Post # 31
*All of my advice is assuming you will not be carrying any non-morgage debt*
I would make it your goal to put down 20% but I would also make sure you leave yourself an emergency fund. Emergencies increase once you own a home! For me, an emergency fund is enough cash on hand to live for 3-6 months. Also, if there are any repairs or upgrades you plan to do right away then of course you’ll want to have that reserved as well.
If you can put down 20% and still have 3 months expenses in the bank, then I think you are in great shape and I can’t see why you’d put less down. The more you get that principle paid off the less interest you’ll pay over the life of the loan. I know some people consider the interest rate on their morgage to be so cheap (espeically once you factor in the tax benefits) that they don’t care about paying it…but not me! I want to keep as much money as I can in my pocket, not in the bank’s pockets 😀
Sounds like you are in great shape. Don’t stress too much! If you make a small mis-step that costs you a bit of money don’t beat yourself up…instead learn from it and call that money “tuition”!
Post # 32
I wanted a conventional mortgage which here meant at least 20%, as it doesn’t need to be insured. I know the US is different, I don’t understand what their definition is.
Post # 33
20% is the golden standard, but you can put down less. I don’t see any positives, really, because the tax break you get on interest is going to be way less than you actually pay in interest during the year.
You can get several types of loans with differing degrees of downpayment requirements. A VA loan requires no downpayment at all, but is only open to members of the military. FHA loans require as little as 3%, but new laws mean with an FHA loan, you will pay mortgage insurance for the entire life of your loan (meaning, you own 99% of your house 29 years later, and you’re still paying a couple of hundred dollar insurance premium in case you default on your payments). Conventional and Jumbo Conventional can require as low as 5% as well.
When we bought our home, our mortgage broker suggested avoiding an FHA loan at all costs unless it was the only possible option. The amount of money you’ll waste in mortgage insurance premiums is absurd (they drop off at 20% equity on a conventional mortgage, which is where the 20% downpayment magic number comes from).
Post # 34
First, make sure you can pay not just the mortgage (PI, prinicple and interest) but also the TI (Taxes and insurance). Look up the county/city and find out the property tax rate and divide by 12 and add to your PI. (And this number will go up, so your mortgage will increase yearly) Insurance is harder to calculate. Talk to some friends and see how much they pay to get a good feel.
Also, are you planning on being there for a short or long time. If this is you starter home and you plan to move in the next 5 years, don’t put too much in down payment. You don’t want too much of your liquid funds tied up in your house. If the market crashes again and you go underwater and you lose your job, you want cash in the bank.
Also, what is the appreciation in your area? If house are going up, you can put less down, pay the PMI in the beginning and in a few years refinance once you’ve reached 80% equity. We bought 3 years ago and our house has appreciated enough that we have more than 80% equity.
Also look into Credit Unions in your area. We used Navy Federal CU (and you have to be a member) but NASA Federal CU has the same program–0% down, no PMI and just a funding fee (for NFCU it was 1.75%).
Post # 35
silvergrey: Our mortgage broker gets paid commission on the total mortgage amount I believe but never the less we did double check that his advice was correct with our real estate agents and another person in the industry. Your advice to double check on all of this stuff is absolutely fantastic, I think a lot of people don’t and get into a few problems down the road.
We’re trying to keep housing below 30% of our total income so that if one of us lost our jobs, the other one could cover the mortgage and utilities on their own. My parents got that advice from a bank manager on the first house they built. I’d love to purchase a house at only twice our annual income but sadly that’s just not a hopeful reality given where we live and what we do. Right now, rent is fairly similar to mortgage prices and the market is cooling so that’s a bonus.
Post # 36
I purchased my first home as a single 24 year old woman and put FIVE percent down. Why? Because I was able to negotiate a no PMI mortgage and wanted extra capital on hand for renovations.
How much you should put down varies from buyer to buyer AND house to house – even for the same buyer.
I now have three properties and am generating income from my investments. And I certainly wouldn’t be in the same spot if I had put more into my first down payment instead of keeping cash out to have on hand.
I guess my point is PLEASE don’t listen to what “rule of thumb” says without taking a look at your individual situation. If you can avoid PMI and put down less than 20%, that extra cash may be more useful to you elsewhere – or may not. It’s just SO situationally specific.
Post # 37
jessicabear: I live in Ontario, Canada and if you put down less than 20% here you end up paying tons in CMHC fees for mortgage insurance – I think the rationale behind it is to discourage home buyers from putting down less than 20% so I would say do at least 20% if you can comfortably. We put down 30% on our home which, for us, was an amount we could reasonably put down while still keeping a good chunk in savings because your Boyfriend or Best Friend is right you don’t want to be “house poor” and have all of your money tied up in the house.
Post # 38
jessicabear: At least 20%. Any more you put down is money you won’t have to borrow. Over the life time of your mortgage you’ll p a lot in interest, so assuming you can comfortably afford to, put as much as you can as your down payment.
Post # 39
littlemisshostess: it just hasnt come in yet.
Post # 40
Pollywog: eek!! what awful timing
Post # 41
jessicabear: It honestly was wonderful in retrospect. One of the bedrooms was the color of the “add a comment” button– bright pink. Another was the color of the raisin. I ended up out of work for 17 days and got the enitre house painted and unpacked and then received back pay. So I got paid to paint my new house 🙂 Darling Husband got picked up on a temporary project and then was given permission to return to work before the government was funded. He ended up losing 3 hours worth of pay. We ended up all good, but at the time it was stressful. That is why I am so big on emergency funds!