(Closed) Buying a home, how much to put down?

posted 4 years ago in Legal
  • poll: How much should / did you put down on home purchase
    0-10% : (16 votes)
    18 %
    11-15% : (11 votes)
    12 %
    20% : (45 votes)
    51 %
    more than 20% : (17 votes)
    19 %
  • Post # 16
    Member
    5364 posts
    Bee Keeper
    • Wedding: May 2016

    Following because we’re trying to decide if we want to buy. And I looked at a couple of houses yesterday😳 

    We haven’t talked to a lender yet and idk where you are, but the ladies yesterday were telling me about a USDA loan for rural areas (only the northern part of the county we are looking is considered rural, even though we’re in Metro Atlanta) and they don’t require a down payment? We obviously have a lot more to check in to but we are prepared to put down 20%+ if need be. But we’d also be selling/ or renting the home out in a couple of years probably so we’re just trying to figure out what’s best.

    Post # 17
    Member
    1469 posts
    Bumble bee
    • Wedding: June 2015 - Holly Hedge Estate

    weatherbug:  I PM’ed you 🙂

    Post # 18
    Member
    6773 posts
    Busy Beekeeper
    • Wedding: June 2015

    We put down about 32%.  That’s a bit random, but it’s the amount I could safely pull out of my bank account at the time, while still leaving me a decent enough cushion to feel comfortable.  My husband then took over mortgage payments for the first year, which has actually passed, so I guess the second year as well.

    The key is to put in the most that you can safely, because it’s fewer interest payments later and you could have a 15-year mortgage instead of a 30 on top of that.  If your house is an older one, you may want to keep some more money in your account in preparation for all the things that go wrong – we had our bathroom vanity pipes leaking within a month of buying and needed to replace all our windows and garage doors before winter and took out 10 trees by spring. 

    Post # 19
    Member
    2178 posts
    Buzzing bee
    • Wedding: May 2013

    jessicabear:  i wouldn’t worry too much about one person running your credit — its more like if 5 banks do it

     

    also why didn’t you get the pre-approval? it just hasn’t come in or you didn’t qualify for a loan

    Post # 20
    Member
    2394 posts
    Buzzing bee

    I just wrote you this big long response and it was deleted … grrr. Here’s the quick version:

    OP I think viridianx has give you the best advice so far. There’s more to it than strictly what you can afford. The “put down as much as you safely can” motto misses a lot of the nuance of personal finance and home buying. What she said about considering the difference in your mortgage payment vs. the ROI you could make if you kept that money as an investment is really important.

    She’s also right that the “less than 20% downpayment = automatic PMI” rule isn’t set it stone either. Many banks will evaluate your credit, your income, and a number of other factors in addition to your downpayment to determine whether you will pay PMI or not – and most banks only require you to pay PMI until you hit a particular home value threshold, or for a certain number of years (say, the first two years assuming you make all your payments on time), or until you’ve made a certain number or payments in general.

    These are all things to consider.

    Post # 21
    Member
    3729 posts
    Sugar bee
    • Wedding: City, State

    jessicabear:  we put down 25% and then 3 days later were both out of work (government shutdown). It was stressful, but we still had plenty in savings. I say that if you can afford it, put as much as you can down with still having 6 months expenses worth of cash in the bank.

    Post # 22
    Member
    4238 posts
    Honey bee

    jessicabear:  

    I didn’t vote because there are way too many factors involved for me to choose. For example, I’d only buy a home with husband with both our names on everything. I could see myself putting 100% down to secure a particular home. With the interest rates about to rise and inflation on the uptick, I could also see going with a 0% down loan as a hedge. It just depends.

    I highly encourage you to do some reading on the issue and then y’all discuss your sense and sensibilities about mortgaging a home in general. It’ll make your house hunt much more enjoyable when you’re on the same page, you know?

    Happy hunting!

    Post # 23
    Member
    670 posts
    Busy bee

    We’re in Canada so some of this might not apply. Minimum is 5% here. We were told by our mortgage broker that the insurance fee you have to pay on your mortgage for under 20% is minor in differences in the insurance cost between 5%-20%. With some lenders, you can pay up to XX dollars per year in addition to mortgage payments without penalty. It varies upon lender and such. Which if that’s the same in the US, you could purchase a house and then overpay your mortgage each year with your savings to ensure you feel secure with the purchase. If you have family and such who could bail you out if things really got tough, then I’d consider the 20%. No, it’s not great to have to lend money from them but if the insurance premium is high and you save that amount on the 20% then it might be worth it. Just my thoughts. We’re heading out to look at houses this afternoon too!

    Post # 24
    Member
    1035 posts
    Bumble bee
    • Wedding: March 2015

    When choosing between a 10% and a 20% down payment, it’s not just the difference in rate that matters. You’re paying the whole interest on the amount that you borrow, not just the difference in the rate. The more money you borrow, the more interest you’ll pay.

    Comparing investments to the appreciation in the house also isn’t relevant. You’re buying the house regardless, and it will appreciate the same amount regardless of your down payment. What you should be comparing the investments to is the interest rate on your mortgage.

    Yes, it’s likely that the investments will come out ahead in the long term, if you’re a disciplined investor making good decisions. That really depends on your investing confidence, since the safest investments have almost zero return. And don’t forget to take into account the tax you’ll be paying on any investment gains.

    Post # 25
    Member
    151 posts
    Blushing bee

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    Post # 26
    Member
    2699 posts
    Sugar bee

    I’d put down whatever amount you need to put down to bring your mortgage to approximately the amount of rent you’re comfortable paying now. Past that, don’t worry too much about paying it off. It will most likely be the largest tax deduction you have – especially if you have no children or your children are growing up and leaving. I pay off my investment properties ONLY – then whatever I charge on those is profit. My primary home will forever and ever have a mortgage. I pay enough taxes.

    Post # 27
    Member
    151 posts
    Blushing bee

    clovesa2015:  Please don’t take your mortgage broker’s word as gospel and double check the numbers on your insurance and your prospective mortgage yourselves. They make more money by encouraging people to put as little down as possible (so you’ll pay more in interest over the course of the mortgage) and buy insurance (which is an entirely avoidable extra cost). I put down more than the 25% required when I bought my house and saved myself $6K in interest. 

     

    Once you have the mortgage there’s a lot of flexibility (such as paying down extra in payment, or in a lump sum annually) but it’s important to strike the right balance for your financial situation — having enough for emergencies. savings, basic expenses, and investment, while still minimizing the amount of interest you pay on the mortgage. That’s why having the best possible foundation is important, and if you can’t comfortably afford the minimum downpayment (this is not directed to the OP, I realise you can, I mean this in general) then it might be wise to rethink whether you’re actually in a good position to buy.  If you owe more than 75% of the value of the house and the prices drop and you can’t make the payments for some reason it leaves you in a dreadful situation, tied to something you can’t afford and can’t afford to sell.

    Post # 28
    Member
    151 posts
    Blushing bee

    leilarobs2:  This only applies if you are in the US. Where I am there is no provision for tax relief due to a mortgage. You pay based on your income no matter what you do or don’t owe so it’s generally in your best interest (ha, I didn’t mean to pun, but I’m leaving it in) to pay off the mortgage more quickly than not.

    Post # 29
    Member
    7898 posts
    Bumble Beekeeper

    I agree with minimum 20% down. You don’t want to pay extra for the PMI or other fees if you can avoid it. That’s just money thrown to waste. 

    Post # 30
    Member
    2699 posts
    Sugar bee

     

    silvergrey:  Indeed. I’d be HEARTBROKEN without that deduction and they threaten to take it all the time. I’m at that point now where I pay probably more principal and less interest (thus smaller deduction) so I am going to suck out as much money as I can and invest it. Even a low risk, moderate return is more return than I get on the money sitting at Bank of America. If I kick the bucket, the cash will be available to pay off the house if that’s what they choose to do with it but nobody (inlcuding me) has any real attachment to this particular property.

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