Down Payment for house

Discussion in 'Teacher Time Out' started by silverspoon65, Jul 7, 2009.

  1. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 7, 2009

    I talked to my mortgage lender today - she was taking more information and will call me tomorrow, hopefully, with the verdict. (getting pre-approved, so just want to know what range we can even look in).

    She asked what we had available as a down payment, and I said - nothing. We haven't been able to save any money because of high rents. I told her we would just roll that into the mortgage.

    She said 3.5% is typically required for a down payment and that the days of totally financing a home are over.

    Has anyone else bought a house recently and found this to be true? We are both first time home buyers and people have already said "Ohh, no, don't worry, you don't need a down payment if its your first home..." So which is true? Has the economy changed that rule? Should I call another bank?
     
  2.  
  3. smalltowngal

    smalltowngal Multitudinous

    Joined:
    Jan 2, 2007
    Messages:
    17,362
    Likes Received:
    46

    Jul 7, 2009

    Well we bought our house 3 years ago and we didn't have any money down, nor did we pay closing costs as the sellers paid it for us.
     
  4. Aliceacc

    Aliceacc Multitudinous

    Joined:
    Apr 12, 2006
    Messages:
    27,534
    Likes Received:
    6

    Jul 7, 2009

    I think that a good part of our financial problems are based on people who bought homes without a downpayment. Not people like you, but people who should never have been looking at houses in the first place.

    I think the days of $0 down are long gone.

    eta: WE, too, had to put down 10% And anyone who put down less than 20% also needed PMI. And closing costs were another $10,000 or so.
     
  5. INteacher

    INteacher Aficionado

    Joined:
    Aug 3, 2007
    Messages:
    3,765
    Likes Received:
    1

    Jul 7, 2009

    When we bought our first home about 20 years ago the going rate for a down payment was 10%!!! And yes, we had to have it in the bank and if I remember correctly the mortagage company even checked to make sure the 10% wasn't put in all at once indicating that maybe it was borrowed money. But, that was back in the day when it really was difficult buying your first house. Since then, we have bought and sold many houses, made profits and used the profits for down payments. So, we have always had a down payment. I really guess I thought that was the norm???
     
  6. Jem

    Jem Aficionado

    Joined:
    May 7, 2008
    Messages:
    3,544
    Likes Received:
    0

    Jul 7, 2009

    I'm facing this same problem, silver. We have some cash, and have been socking money into a 401k that we can pull from if needed. Our inlaws have also offered some money. But we were approved for way more than we want to offer, so the less we have to put down, the better. Our mortgage lender wants to know exactly how much we have to put down right now, before we've put in an offer and had it accepted. I don't really want to lay a number out there right now-apparently you have to have it all liquid in your account before they will officially officially approve you (we're only pre-approved right now). If we liquidate it and don't end up using it all, that stinks. Or what if we don't liquidate enough?

    I know that's a bit different than not having anything at all, but it's still an issue with the whole downpayment thing. Blech. I've gotten an ulcer today with all the stress. I feel your pain.
     
  7. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 7, 2009

    I guess the good news is we can probably borrow it from his mom. 3.5% isn't too bad. I have just been told for the past 5 years that I should buy buy buy, don't worry, you don't need a down payment! Guess that's just not true anymore.
     
  8. MrsTeacher2Be

    MrsTeacher2Be Companion

    Joined:
    Jun 9, 2008
    Messages:
    208
    Likes Received:
    0

    Jul 7, 2009

    We've been pre-approved for a mortgage with no down payment. We actually have about $20,000 we could put down, but we're getting a USDA loan (must be first time home buyer, only in certain areas, has lower interest rates, and does not require mortgage insurance). Due to the significantly lower rates and not having to get mortgage insurance, not putting any money down our payments will be 100 a month more than if we did put $20,000 down. Our mortgage officer advised us not to put down so we could get the USDA loan and to use the $20,000 for any repairs and to pay extra on the loan so we can pay it off faster.

    I would definitely ask your mortgage broker about a USDA loan or maybe an FHA loan (not sure about all of its specifics).
     
  9. TeacherNY

    TeacherNY Maven

    Joined:
    Apr 29, 2008
    Messages:
    5,135
    Likes Received:
    1,551

    Jul 7, 2009

    We bought our house 4 years ago and had about $20,000 to put down. We ended up only putting 12,500 down and saving the rest for closing costs.
     
  10. JustT

    JustT Comrade

    Joined:
    Mar 21, 2008
    Messages:
    342
    Likes Received:
    0

    Jul 7, 2009

    Don't forget the tax break if you purchase your first home by December 2009.

    I'm looking for a mortgage also and I'm running into the same thing. I think the last mortgage broker I spoke to hinted about the amount I needed for a down payment before he would proceed with all the paperwork. I need about 5k :cough: :cough: and I'm trying to decide what I want to dip into. :(
     
  11. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 7, 2009

    I know, that's why we want to buy now.

    Guess we are going -a-begging. We were considering asking DBF's DM for the $$$ for the whole house - she def. has it... But then she is involved.... ugggg. lol
     
  12. RainStorm

    RainStorm Phenom

    Joined:
    Aug 23, 2005
    Messages:
    4,377
    Likes Received:
    809

    Jul 7, 2009

    silver,
    If the downpayment is a gift, that will work, but if it is a loan, it adds to your current debt load, and will not help you the way you think when it comes to a mortgage. (And yes, they do look to make sure a lump sum of money doesn't just show up in your account, and if it does, they ask for a written "explanation" -- that it is liquidation of other funds, a gift, or a loan from somebody. If it is from mom or MIL, they usually will want a letter explaining the terms for the loan, and it will affect your debt load.
     
  13. MsMar

    MsMar Fanatic

    Joined:
    May 16, 2007
    Messages:
    2,771
    Likes Received:
    53

    Jul 7, 2009

    I know someone here in PA buying a house this summer and she had to borrow against her 401K in order to get the down payment she needed. I can't imagine she'd take the penalties of taking money out of a 401K if she didn't have to.

    Although the tax credit for this year is a great reason to buy, you could also consider living in a cheap, small apartment for a year and save up some money for your own down payment, if going a-begging is something you'd rather not do.
     
  14. RainStorm

    RainStorm Phenom

    Joined:
    Aug 23, 2005
    Messages:
    4,377
    Likes Received:
    809

    Jul 7, 2009

    Debt-to-income ratio -- that was the term I was looking for. If you borrow the down payment with a conventional loan, it will increase your debt-to-income ratio and might prevent you from even getting a loan.

    Make sure you look into an FHA loan -- because they allow a higher debt-to-income ratio and are usually okay with borrowing the down payment. Many conventional plans want to make sure the deposit is "your" money, because that tells them that you have something to lose, so you aren't as likely to default.
     
  15. Jem

    Jem Aficionado

    Joined:
    May 7, 2008
    Messages:
    3,544
    Likes Received:
    0

    Jul 7, 2009

    Rainstorm, you are correct that an FHA allows you to borrow the downpayment. That is what made it attractive to us. We would still pay our in-laws back, but legally it would be a 'gift'.
     
  16. RainStorm

    RainStorm Phenom

    Joined:
    Aug 23, 2005
    Messages:
    4,377
    Likes Received:
    809

    Jul 7, 2009

    This is just me personally, but I waited until I had $20,000 in cold hard cash for the downpayment, and another $5,000 in the bank for contingencies -- losing a job, having a major repair, etc. It meant living a simpler life -- no vacations, a used TV, no new furniture (all hand-me downs), no frills -- and I had to do that for a few years before I had it saved, but you'd be amazed what you can do when you put your mind to it.

    I had to wait a little longer than I wanted -- I think I was 26 when I bought my house (I was just finishing grad school) and I made sure I paid for my education as I went so I didn't have any loans to pay off.

    Then again, I'm an odd duck financially. I have a strict "no credit" policy. Except for the house and a car, I do not use any credit -- no credit cards, no "buy now, pay later." Even my so-called "credit cards" in my wallet are really debit cards that come directly out of my savings and checking account respectively. I do have one other credit card, because I needed it to build a credit record, but I pay it off immediately.

    My grandma always told me "if you can't pay cash for something, you don't really need it." I've tried to live by that.

    Now, I did have to refinance my house to pay off some extraordinary medical bills about 10 years ago, but I will still own it outright way before retirement.

    Consider downsizing your life -- it can almost be a fun game, to try and have fun while saving money -- and get a down payment and some rainy day money put away.

    Good luck in getting your first house.
     
  17. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 7, 2009

    I would prefer to rent and save - I just think the market is too good now, and it won't stay this way.
     
  18. JaimeMarie

    JaimeMarie Moderator

    Joined:
    Jul 13, 2005
    Messages:
    10,120
    Likes Received:
    0

    Jul 7, 2009

    You need 3.5% if you go with an FHA loan. If you go with Fannie Mae (sp) than I think you only need 3%. Total financing is gone out the window as far as I know.

    I coached and put aside a few 100 a month to get 6000 for a down payment. It took me a year.
     
  19. JaimeMarie

    JaimeMarie Moderator

    Joined:
    Jul 13, 2005
    Messages:
    10,120
    Likes Received:
    0

    Jul 7, 2009

    Just thought of something. There was some where saying you could use the 8000 the gov. is giving first time home owners as the down payment. I don't know where I read that. Ask your relator.
     
  20. Ima Teacher

    Ima Teacher Maven

    Joined:
    Oct 25, 2005
    Messages:
    5,955
    Likes Received:
    1,449

    Jul 7, 2009

    My mortgage broker told me that I could get a better interest rate if I had a larger downpayment. All of the lenders he used required a minimum of 10% down. Of course, that was 9 years ago, too.
     
  21. JaimeMarie

    JaimeMarie Moderator

    Joined:
    Jul 13, 2005
    Messages:
    10,120
    Likes Received:
    0

    Jul 7, 2009

    The mortage broker I went to said that FHA is better now than conventional. We asked if we had 30,000 to put down if it was better than having just the 3.5%. She said no.
     
  22. janlee

    janlee Devotee

    Joined:
    Aug 22, 2003
    Messages:
    1,157
    Likes Received:
    9

    Jul 7, 2009

    This is the best advice for anyone contemplating buying a home. Two couples I personally know went into homes with nothing down and nothing saved. Within 6 months they had almost $25,000 in credit card debt due to unforeseen items popping up. I've built and sold 5 homes. I wouldn't even consider selling to anyone without a down payment.
     
  23. swansong1

    swansong1 Virtuoso

    Joined:
    May 19, 2007
    Messages:
    6,740
    Likes Received:
    1,696

    Jul 7, 2009

    I, too, live credit free. We paid everything off when an inheritance came in because we want to be able to retire in 5 years. Now, if some kind soul would please buy my house (close to the beach, year round good weather, excellent school, family area, sidewalks, Walmart 1 mile away, hiring more than 100 teachers this year :whistle:) we could get out from under that debt, also. We were able to buy with no money down about 5 years ago, I don't know anyone who can do that now.
     
  24. giraffe326

    giraffe326 Virtuoso

    Joined:
    Jan 2, 2006
    Messages:
    7,075
    Likes Received:
    15

    Jul 7, 2009

    The last I knew, FHA loans require the smallest percentage down- and it is 3.5%. The ONLY way you can get 100% financing is to buy a HUD foreclosure.
    At least this was the case when I purchased back in November. Most require 20% down.
     
  25. JustMe

    JustMe Virtuoso

    Joined:
    Jun 7, 2006
    Messages:
    7,946
    Likes Received:
    3

    Jul 7, 2009

    We built a year and half ago, which I know is a little different, but not a word was ever said about any type of down payment. We had saved around $50K up for the house, and the bank of course knew we had this in our savings, plus we had bought the land two years prior and paid that off in a year or so, and that was just under $30K...I suppose that's like our down payment.

    I hate debt, as does my husband, so we pay at least double the house payment every month and will continue do so as long as his job isn't impacted by the economy (which could happen). I say this because I understand the desire to take advantage of the market, but I would not feel comfortable buying a house with nothing down and nothing saved. Debt is such a heavy burden. (Our home is our only debt, and it still weighs heavily on us.)

    Good luck!
     
  26. RainStorm

    RainStorm Phenom

    Joined:
    Aug 23, 2005
    Messages:
    4,377
    Likes Received:
    809

    Jul 7, 2009

    For an FHA loan, it is 3.5 percent as a downpayment. If you are looking at a $150,000 house, then that is $5,250. But you still need to have money in your savings. If that $5,250 is all the savings you have, period -- then you really aren't in the position to be a home-owner right now. The first unexpected major expense (of which, there will be many) will wipe you out, and the next thing you know, you will be in foreclosure. This is why mortgage companies check the debt-to-income ratios, and check how much savings you have, so closely.
     
  27. RainStorm

    RainStorm Phenom

    Joined:
    Aug 23, 2005
    Messages:
    4,377
    Likes Received:
    809

    Jul 7, 2009

    When you shop for a mortgage or other loan, one of the key factors a lender takes into consideration before granting approval is your debt-to-income ratio. This is the ratio between how much you owe each month on personal debt and how much you earn. This ratio calculates the percentage of debt you are carrying in relation to how much money you are making and gives lenders a good indication of how much additional debt you’ll be able to handle.

    The arithmetic
    In order to make the calculation, add up your fixed monthly expenses such as your car payments, minimum credit card payments and any other regular debt obligations such as monthly child support or student loans (you don’t have to include bills for things such as groceries or utilities). Add your expected housing payments (your mortgage payments plus, for example, private mortgage insurance, homeowner’s insurance and property taxes) and divide the total by your gross monthly income.

    Standard rule of thumb
    A common rule when shopping for a mortgage is that your debt-to-income ratio should be no higher than 36 percent. Anything above this could mean youÂ’ll be denied credit or charged a higher interest rate on your loan. Lenders also like the total of your housing expenses alone to not exceed 28 percent of your monthly gross income.

    Exceptions to the rule
    Some lenders will accept loans even if your ratio is above 40 percent, and there are certain mortgages that allow a higher percentage as well. Federal Housing Authority mortgages and Veterans Administration mortgages, for example, allow a debt-to-income ratio of up to 41 percent. With any loan, however, you need to be sure you are comfortable with the amount of debt you are accumulating. Keep in mind, the lower your debt-to-income ratio the better, so pay down as much debt as you can before starting the mortgage process.

    Use the following worksheet to calculate your debt-to-income ratio:

    Minimum monthly credit card payments*: _____________
    + Monthly car loan payments: _____________
    + Other monthly debt payments: _____________
    + Expected mortgage payments: _____________
    = Total: _____________
    Your debt-to-income ratio:
    Total · monthly gross income = _____________

    *Your minimum credit card payment is not your total balance every month. It is your required minimum payment -- usually between two and three percent of the outstanding balance.
     
  28. cMcD

    cMcD Groupie

    Joined:
    Aug 3, 2007
    Messages:
    1,214
    Likes Received:
    0

    Jul 7, 2009

    We closed on our house 2 weeks ago. We're both first time home buyers. I haven't heard anything about not putting anything down. I put 10% down on the house. My SO doesn't have anything in savings so it was all on me. The thing to know is that if you don't put at least 20% down you'll have to pay mortgage insurance-- it comes out to be like $30 a month for us.

    I don't know about his mom lending you the money... My parents "gifted" me about $3,000 to help with the down payment, BUT I had to put down at least 5% first. So her lending you the money won't work out because your lender will be watching your bank accounts for such situations. But this is for my lender (a teacher credit union) and the type of loan we got.
     
  29. cMcD

    cMcD Groupie

    Joined:
    Aug 3, 2007
    Messages:
    1,214
    Likes Received:
    0

    Jul 7, 2009

    I don't think you can use the $8,000 tax credit as the down payment because you can't file the amendment until you purchase the home and you need to pay the down payment before purchase...
     
  30. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 7, 2009

    The banker actually told me we could use a "gift" to make the down payment.
     
  31. cMcD

    cMcD Groupie

    Joined:
    Aug 3, 2007
    Messages:
    1,214
    Likes Received:
    0

    Jul 7, 2009

    That's good... with my lender I had to have 5% before they would accept a gift as part of my down payment.
     
  32. Jem

    Jem Aficionado

    Joined:
    May 7, 2008
    Messages:
    3,544
    Likes Received:
    0

    Jul 7, 2009

    On FHA loans, there is no limit for the gift-you don't need any money of your own before you get the gift. We thought we'd have to do the entire thing in a gift, and our mortgage person said we'd be fine. We're finding we can do about a 1/3 ourselves, but it still won't be 5%.

    If you use a Redfin realtor, silver, you can get half your closing costs back and you can apply it to your closing costs. Look at www.redfin.com. We've decided to do our offer through them-we found the house on our own, so we don't think we should have to give all that commission to a realtor. Redfin splits the commission with you and gives you a check or applies it to your closing costs-your choice.
     
  33. giraffe326

    giraffe326 Virtuoso

    Joined:
    Jan 2, 2006
    Messages:
    7,075
    Likes Received:
    15

    Jul 7, 2009

    Very good advice.

    I was just wondering the other day how a year ago right now, I was credit card debt free with $9000 in the bank. I am now in $5K cc debt with $2000 in the bank :eek: :eek: :eek:
    I did buy a foreclosure (in November) and it required about $6K in repairs. Plus the $1K it cost to move, the $2K to the plumber I paid two weeks ago, the $900 to the air conditioner repairman, etc... Home owning is expensive!
     
  34. MissWull

    MissWull Cohort

    Joined:
    Oct 25, 2006
    Messages:
    721
    Likes Received:
    0

    Jul 7, 2009

    Even if you bought a new construction home? Would the savings still matter as much?
     
  35. smannes

    smannes Companion

    Joined:
    Jul 25, 2007
    Messages:
    200
    Likes Received:
    0

    Jul 8, 2009

    I bought a house 3 months ago and we didn't put anything down and didn't have to pay PMI. Good thing my DH was in the military (many years ago). We got a VA loan. Oh yeah, and it was new construction.
     
  36. giraffe326

    giraffe326 Virtuoso

    Joined:
    Jan 2, 2006
    Messages:
    7,075
    Likes Received:
    15

    Jul 8, 2009

    Savings is still important, even with new construction. My house is only 6 years old and I have sunk about $14,000 into it since closing- none of which was for furniture or anything like that.
    You typically have a warranty for 1 year with new construction, then you are on your own. A friend of mine bought his house brand new 3 years and has had problems- all occurring right after the year was up. The water heater and stove both died (already!) among other things.
    There are other things that still need to be done, but until I win the lottery..............
     
  37. Hoot Owl

    Hoot Owl Aficionado

    Joined:
    Jan 15, 2008
    Messages:
    3,888
    Likes Received:
    0

    Jul 8, 2009

    When were going to move and sell our house, our Realtor told us the buyer was going to use $8000 first home buyer money and the city had received gov. STIMULUS money to use for her down payment! Check it out.
     
  38. Maryhf

    Maryhf Connoisseur

    Joined:
    Jul 28, 2006
    Messages:
    1,610
    Likes Received:
    52

    Jul 8, 2009

    Rainstorm gives very sound advice! Listen to her if possible but you can succeed without having all your ducks in a row. We relocated 11 years ago with too much debt accumulated while I was a SAHM and DH was commuting. With some help from my parents for the down payment, and seller's help for closing costs, we bought a small house. This spring, I fell in love with a bigger house and within 2 weeks we had the bank financing in place and had purchased it. Again, no preplanning. Here's what we did right: we lived in that little house and didn't make any major improvements until we had paid off debts and could afford to make it better. I worry about the young couples on House Hunters who spend lots of money making their houses into showcases. Our parents were the wise ones - they didn't have things until they could afford them.
     
  39. 1stesl

    1stesl Rookie

    Joined:
    Sep 23, 2006
    Messages:
    75
    Likes Received:
    0

    Jul 8, 2009

    I just bought my first house at the end of May. I had no money for a down payment....I rolled my closing costs into the loan. And somehow, I actually got money back at closing! Plus the money I did put into escrow.....the check never got cashed, so I got that money back as well! I did pay for a home inspection and got a small loan to cover that and the escrow....which i paid back with the money I got back at closing. I have a low interest rate and no pmi. My mortage payments are $100 less a month than what I was paying in rent! And since my homeowners insurance is in my mortage payment...my bill that way is less too. I have spent money on things I wanted to do for the house and bought a new frig....but I got it at sears...no interest for a year, and hope to have it paid off by then. So yes, it is still very possible to buy a house for no money down! Good luck to you and happy house hunting!!!
     
  40. scooter503

    scooter503 Comrade

    Joined:
    May 27, 2008
    Messages:
    392
    Likes Received:
    1

    Jul 8, 2009

    My hubby and I just started building a week and a half ago. I know construction loans are different, but almost every bank I called required 20% down (six months ago that number was half). Some banks are even raising their requirement to 40%!!! Luckily, we found a bank that was more flexible...I think we put just over 10% down on the construction loan. We've been saving since we got married...even spent 22 months living with my sister and BIL (bless their hearts). Of course, I spent most of that time looking for full-time employment and there was one year in there where my husband was looking for work as well.
     
  41. silverspoon65

    silverspoon65 Enthusiast

    Joined:
    Aug 3, 2007
    Messages:
    2,403
    Likes Received:
    1

    Jul 8, 2009

    Well, we just got pre-approved for $30,000 - $50,000 more than the asking prices we are looking for. BUT we still need the 3.5% plus closing. That will come from his mom, I guess. At least we can start looking...
     

Share This Page

Members Online Now

  1. SaraFirst,
  2. Substitutemw,
  3. tuankiet153,
  4. miss-m
Total: 284 (members: 4, guests: 252, robots: 28)
test