Need advice- down payment for mortgage!- UPDATE post 104!

Start looking into prequal. In some areas, they won't even take your offer seriously unless you've pre-qualified for a mortgage. Just talking with a mortgage rep ought to tell you how much you'll be able to borrow, as long as you tell them how much you're willing to put down. Then try to knock 20% off the amount they're willing to lend to use as your budget.
 
CalDisneyMomof2 said:
This is mostly true. (I'm not doubting your experience! ) My experience was different, however. We have a 3.25 interest rate. I think the lowest in who knows how long. We quickly got to the 20% equity mark (maybe 8-10 months? ) but as our house went up in value so did interest rates! In order to drop our PMI we would have had to refinance thus having an interest rate over 1% of what we had!

It didn't make sense to refinance so here we are waiting to get to that 20% equity mark (it doesn't come off automatically, however). I'm hoping to get to it sooner (by a year or so)by paying down the principal. I will be so happy to have an extra $450 a month in our pockets!
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I'm quite willing to believe that some mortgages, in some states, were not required to remove PMI when equity reached 20%. But we happened to know that our particular mortgage could get the PMI removed just by getting a good appraisal. We didn't want to fuss with a borderline appraisal, so we waiting a few months more than necessary.

It also helped that the amount we had set aside from not putting down 20% went into finishing the garage that the previous owner had started, which quickly raised our equity.
 
DisneyMandC said:
OK good to know. I assume the PMI payment goes down based on how much you put down? The asking price is what we had considered reasonable for first home (250) so I'm thinking if we can talk them down a little and have a lower mortgage than expected, the PMI wouldn't be so bad.
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Don't quote me on this but I believe the PMI percentage is at about .85% of the loan. So if you put 5% down on a $250,000 house your mortgage would be $237,500. .85% of that would be $2018.75 or $168.23 per month. Not to mention you pay an up front PMI which is higher than 1% I believe.

Of course these are all rough estimates.
 
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Disney_Dogs_Rule said:
I should be happy that my PMI/insurance/taxes is less than $300 a month. (considering my taxes are close to $1900)
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Mine are over $900 :guilty:

However, we've owned our home over 2 1/2 years now and if we were to sell TODAY we'd walk away with close to $200,000 in our pockets after closing costs and realtor fees. So, can't complain too much!
 
I am 5 years down and I would be lucky to make 20K

Then market is improving but just not the "demand" in our area currently.
 


DisneyMandC said:
I don't think we're at the max for a home. I know I shouldn't compare, but I see couples our age (mid-20s) buying homes in neighborhoods where prices start in the low 300s, and I know they aren't making our income. I realize that's not a good basis for comparison for our own lives, but I feel like if they're getting mortgages for up to that high, I should definitely be able to qualify for the significantly lower amount I'm requesting.

I am getting ready to start a job with the state retirement system, so I will be maxing that out, and DH has retirement as well as stocks through his company. Fortunately, we are not planning to have children, so future education expenses will not be a concern. Yes, I know "anything can happen." No, it's not happening.

That is my biggest concern regarding the less than 20% is the previous market bust. I was in college when that happened so wasn't super educated about it, but I knew enough to know it was from people putting down too little on their homes. I would definitely want us to put down the max amount possible without disrupting our emergency fund,

Maybe I'll just win the lottery and won't have to worry about this! Guess I better buy a ticket first though. :rotfl2:
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if you're going to work for a job that's associated with your state's retirement system check to see if there are any home loan programs available to members. when we purchased our current home dh was a member in another state's system-we used a program they offered to members that saved us quite a bit and had VERY competitive rates. you could always get prequalified now but check into if these programs are available to you if it would time out that you start the job prior to closing on the house (people can change lenders right up to closing-we did it once to grab a much better rate).

as for the previous market bust-we lived in a part of northern California that didn't see the 'bubble' burst-it completely deflated overnight (we had just sold and ours was the only home in escrow for that city for the next couple of months). I would say that at least 60-70% of our neighbors lost their homes (heck the person who bought from us lost it w/in a year, the person who subsequently purchased it lost it as well). none of the losses really had anything to do with how much equity they had in their homes-it had to do with their ability to stay current on their mortgages. with far too many they purchased above their means w/interest only or non fixed loans-and when those balloon payments or interest rates increased their incomes were not what they had anticipated (the majority worked-like dh and I-for government and were accustomed to cost of living increases every year and minimal increases in health care costs-when their incomes not only didn't raise but they had pay cuts and unpaid furlough days coupled with massive increases in employee health care costs they couldn't make ends meet). there were also those who bought within their means but had little wiggle room so when gas costs soared they saw their commutes extinguishing their wiggle room so normal increases in expenses (homeowners insurance increasing, utility bills increasing, food costs.....) they were in the red. there were those who bought well below their means but the allure of taking out low interest (at the time) home equity loans to furnish their homes, landscape....put them in the position of being wildly upside down (I know of some homes on the market to this day that will NEVER sell b/c it would take decades of a 'normal' market place increase in values to get the homes to the point of being valued at what is owed on them).

figure out what you are comfortable paying out-take into consideration repairs and upkeep. the last thing you want to do is to move into your dream home only to have nightmares about how to keep it let alone make ends meet financially.
 
barkley said:
if it's rural you might want to check with credit unions within/near the area. the advantage would be they likely use appraisers who are familiar with the oddities, rules and restrictions that come with rural properties in a given area. they can also be better versed at more quickly coming up with comps to justify the loan. we live rural and in our experience those that go with the local lenders can get more personal knowledgably attention from professionals who know the area in a much more timely manner.

keep in mind a few things when looking at rural properties though-in addition to your pmi, you may end up paying more for homeowner's insurance depending on the proximity to a fire department/historical issues with flooding and if there are multiple empty lots adjacent to your new home (agents around here consider those empty lots attractive nuisances that can attract atv riders and such who may wander on to our property so it puts our property at a higher risk factor, they also see those unmaintained lots as a fire hazard for our homes.
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Thanks for the tip! I'm not sure what my mom pays for her insurance (her property adjoins this property), but I know it's through Farm Bureau and they always have excellent rates. Definitely familiar with being far away from the fire department though! We have sadly had three fires within about 8 years on a nearby road and the homes burned to the ground.

barkley said:
if you're going to work for a job that's associated with your state's retirement system check to see if there are any home loan programs available to members. when we purchased our current home dh was a member in another state's system-we used a program they offered to members that saved us quite a bit and had VERY competitive rates. you could always get prequalified now but check into if these programs are available to you if it would time out that you start the job prior to closing on the house (people can change lenders right up to closing-we did it once to grab a much better rate).

as for the previous market bust-we lived in a part of northern California that didn't see the 'bubble' burst-it completely deflated overnight (we had just sold and ours was the only home in escrow for that city for the next couple of months). I would say that at least 60-70% of our neighbors lost their homes (heck the person who bought from us lost it w/in a year, the person who subsequently purchased it lost it as well). none of the losses really had anything to do with how much equity they had in their homes-it had to do with their ability to stay current on their mortgages. with far too many they purchased above their means w/interest only or non fixed loans-and when those balloon payments or interest rates increased their incomes were not what they had anticipated (the majority worked-like dh and I-for government and were accustomed to cost of living increases every year and minimal increases in health care costs-when their incomes not only didn't raise but they had pay cuts and unpaid furlough days coupled with massive increases in employee health care costs they couldn't make ends meet). there were also those who bought within their means but had little wiggle room so when gas costs soared they saw their commutes extinguishing their wiggle room so normal increases in expenses (homeowners insurance increasing, utility bills increasing, food costs.....) they were in the red. there were those who bought well below their means but the allure of taking out low interest (at the time) home equity loans to furnish their homes, landscape....put them in the position of being wildly upside down (I know of some homes on the market to this day that will NEVER sell b/c it would take decades of a 'normal' market place increase in values to get the homes to the point of being valued at what is owed on them).

figure out what you are comfortable paying out-take into consideration repairs and upkeep. the last thing you want to do is to move into your dream home only to have nightmares about how to keep it let alone make ends meet financially.
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Thank you for the advice! Yes, I definitely realize anything can happen, which is scary. We definitely aren't the type to take out any loans in terms of furnishing, landscaping, etc. We're very basic people. I just want this piece of property so bad as it adjoins my mother's property and is therefore very convenient in terms of keeping our horses at my mother's house and staying close to her as she gets older. Hopefully now that we're out of that long dark recession period (or on the way out, depending on who you're talking to), everything will stick in terms of jobs and healthcare costs for a while!

Thank you all so much for the advice on PMIs, etc.! I really appreciate it and am truly taking everything to heart. I should mention that this property isn't even listed online yet, the sign literally went up last night on the property and my mom saw it this morning and was so excited she called me immediately to let me know! When I called the realtor to ask about it, she was like "uhhh how did you even see that property, it's in the middle of nowhere?" haha. I didn't mention to her that that's EXACTLY where we wanted to be! I'm supposed to get pictures from her tonight and am going to talk to DH some more about the finances of it and see what we can work with. At least I know that not putting 20% down isn't the end of the world now!
 
How about going in full price and asking for 10-15% back so you can reach the 20% down? Or paying a little more than full price, PMI can be a pain in the butt if you have to refinance to get it to fall off.
 
Madteaparty001 said:
How about going in full price and asking for 10-15% back so you can reach the 20% down? Or paying a little more than full price, PMI can be a pain in the butt if you have to refinance to get it to fall off.
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How exactly would that work? Sorry, knew to this whole process so not sure you mean would give us the 10-15% back.
 
If you don't have/don't want to put a full 20% down to avoid PMI there is an option to prepay PMI (2.5 yrs worth, I think, versus 5 years). In our case the PMI monthy charge was around $65/month. We were going to put 10% down on a $170,500 house and prepay PMI, $23,500 would have been due at closing and our payment would have been $1050. I use the past tense b/c the house had major structural issues--it had shifted off the foundation--and we cancelled the contract.

You can always ask for the seller to pay some or all of your closing costs, so you have more cash at hand. I think closing costs are usually 3-4% of the sales price.
 
PMI is not bad, IF you buy in a good neighborhood and plan to stay for at least 10 years. You can refinance out of FHA and into conventional once you hit that 20 percent equity mark. FHA is good for getting you into a home. We went with FHA 3.5 percent down and our interest rate is 3.35. We pay PMI of $120.00 per month on a 180,000.00 loan.
 
You can avoid PMI by getting an 80/10/10 or 80/15/5 loan. That means you put 5-10% down and take out a second loan to get you to 20%. The second loan will have a higher interest rate, but it will be better than throwing money away on PMI.
 
Love the mortgage rates. We bought our house with 5% down, and a rate of 12.25%. We jumped at that loan because just 6 months earlier mortgage rates were 18.45%! But that was 1983, and you could get 16% on CD deposits those days too.
Only issue we had was 5 years later when we tried to refi through the same bank the loan officer insisted they NEVER wrote mortgages with less than 20% down. The look on his face when he finally pulled our original loan documents was priceless.
Get pre-qualified, and go for it.
 
supersnoop said:
You can avoid PMI by getting an 80/10/10 or 80/15/5 loan. That means you put 5-10% down and take out a second loan to get you to 20%. The second loan will have a higher interest rate, but it will be better than throwing money away on PMI.
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This! We did this b/c we didn't want PMI. We did a 80/15/5. We could have done the full 20% down but didn't want to dwindle down our savings by that much. So the primary mortgage is at 3.25% for 80% of the price, the secondary is at 4% for 5% of the price, and the other 15% we put down. Saves us a few hundred a month in PMI and we plan to pay off the secondary in 5 yrs or less.

Good luck, OP!
 
supersnoop said:
You can avoid PMI by getting an 80/10/10 or 80/15/5 loan. That means you put 5-10% down and take out a second loan to get you to 20%. The second loan will have a higher interest rate, but it will be better than throwing money away on PMI.
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We are able to deduct our pmi.
 
DisneyMandC said:
How exactly would that work? Sorry, knew to this whole process so not sure you mean would give us the 10-15% back.
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Just talked to my husband, I thought the sellers had paid some of our down payment, apparently we paid a little more than another buyer in exchange they gave us 5k for closing costs. Our closing costs were about 3.5k-4k and the rest of the money went towards paying points to get a lower interest rate. Our loan was FHA at 3% so we put down a 3.5% down payment. We're working on paying off student debt and then we will focus on refinancing to get rid of our PMI, which in our state does not fall off after 5 years like some others.

ETA: the bank also allows you to borrow money from a friend or relative for your down payment and if this is your first house you should check into your state's first time home buyer assistance programs
 
Madteaparty001 said:
Just talked to my husband, I thought the sellers had paid some of our down payment, apparently we paid a little more than another buyer in exchange they gave us 5k for closing costs. Our closing costs were about 3.5k-4k and the rest of the money went towards paying points to get a lower interest rate. Our loan was FHA at 3% so we put down a 3.5% down payment. We're working on paying off student debt and then we will focus on refinancing to get rid of our PMI, which in our state does not fall off after 5 years like some others.

ETA: the bank also allows you to borrow money from a friend or relative for your down payment and if this is your first house you should check into your state's first time home buyer assistance programs
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thank you for checking for me! It sounds like we have a lot of research to do! I'd love to qualify for these USDA loans since we're rural as well. Dream big right!

disneymagicgirl said:
This! We did this b/c we didn't want PMI. We did a 80/15/5. We could have done the full 20% down but didn't want to dwindle down our savings by that much. So the primary mortgage is at 3.25% for 80% of the price, the secondary is at 4% for 5% of the price, and the other 15% we put down. Saves us a few hundred a month in PMI and we plan to pay off the secondary in 5 yrs or less.

Good luck, OP!
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Thank you! And thank you everyone who has commented with advice on PMIs and whatnot. I really appreciate it! Just when I think I'm doing a good job adulting by getting my car insurance rates lowered, something else comes up! :rotfl2:I guess I'll get the hang of it eventually right?!
 
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