantial cash reserves.
Reason being, if the market suddenly takes a downturn, you can be underwater quick with only 5% down.
If that happens and you have to sell for some reason (job transfer, moving for another reason, etc) then you could be required to bring cash to the table to make up the difference. If you do not have the cash reserves to do so, then you could be trapped and unable to sell in a declining market (or have to short sell and wreck your credit).
This may not apply to the OP since he said he could put 20% down (meaning the cash reserves are there).
I would recommend putting 20% down and getting a 10% companion heloc that you don't draw on at the table. This way, you are not penalized for subordinate financing in your interest rate, but can have instant access to your funds. (Instant = access in a couple days)
I'm sure this has come up before but I couldn't find the thread.
Looking to buy a house for 325K or so. I could put down either 20 or 5 percent comfortably.
What makes better sense though?
It seems like it's better to put 5% down and invest the rest. But all the articles I read say otherwise.
What do you all think?
5% down means hefty PMI payments, so your effective interest rate on the 15% difference between a 5% vs. a 20% down payment is quite large. Typically the effective rate is around 10%, almost comparable to some credit cards. I say do 20% down unless that would leave you cash poor. Otherwise it's almost like you're putting your down payment on a credit card.
5% down means hefty PMI payments, so your effective interest rate on the 15% difference between a 5% vs. a 20% down payment is quite large. Typically the effective rate is around 10%, almost comparable to some credit cards. I say do 20% down unless that would leave you cash poor. Otherwise it's almost like you're putting your down payment on a credit card.
Quote:
Originally Posted by Pfhtex
5% down yields a MI payment of $113.21. So you keep $48,750 on hand at a cost of $113.21.
BTW, single-premium is $6,607 - negotiate, and make the seller pay it!
Based on these numbers ($113.21 *12)/ $48,750 = .0278 or 2.78% which is actually less the the interest rate. Ncole1, how did you calculate the effective interest rate?
Based on these numbers ($113.21 *12)/ $48,750 = .0278 or 2.78% which is actually less the the interest rate. Ncole1, how did you calculate the effective interest rate?
Well you can add the stated interest rate to the 2.78% but as you pay down the loan monthly that 2.78% climbs in percentage terms until you remove the mortgage insurance
I am in the hottest market on the planet and regularly secure successful negotiations like this. I guess it comes down to who's doing the asking.
Same. I am probably one if the few doing this in my office. Between seller credit and Lender Credit, my last 3 out of 4 buyers have been bought out of their PMI for life.
Forgot to add: all price ranges are red hot in DC area. We are seeing full price offers w/ seller concessions.
Last edited by SmartMoney; 08-25-2016 at 07:10 PM..
Reason: Tired of seeing spellchecker-correction rewriting my posts, like it just happened.
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