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loveus
LIF Adolescent
Member since 9/13 684 total posts
Name:
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Downpayment for House
Does anyone know the pros and cons of having 20% downpayment?
We are currently up for renewal for our apartment. I am not sure if we should sign a 1 or 2 year lease. We would need to stay 2 years for a 20% down payment.
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Posted 9/18/13 10:33 AM  |
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2BadSoSad
LIF Adult
Member since 8/12 6791 total posts
Name:
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Re: Downpayment for House
No PMI and a lower monthly payment.
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| Posted 9/18/13 10:37 AM |
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Mustanggrl
LIF Infant
Member since 10/12 154 total posts
Name:
Newlywed
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Re: Downpayment for House
Posted by 2BadSoSad
No PMI and a lower monthly payment.
This! Make sure your debt to income ratio meets the level on the loan as well to avoid addt'l charges.
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| Posted 9/18/13 10:49 AM |
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Ian&EmmesMommy23
My family is complete!
Member since 11/08 12970 total posts
Name:
Diana
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Downpayment for House
if you can do it...do it! PMI can be $400 a month and it's not tax deductible.
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| Posted 9/18/13 11:59 AM |
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MarathonKnitter
HAPPY
Member since 2/07 17374 total posts
Name:
EMBRACING CHANGE
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Downpayment for House
after the "bubble" a lot of lenders aren't even looking at you if you don't have the 20% down payment... this aside from what others have mentioned.
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| Posted 9/18/13 12:01 PM |
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Re: Downpayment for House
Posted by libby2595
after the "bubble" a lot of lenders aren't even looking at you if you don't have the 20% down payment... this aside from what others have mentioned.
Most lenders do FHA loans nowadays, which will only require 3.5% down. Some lenders also do Sonyma loans, which have a minimum of 3% down. With a VA loan, if you qualify, a buyer can actually get a 0% down loan. So it's a misconception that 20% down is required, but there are some advantages.
However, if it will take a buyer a long time to save up the 20%, it's almost always better to buy when the rates are lower than wait and then perhaps be stuck with a much higher interest rate (that would outweigh any pmi savings).
With an FHA loan, you always pay pmi, and under new rules, the pmi stays on for the life of the loan. However, there is always the option of refinancing with a conventional loan down the road.
With a conventional loan - assuming you qualify -- most people do at least 10%. But I've seen buyers put as little as 5% down with a conventional loan (credit, debt-to-income, etc. must be stellar).
The advantage to putting the 20% down is really what others have said -- no mortgage insurance (pmi). And of course, your overall mortgage amount will be lower if you put more down. Plus, if you are looking at higher price homes, if you take a conventional loan amount of over $417,000, it is considered a jumbo loan, and rates are higher. So a larger down payment may help you avoid jumbo loan classification.
You will also need about 3% to 6% of the loan amount in cash for closing costs (it varied depending on type of loan, lender, etc.). So if you have cash for a large down payment, keep in mind you will need cash for closing. (There is such a thing as a sellers' concession that would allow a buyer to roll closing costs into their loan, but there are downsides, and again, it raises your loan amount -- so I think you are often better off allocating more cash to the closing costs at the expense of a smaller down payment).
As a buyer, though, what really matters to you is what your monthly payment will be. So I think it's always advisable to talk to a mortgage professional, even in the earliest stages, to find out (I) if you qualify for a loan, (ii) if you do, what type(s) of loan, and (iii) what makes most financial sense for you in terms of how to structure the loan and the transaction (down payment, closing costs, etc.) taking into account interest rates you qualify for and all of the pros/cons of your different options.
If you need mortgage lender recommendations, let me know.
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| Posted 9/18/13 12:35 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Downpayment for House
Posted by Century 21 Dallow - Christine Braun
Posted by libby2595
after the "bubble" a lot of lenders aren't even looking at you if you don't have the 20% down payment... this aside from what others have mentioned.
However, if it will take a buyer a long time to save up the 20%, it's almost always better to buy when the rates are lower than wait and then perhaps be stuck with a much higher interest rate (that would outweigh any pmi savings).
With an FHA loan, you always pay pmi, and under new rules, the pmi stays on for the life of the loan. However, there is always the option of refinancing with a conventional loan down the road.
Normally I don't bother commenting on these threads, but aren't you are contradicting yourself here?
You are stating that buyers should dive into 3% down mortgages now while rates are low and pay the PMI. You are implying that "possible" rate increases (not definite) can be more costly than guaranteed PMI now. Ok if that's your opinion, you are entitled to it. Fine.
But then you say that since PMI is there for the life of the loan (now calling it a disadvantage), you can refinance into a conventional mortgage down the road to remove the PMI. However according to you wouldn't mortgage rates be higher then? Why would you want to refinance into a higher interest rate?
Also don't you think it will be difficult for a buyer to refinance from an FHA to a conventional mortgage without sufficient equity?
If a buyer does not have sufficient down payment for a house while keeping an adequate emergency fund, frankly they shouldn't be buying. Just because interest rates have risen in the past six months doesn't mean buyers should be so quick to go out there and buy when they aren't financially ready. 20% down is really the best way to go.
Also you are quick to state that's its all about being comfortable with the monthly payment. That's also sort of foolish, you should be comfortable with the price of the house. It's like car buying, the monthly payment is a result of the price of the house. You shouldn't buy an overpriced expensive house just because you can afford the monthly payment.
But who am I to judge I guess. The more I see here that buyers are paying asking or above asking, the higher my property value goes. 
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| Posted 9/18/13 1:39 PM |
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JandJ1224
Member since 6/06 5911 total posts
Name:
Jannette
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Re: Downpayment for House
Posted by ave1024
Posted by Century 21 Dallow - Christine Braun
Posted by libby2595
after the "bubble" a lot of lenders aren't even looking at you if you don't have the 20% down payment... this aside from what others have mentioned.
However, if it will take a buyer a long time to save up the 20%, it's almost always better to buy when the rates are lower than wait and then perhaps be stuck with a much higher interest rate (that would outweigh any pmi savings).
With an FHA loan, you always pay pmi, and under new rules, the pmi stays on for the life of the loan. However, there is always the option of refinancing with a conventional loan down the road.
Normally I don't bother commenting on these threads, but aren't you are contradicting yourself here?
You are stating that buyers should dive into 3% down mortgages now while rates are low and pay the PMI. You are implying that "possible" rate increases (not definite) can be more costly than guaranteed PMI now. Ok if that's your opinion, you are entitled to it. Fine.
But then you say that since PMI is there for the life of the loan (now calling it a disadvantage), you can refinance into a conventional mortgage down the road to remove the PMI. However according to you wouldn't mortgage rates be higher then? Why would you want to refinance into a higher interest rate?
Also don't you think it will be difficult for a buyer to refinance from an FHA to a conventional mortgage without sufficient equity?
If a buyer does not have sufficient down payment for a house while keeping an adequate emergency fund, frankly they shouldn't be buying. Just because interest rates have risen in the past six months doesn't mean buyers should be so quick to go out there and buy when they aren't financially ready. 20% down is really the best way to go.
Also you are quick to state that's its all about being comfortable with the monthly payment. That's also sort of foolish, you should be comfortable with the price of the house. It's like car buying, the monthly payment is a result of the price of the house. You shouldn't buy an overpriced expensive house just because you can afford the monthly payment.
But who am I to judge I guess. The more I see here that buyers are paying asking or above asking, the higher my property value goes.
I think the idea of being comfotable with a payment implies that should interest rates go up you can afford less house at the same payment amount.
I would agree that the best thing to do is to speak to a mortgage professional to discuss your particular situation and go over options.
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| Posted 9/18/13 2:09 PM |
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Re: Downpayment for House
Posted by ave1024
Posted by Century 21 Dallow - Christine Braun
Posted by libby2595
after the "bubble" a lot of lenders aren't even looking at you if you don't have the 20% down payment... this aside from what others have mentioned.
However, if it will take a buyer a long time to save up the 20%, it's almost always better to buy when the rates are lower than wait and then perhaps be stuck with a much higher interest rate (that would outweigh any pmi savings).
With an FHA loan, you always pay pmi, and under new rules, the pmi stays on for the life of the loan. However, there is always the option of refinancing with a conventional loan down the road.
Normally I don't bother commenting on these threads, but aren't you are contradicting yourself here?
You are stating that buyers should dive into 3% down mortgages now while rates are low and pay the PMI. You are implying that "possible" rate increases (not definite) can be more costly than guaranteed PMI now. Ok if that's your opinion, you are entitled to it. Fine.
But then you say that since PMI is there for the life of the loan (now calling it a disadvantage), you can refinance into a conventional mortgage down the road to remove the PMI. However according to you wouldn't mortgage rates be higher then? Why would you want to refinance into a higher interest rate?
Also don't you think it will be difficult for a buyer to refinance from an FHA to a conventional mortgage without sufficient equity?
If a buyer does not have sufficient down payment for a house while keeping an adequate emergency fund, frankly they shouldn't be buying. Just because interest rates have risen in the past six months doesn't mean buyers should be so quick to go out there and buy when they aren't financially ready. 20% down is really the best way to go.
Also you are quick to state that's its all about being comfortable with the monthly payment. That's also sort of foolish, you should be comfortable with the price of the house. It's like car buying, the monthly payment is a result of the price of the house. You shouldn't buy an overpriced expensive house just because you can afford the monthly payment.
But who am I to judge I guess. The more I see here that buyers are paying asking or above asking, the higher my property value goes.
I think when someone asks a general question about down payments (or anything re: home buying, really), it's hard to speak to their specific situation. And you can't really generalize, because everyone is different in terms of their wants and needs and financial situation.
I always try to provide helpful, albeit generalized, information on the boards.
So I don't think I am contradicting myself (or at least I am not intending to); I think I am laying out ALL of the options someone would have and pointing out some of the pros/cons that go with each option. But as I stated, it's always best to sit down with a reputable mortgage loan officer who can provide more guidance based on the poster's actual financial situation.
My main point is that you don't NEED 20% down to buy a house, and many people believe you do. If someone has 20% down - great! I would never advise someone to go FHA if they can go conventional and avoid pmi.
But the truth is, some people just do not have 20% down, and there are other options available to them. The majority of the buyers I work with get FHA loans and have lower down payments. And for many people who want to buy a house, it does make sense to put 3.5% down and go FHA, ASSUMING they can afford the mortgage and other expenses that come along with home ownership. But I would never make an assumption about what someone can afford based upon their down payment alone. I would absolutely encourage anyone considering buying to make sure that they can afford a house. I am not saying that owning a home should come at the expense of financial security and stability, or that people should rush in to get in over their heads. But for some people, it does make sense to buy sooner and go FHA, or put less down with a conventional loan and pay pmi.
As far as the rates - I don't have a crystal ball. Everyone I know in the economic/financial/mortgage industry are predicting rates will rise (and as we all know, they've gone up already). They may not. But my point is, if someone can afford to buy today and put 10% down, but it will take them another 2 years to save 20%, it MAY make sense to buy today, and pay $200 month in pmi versus waiting until they have the down payment but winding up paying $400 more a month because of higher rates. These are just hypothetical examples, but you take my point. But everyone has to look at the big picture and make their own decisions.
I raised the idea of refinancing from FHA to conventional only because with the new pmi rules, many people are upset at the thought that they will be paying pmi for 30 years if they get a 30 year loan. But I was raising the possibility that, if in 10 years, it makes sense, they qualify, etc., refinancing to a conventional loan would be the way they could get rid of the pmi. I am not saying that it's wonderful, just that it's an option.
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| Posted 9/18/13 2:19 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Downpayment for House
Posted by Century 21 Dallow - Christine Braun
As far as the rates - I don't have a crystal ball. Everyone I know in the economic/financial/mortgage industry are predicting rates will rise (and as we all know, they've gone up already). They may not. But my point is, if someone can afford to buy today and put 10% down, but it will take them another 2 years to save 20%, it MAY make sense to buy today, and pay $200 month in pmi versus waiting until they have the down payment but winding up paying $400 more a month because of higher rates. These are just hypothetical examples, but you take my point. But everyone has to look at the big picture and make their own decisions.
But you do realize that if you put more money down, you are lowering your monthly payment anyways right? You never mention this point.
And if you put enough money down, you can have LOWER monthly payments even with higher interest rates AND no PMI to worry about. And if you have lower monthly payments you technically have HIGHER affordability.
Case & Point:
400k house put 20k down @ 4.75% interest
Monthly Payment: $1982
PMI: few hundred likely on top of the $1982
400k house put 80k down @ 5.75 (higher) interest
Monthly Payment: $1867 (lower)
plus more interest you can deduct from taxes - effectively making $1867 even lower
This is of course assuming rates go up an entire percentage point. If they stay the same you save even more. I know when rates went from the 7s down to the 5s, every financial expert in the world said buy buy buy before the rates go up. Then we saw rates in the 3s so every financial expert was basically wrong with their assessment. Rates can stay the same or come down to the low 4s again. We really don't know.
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| Posted 9/18/13 2:54 PM |
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Re: Downpayment for House
Of course, a higher down payment = a lower mortgage amount, which I mentioned originally when I discussed the advantages to putting 20% down. By stating that, I meant to convey that the lower mortgage amount would equate to lower cost per month.
And my point about price v. monthly payment is simply that I hear many buyers say "oh, I can't go more than $350K" -- but those people don't realize that the monthly payment at $350K with the taxes on the houses they are considering would be too costly for them. Or, conversely, that if they have to go up to $355K to get a house, it may only cost them $25 more a month. So of course price matters, in terms of wanting the house to appraise, not wanting to overpay for the area, etc. -- but monthly payment is the relevant number that dictates affordability for most buyers, and it's what I counsel people to focus on when deciding what works and doesn't work for them.
But I don't think we are really disagreeing here. Obviously, 20% down and avoiding pmi is optimal. Personally, I put 20% down when I bought my house in 2008, so I see the benefit of it. But it's not feasible for everyone, and it's not a prerequisite to buying a house.
My post was in response to the person who posted before me, saying many lenders won't work with you if you don't have 20% down. There is a common misperception that you need 20% down, but if that was the case, at least half of the buyers I've worked with would not have been able to buy. There are other options -- good options -- available from most lenders that enable someone with less money to put down to buy a house. Should everyone do it -- no. It obviously would have to be evaluated on a case-by-case basis.
But yes, for some people, it does make sense to buy with less money down. IF the rates go up as predicted (and I don't know for a FACT that they will, I readily admit), some people who can afford to buy now won't be able to afford to buy in the future. They will be priced out the market, as Janette said. Now, that is not a good reason to buy, if the people in question really can't afford to buy now or if it isn't the right time to buy for them because of other personal issues. Concern about rising rates shouldn't be the only factor in the decision to buy. But potentially rising rates are ONE factor that I think buyers should consider if they are thinking of buying in the near future.
And as you mention, there are tax benefits that come with home ownership, and prices and rates are still fairly low (although they've both come up since the beginning of the year), so for SOME people (not all), I think it's a good time to buy. And if it is a good time to buy and affordable, but the only obstacle standing in the way is 20% down, my point is that I wouldn't let that be an obstacle. It's at least worth further investigation and a discussion with a mortgage lender to see what can be done and if it makes sense to do it.
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| Posted 9/18/13 3:52 PM |
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ElizaRags35
My 2 Girls
Member since 2/09 20494 total posts
Name:
Me
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Re: Downpayment for House
Posted by IansMommy23
if you can do it...do it! PMI can be $400 a month and it's not tax deductible.
It's not? I could have sworn it was!
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| Posted 9/18/13 3:58 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Downpayment for House
Posted by ElizaRags35
Posted by IansMommy23
if you can do it...do it! PMI can be $400 a month and it's not tax deductible.
It's not? I could have sworn it was!
Only if your AGI (adjusted gross income - household) is below 100k.
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| Posted 9/18/13 4:00 PM |
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Re: Downpayment for House
As already pointed out, putting down 20% really is optimal and contrary to general wisdom, I do think it should be almost mandatory because if you cant afford the 20% downpayment, in my opinion - you cant afford to buy the property, period.
I bought my condo w. less than 20% down a few years ago and still have to pay PMI. I am basically throwing away $100/month on PMI and have refinanced under HARP 2.0 - and was unable to remove the PMI. Because of the new lender rules, my PMI technically won't come off until LTV reaches 20% in 2023 or something ridiculous like that, EVEN IF I PREPAY MY MORTGAGE TO THAT PRINCIPAL BALANCE NOW.
The key thing to remember is that PMI is no longer coming off (I believe new FHA loans now require PMI remain in place for the duration of the loan). If you go ahead and only put down 5% DP, be prepared to pay PMI out of your butt for the length of the loan (15/30 years). If thats ok by you, then go ahead but personally I think its absolutely foolish to do so. YMMV of course.
Here is a helpful article:
http://www.bankrate.com/finance/mortgages/how-to-get-rid-of-mortgage-insurance.aspx
Message edited 9/18/2013 4:35:32 PM.
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| Posted 9/18/13 4:29 PM |
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ElizaRags35
My 2 Girls
Member since 2/09 20494 total posts
Name:
Me
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Re: Downpayment for House
Posted by ave1024
Posted by ElizaRags35
Posted by IansMommy23
if you can do it...do it! PMI can be $400 a month and it's not tax deductible.
It's not? I could have sworn it was!
Only if your AGI (adjusted gross income - household) is below 100k.
Well that explains it lol
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| Posted 9/18/13 4:50 PM |
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evrythng4areason
And then there were 4
Member since 1/10 5224 total posts
Name:
Kayla
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Downpayment for House
We bought our house last year so the pmi laws were slightly different-we pay until we have 20% and at least 5 years..we used an FHA loan and only put down 3.5%. I completely disagree that if you don't put down 20% you can't afford the property. We got a lower interest rate than we would right now, and not only did we buy a house (and I took a pay cut a month later), but we got married, went on a honeymoon, furnished the house, put up a fence, replaced a boiler, spent thousands on landscaping, and gutted a bathroom. I'm pretty sure we are doing just fine, and I truly think that waiting longer would have been an awful decision for us.
Jmho
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| Posted 9/18/13 9:58 PM |
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Mrs213
????????
Member since 2/09 18986 total posts
Name:
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Downpayment for House
We bought a house 3 years ago. We did an FHA with only 3.5% down, if I had it to do over I would have waited and saved for a bigger down payment. I'd try to go with a regular loan if you can...
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| Posted 9/18/13 11:56 PM |
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jessnbrian
Only God knows His plan for us
Member since 4/13 7238 total posts
Name:
Jessica
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Downpayment for House
DH and I bought our home about 1.5 years ago with about 10% down. Our house at the time appraised about $50K more than what we paid for it (and is likely more than that since we've done as much work on it as we have). We pay apxtly $200 per month in PMI and as soon as we finish this last leg of work we are getting the appraisers back in to reappraise to have the PMI removed - already approved by our mortgage company pending the appraisal. For us, there is no question or doubt in our minds that buying the house at the ridiculously low price we paid and ridiculously low interest rate we got was right for us, despite the PMI. My bro & future SIL just bought a house in similar condition about 5 min away from us for over $150K more than what we paid at a higher interest rate. It just wasn't worth that risk for us.
Granted, we lucked out by finding a house that needed a little TLC (by no means a "fixer upper") - just some updating - that was an estate sale where the sellers just wanted to unload it. I say only keep saving and renting (a contradiction in terms in my opinion) if you think it'll help you be able to buy the house of your dreams... if you are going for a "starter home" to me, and DH, it wasn't worth spending the money on rent that we would never see a return on.
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| Posted 9/19/13 6:10 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Downpayment for House
Posted by evrythng4areason
We bought our house last year so the pmi laws were slightly different-we pay until we have 20% and at least 5 years..we used an FHA loan and only put down 3.5%. I completely disagree that if you don't put down 20% you can't afford the property. We got a lower interest rate than we would right now, and not only did we buy a house (and I took a pay cut a month later), but we got married, went on a honeymoon, furnished the house, put up a fence, replaced a boiler, spent thousands on landscaping, and gutted a bathroom. I'm pretty sure we are doing just fine, and I truly think that waiting longer would have been an awful decision for us.
Jmho
Didn't you also pull money from your 401k because you didn't have adequate savings for a DP?
Every financial expert in the world would say this situation is definitely "not fine", because it basically shows you have no emergency fund (at least definitely not the 6-12 months of expenses recommended by most).
But hey if it works for you, great. Most would disagree.
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| Posted 9/19/13 8:19 AM |
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Re: Downpayment for House
Posted by ave1024
Posted by evrythng4areason
We bought our house last year so the pmi laws were slightly different-we pay until we have 20% and at least 5 years..we used an FHA loan and only put down 3.5%. I completely disagree that if you don't put down 20% you can't afford the property. We got a lower interest rate than we would right now, and not only did we buy a house (and I took a pay cut a month later), but we got married, went on a honeymoon, furnished the house, put up a fence, replaced a boiler, spent thousands on landscaping, and gutted a bathroom. I'm pretty sure we are doing just fine, and I truly think that waiting longer would have been an awful decision for us.
Jmho
Didn't you also pull money from your 401k because you didn't have adequate savings for a DP?
Every financial expert in the world would say this situation is definitely "not fine", because it basically shows you have no emergency fund (at least definitely not the 6-12 months of expenses recommended by most).
But hey if it works for you, great. Most would disagree.
I know every financial guru says never to touch it - normally I would would agree. But then again, doesn't it depend upon a lot of factors overall? Like if you're a dual income household and two people both have 401ks, and let's say one or both get a nice sized bonus every year - is it always bad to hit up your 401k? I have read people here do it for fertility issues. To me, that's worth it. Even for a home - can't you replenish your 401 by quickly paying back what you owe as soon as you can? Maybe with a year end bonus or what have you.
Not disagreeing with you at all.. Just thinking overall..is it always the worst possible financial choice?
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| Posted 9/19/13 9:42 AM |
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Downpayment for House
To the OP.. My best advice is save as much as you can for a DP and for a cushion of savings when all is said and done. And buy a home for way less than you're approved for.. You just never know.
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| Posted 9/19/13 9:46 AM |
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LiGirl1225
LIF Infant
Member since 6/13 69 total posts
Name:
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Re: Downpayment for House
If you can afford a home putting less than 20%, then thats great for you. You have to be comfortable with the payment not anyone else. We happened to put down 25% out of preference. This enabled us to look in a higher price range. If we put down 3.5% (this is OUR situation) we wouldn't have been able to look in the price range that we did. It is all dependent on your personal income and finances and what you are comfortable spending. if the PMI charge is something you can swing comfortably, then do it. If you can't, then I would continue to save.
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| Posted 9/19/13 9:57 AM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Downpayment for House
Posted by EatingMyVeggies
I know every financial guru says never to touch it - normally I would would agree. But then again, doesn't it depend upon a lot of factors overall? Like if you're a dual income household and two people both have 401ks, and let's say one or both get a nice sized bonus every year - is it always bad to hit up your 401k? I have read people here do it for fertility issues. To me, that's worth it. Even for a home - can't you replenish your 401 by quickly paying back what you owe as soon as you can? Maybe with a year end bonus or what have you.
Not disagreeing with you at all.. Just thinking overall..is it always the worst possible financial choice?
The reasoning against what you are saying is... what if one of you lose your job. What if the bonuses get cut. If you take out a 401k loan and you lose your job payment in full is required within 30 days or take a withdrawal with high taxes and a penalty. No job and no bonus is guaranteed, regardless of how "secure" you think your job situation is. If you went on Suze Orman and asked if you could afford a house, she would give you an instant decline. (and I am not even a fan of hers)
Some people may prefer to live a riskier life, and if you don't have an issue that's fine. It's yours and their choice. Just because other people are doing it (even with fertility treatments), doesn't mean it's wise.
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| Posted 9/19/13 9:58 AM |
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ElizaRags35
My 2 Girls
Member since 2/09 20494 total posts
Name:
Me
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Re: Downpayment for House
Posted by evrythng4areason
We bought our house last year so the pmi laws were slightly different-we pay until we have 20% and at least 5 years..we used an FHA loan and only put down 3.5%. I completely disagree that if you don't put down 20% you can't afford the property. We got a lower interest rate than we would right now, and not only did we buy a house (and I took a pay cut a month later), but we got married, went on a honeymoon, furnished the house, put up a fence, replaced a boiler, spent thousands on landscaping, and gutted a bathroom. I'm pretty sure we are doing just fine, and I truly think that waiting longer would have been an awful decision for us.
Jmho
Pretty much same here. No regrets. I think we ended up putting around 5% down.
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| Posted 9/19/13 10:18 AM |
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evrythng4areason
And then there were 4
Member since 1/10 5224 total posts
Name:
Kayla
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Re: Downpayment for House
Posted by ave1024
Posted by evrythng4areason
We bought our house last year so the pmi laws were slightly different-we pay until we have 20% and at least 5 years..we used an FHA loan and only put down 3.5%. I completely disagree that if you don't put down 20% you can't afford the property. We got a lower interest rate than we would right now, and not only did we buy a house (and I took a pay cut a month later), but we got married, went on a honeymoon, furnished the house, put up a fence, replaced a boiler, spent thousands on landscaping, and gutted a bathroom. I'm pretty sure we are doing just fine, and I truly think that waiting longer would have been an awful decision for us.
Jmho
Didn't you also pull money from your 401k because you didn't have adequate savings for a DP?
Every financial expert in the world would say this situation is definitely "not fine", because it basically shows you have no emergency fund (at least definitely not the 6-12 months of expenses recommended by most).
But hey if it works for you, great. Most would disagree.
The money we borrowed we used as a "just in case"..it's actually sitting in our bank account as we speak, and was never touched-we factored in the payments to repay the loan, and it will be paid off in a few years. We like knowing it's there, and it was easier to take it out when we bought the house.
If DH had lost his job the day after we closed, and we had to repay the money, we absolutely would have been able to do so.
And as for financial "experts", DH is a bond trader for a fortune 500 company. Pretty sure he knows how to handle finances.
As I said..the timing of buying our house, and putting down 3.5% worked for us. We also didn't even factor my salary in when taking out our mortgage-it's based only on DH's salary. We've managed to maintain and build up a cushion in our account, and do multiple home upgrades over the past 19 months since we purchased our home. And like I said-right after we closed I actually took a 20% pay cut, and we were still perfectly fine.
Then again, multiple people on this board told me that we should rent before owning since we had never lived on our own. That would have been completely pointless, as we're now building equity in our own home.
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| Posted 9/19/13 10:29 AM |
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