House downpayment

[Orionsmama]

DH and I have found the perfect home, 4bedrooms, fireplace, 2 decks and a huge basement waiting to be finished and best of all a huge chunk of land for our (fingers crossed) chickens. I am wondering about the downpayment. What did most of you mamas who own homes do for your downpayment? Was 20% pretty much the standard? I know in today's market things have shifted a bit, but any first time home buyer advice would be gladly appreciated....even if it is not financially related

[MacroMama]

Suze Orman, who is a financial adviser, just had a show about buying a house. You can find the show for free on iTunes by searching for the Suze Orman show.

20% down would be good.

Getting a fixed APR is necessary.

Make sure you include closing costs (plan on it being higher than what the bank tells you), insurance (higher than renters ins), property taxes, higher utility bills, and moving costs in your financial calculations.

Good luck!

[taubel]

We did 20% when we bought our first house almost 8 years ago. The main reason was to avoid PMI. As we get ready to buy a different home in the next two years, we will also be putting 20% down. 

Good luck buying your house!

[BetsyS]

We bought at the height of the boom 5.5 years ago.  Nothing down, an 80/20 loan (so no PMI), adjustable rate.

Don't be stupid like us. 

[Sharlla]

when we were going fha it would have been 3.5% but we went traditional and put 25% down.  dh had cosigned for someone's student loan and because of that it messed up his dept to income ratio.  we had to put the higher down to make the mortgage payment low. 

[ChristyMarie]

We bought our house 2.5 years ago and were required to put 20% down.  It was also at a time when mortgages were very hard to get.  I have no idea if lenders have eased up a bit or are still sticking to the 20% thing.  I do know for a jumbo loan (over $419K) they are still requiring 20%.

[goldingoddess]

We did FHA and put down 3.5%, it was not our ideal, but at the time our choices were to buy a house or get rid of our dogs so we could find somewhere to rent (we're in the bay area and it is extremely difficult to rent with 2 large dogs cause the rent market is so saturated.)  Our payment is still lower than what it would cost to rent a house in the bay area even with  the ~150/month PMI.  Plus I LOVE owning.  We bought a 'fixer-upper' with a massive yard and I love doing all the painting and buying new appliances and pruning fruit trees, designing gardens etc, etc.

Our plan is to stay here another 5ish years save up a downpayment for a larger home, then rent this place out when we buy a larger home.

[stephbrownthinks]

For a Conventional mortgage, you'll need 20% down and the credit requirements are pretty strict. You can go FHA which has easier requirements, and only requires 3.5% down. If you go FHA for a 15 year loan and put 10% down, you can also avoid monthly PMI.

[tinuviel_k]

Our bank does a "conventional" 3.5% down loan (not FHA) for folks with great credit. We went that route. We also made sure we have enough for closing (though the seller paid 1/2) and cash left for immediate necessary repairs. We have a 30 year fixed rate mortgage.

I would have loved to go with 20% down but in my area but it wasn't possible for us. Our 1150 sq ft older 3 bedroom house cost $225,000 and that is a GREAT deal in our area. 20% down would have been $45,000.
We would have needed to live in our tiny one bedroom great-deal rental for four more years to save that much money, and our daughter was seven and needing her own space, AND the place had rats. Staying wasn't a good option.
If we had moved into a two bedroom place and saved it would have taken us more like seven years to come up with the down payment, and it would have taken even longer had the housing prices risen again in that time.
Between those issues and the fact that the interest rates are so low right now we decided to go ahead and buy with the 3.5% down. Not ideal but it was the best we could do.
Edited by tinuviel_k - 2/8/11 at 4:00pm

[Sharlla]

they included closing costs into the loan amount.  so we bought the house for 50k but the loan was 52500 and we put down 13500 down. 

[SunRise]

First house, in 2004, I put 5% down. I had a low adjustable interest rate for 5 years, but sold the house before that time frame (2007).

Bought 2nd house in 2009. I had the cash to put 20% down (advantage: avoid PMI) but decided to put 5% down instead (pd. less for it then my first house / it's a fixer upper and I probably will own it for 5 years (reasons that I went with 5% down). Fixed interest rate. Conventional (I think) /  no conditions.

When budgeting make sure to account for higher property tax payments;  the property / house may be assessed shortly after you buy it, which could increase your property taxes/monthly payments. (they may increase if you buy the house for a significant more $ then what the owners paid for it - this is usually when our county assessors come out and reassess the values.) Housing assessments here are way off and sometimes go 5+ years before the house gets assessed, which means a huge increase in property tax. Property taxes are also very high so they do affect the monthly budget.  My first house payment increased 200 dollars/month within a year. Second house property taxes have not increased, but I paid less then the assessed value. Property taxes and sales are public records; check out your local county website and you may find the history of sale prices and property & school tax for the address you are interested in.

[heatherdeg]

Originally Posted by BetsyS 

We bought at the height of the boom 5.5 years ago.  Nothing down, an 80/20 loan (so no PMI), adjustable rate.

Don't be stupid like us. 

Those "piggyback" loans are no longer available.  You either put 20% down or you pay PMI with extremely rare exception these days.  Like a pp said--there ARE still banks that do a non-FHA, less than 20% down loan without PMI for excellent credit.

We have never put 20% down, BUT we also bought our primary residences before there was no longer the "piggyback" option that BetsyS had above.  We always bought ours with 5% down and then a 15/80 loan.  We just recently bought our first primary residence in a long time and only put 5% down and are paying PMI that will be removed after 12 months because we paid $159k for a house that appraised in it's pre-renovated condition for $194k (it was a foreclosure and I'm trained as an appraiser--so I knew the value was higher going into the deal).  So we HAVE 20% equity in the house already.  I would say that unless that's the position you would be in, it would be smarter to put more money down.  You have to remember that heaven forbid you are caught in a bad situation and need to sell the house (and assuming the values don't tank any MORE), you have to cover your exit fees--a realtor (and you need to assume a 6% commission) plus transfer taxes, etc.  I know that here in IL, you'll have to shell out a year's worth of property taxes as well because of the way they're paid (way different from back home).  So you should always have at least 10% of equity just to hopefully breakeven in the event of a problem.

I would also run your own credit report and scores when you're shopping for a mortgage and work with banks that will quote a rate based on the report/score you give them with the understanding that  1) you know that THEY have to run their own copy of your score & report if you decide to apply with them; and 2) that you know that what they tell you will change if the report & score they run differs significantly from what you have in your hands.  Some banks DO NOT LIKE THAT.  There are plenty of banks out there that will work with you that way.  Also, lock your report down and give them a code to run the report.  We had one bank mistakenly run dh's credit THREE TIMES in the course of two months.  Two runs close together won't demerit your score, but the third one did.  >:(

Also, we have had banks that quote closing costs higher than what they actually are MOST of the time.  I believe that the rules have recently changed such that they now also have to show you the difference between what they quoted you and what you paid.  As to the repercussions for it being significantly off, I have no clue.  But there is greater regulation around them having to be as close as possible.

[JesKace]

When we bought our first house in Dec of 2004 when they were practically handing out loans to anyone.  We didn't have any money at all to put down, like nothing at all!  We ended up getting an FHA loan.  It was a 30 year fixed, but there was also a 2nd loan thing for the down payment (5% I think) that was forgivable after so many years, if we stayed in the house we wouldn't have to pay it back.  It was different from an 80/20 type thing.  We refinanced while in that house since our original loan interest rate was really high 7+% and we lowered it by more an 1% saving us a lot each month.  When we refinanced we rolled that 2nd loan into our new mortgage since we had to and it was completely gone.  We sold that house after only living there a year and a half because of the neighbor hood.  Luckily we sold when the market was really good and we actually turned a decent profit.

We bought our current house in Sept of 05 which was reasonably priced at the time.  We did put some money down, I'm thinking we had to put down a minimum of 10%.  We had great credit, and they were still giving out loans fairly easy at the time.  I made sure we got a 30 year fixed at a good rate, even though the adjustable rate mortgages and 80/20's would save a ton of money each month.  I'm so glad we went with the 30 year fixed because now we don't have any worries about our payment changing and we didn't have to try to re-finance after the market went bad.  We used the profit from our first house to put the down payment and used some of what was left for credit card debt we accumulated.  Since we couldn't put down the whole 20% we did end up with PMI which stinks because we pay an extra 80+ dollars a month for that.  We still have a while to go before we can get rid of the PMI since we haven't payed down enough off the mortgage and house prices have dropped so if they came to appraise the house we wouldn't end up with enough equity to get rid of the PMI.

I'm not sure how things work now.  I know things have gotten more strict and I'm sure they are requiring more of a down payment than they were at the time we were buying.  But I'm sure a lot depends on your credit, and the lender.

[mnnice]

Generally, I think you should shop for you financing and then look at houses.  I honestly, I think that for lots of people taking the number that a mortgage person or online calculator tells you and then dividing by two would be a good idea.  Personally, I think we are entering an era that were most folks are going to be spending more on food and fuel than they have in the past and in order to not be stretched too thin spending less on one of the other major areas (housing) is going to help.

I am pretty sure that what we did in 1998 and 2001 is neither what I would advise someone now nor really available anymore.  I thing having 20% down would be the best for most situations and 10% down would be the least I would recommend for anyone.  IIRC having 10% or 15% down will give you smaller monthly PMI payments and shorten the duration of time that you are required to pay PMI.

[velochic]

I bought my house a long, long time ago when there really weren't many options to financing and the "inventive" methods of financing had not yet been... invented.  Yes, 20% was the down payment.  Yes, people had to save up the money for the down payment (sometimes living in poor conditions for the interim and just dealing with that fact) and back then they even had rules against things like getting the down payment as gifted money.  That is, a parent couldn't help out (not that mine would have, anyway)... you had to prove that you saved the money from your own financial abilities.  And even though I had a good job, it was still a bit of a challenge to save the money as a single, childless woman.  Having a family and trying to save for a down payment may not be easy... but it builds character and I think it lays a good financial foundation for the future.

I watch the Suze Orman show each week, too, and I suggest watching that episode mentioned above.  She has very pragmatic advice.  I *personally* would not buy a home without 20% down.  Best of luck.

Oh, one thing I remember Suze saying in recent weeks was to talk about the "NEW" American Dream.  In these times, having a stable job can be the American Dream and actually owning a home can be the burden.  I know many here have stated as much, corroborating what she has said.

[Orionsmama]

This advice is AMAZING! Thanks Mamas. Keep it coming.