Advice on downpayment for first home

[blissfulbride]

Hi,

I''m 26, and getting married april 25,2009. We really want to buy a house about a year after the wedding with hopes that his family and mine will give us a nice $ gift. I''m pretty sure we can come up with atleast 20-30k with some serious saving (bonus & taxes). Will something like that be enough for a downpayment? Will the morgage be reasonable on a townhouse going for 250-300,000 ?

Just try to get idea here, because if I try looking it up the sites. they always direct me to call a real estate broker.

 

[LitigatorChick]

What country are you in?

 

[blissfulbride]

Sorry ! lol

I live in brooklyn NY But want to buy a townhouse in staten island

 

[LitigatorChick]

I don''t know what the situation is in the US, but in Canada, you need 20% down or you need to get mortgage insurance which costs a lot and exposes you to more liability. I would recommend coming up with 20% down (assuming the law is the same - again, don''t know).

 

[Tacori E-ring]

Pretty sure you can get a first homeowner''s loan for 10% down still. They change all the time though so who knows what the market will be like in a year. If you are really curious call up a mortgage broker in your area. Do you know your fico scores?

 

[dani13]

BB-

10% is a nice downpayment....Dont forget though, you are going to have to come up with closing costs (probably about 7-8K on a townhome of that price), so add that in to to the $$ you will need to save. If you are not able to come up with a 20% down payment, (which is difficult for 1st time home buyers in this market) then most likely you will need to pay PMI. PMI is a fee that the bank you are borrowing from charges for basically not putting the whole 20% down (they consider you more of a financial risk). Once you talk to a mortgage broker, he/she will go over all the different types of mortgage programs that are out there. IMO, stay away from any of those "interest-only" type loans...they are just bad news.

The best thing to do is just hook up with a good mortgage consultant who can go over all the different types of programs and numbers with you until you and your fiance can find a program and payment that you are comfortable with. Good luck!

 

[blissfulbride]

omg i dont even know what a fico score is. what is that ?

 

[dani13]

Date: 7/2/2008 9:32:27 AM
Author: blissfulbride
omg i dont even know what a fico score is. what is that ?

A FICO score is your credit score. You are entitled to a free credit report once or twice a yr through a few agencies...Maybe someone can chime in and give those links to BB?

Your FICO score will determine what kind of loan programs you and your FI qualify for....

 

[blissfulbride]

oh ok I have an excellect credit report. 750 ! I didnt know it was called fico

 

[dani13]

Date: 7/2/2008 9:37:34 AM
Author: blissfulbride
oh ok I have an excellect credit report. 750 ! I didnt know it was called fico

Well that great, BB!! Hopefully your FI''s is just as good...this way you can qualify for great mortgage programs TOGETHER!!!!!

 

[robbie3982]

Dont'' forget to make sure that you have a significant amount of $ left over after the downpayment and closing costs. You never know what will break and you''ll probably want to do some redecorating, possibly buy some new furniture after you move in.

I think 10% is a very respectable amount to put down. You may be able to get an 80/10/10 loan which would allow you to avoid PMI (I think our PMI on a 183,000 loan is a bit over $100/month). It''s hard to say what your monthly mortgage payment would be because it depends on how much you actually borrow, what the interest rates are and don''t forget to include your homeowners insurance, taxes and PMI (if you have it) in that payment!

For our loan ($183,000 at 6.125%) our monthly payment (including taxes, insurance and PMI) is $1499.01 just to give you an idea. I think rates are a bit higher right now, but it''s impossible to say what they''ll be a year from now.

 

[blissfulbride]

robbie that was very helpful. I have alot of homework to do !

 

[absolut_blonde]

Date: 7/2/2008 8:51:19 AM
Author:blissfulbride
Hi,

I'm 26, and getting married april 25,2009. We really want to buy a house about a year after the wedding with hopes that his family and mine will give us a nice $ gift. I'm pretty sure we can come up with atleast 20-30k with some serious saving (bonus & taxes). Will something like that be enough for a downpayment? Will the morgage be reasonable on a townhouse going for 250-300,000 ?

Just try to get idea here, because if I try looking it up the sites. they always direct me to call a real estate broker.

You can get approved by a mortgage broker quickly online. SO and I did that, just for a ballpark of what they'd give us (we had an idea but wanted something in writing just in case we decide to buy sooner rather than later). We were actually shocked/mildly horrified at how MUCH they approved us for -- far beyond what we could live on comfortably!

Much of it will depend on your salaries and other expenses, too. I'd say in general, I would want to put at least 10% down, preferably 20% (will they even let you buy with 0 down in the US anymore?).

Edited to add: Also keep in mind that most townhouse developments (at least where I live) have condo fees as well. These may or may not cover some of your utilities, but are often $200-300 or even more. So that would have to be factored into your monthly payments too. And then property taxes, etc.

 

[brooklyngirl]

Here's a mortgage calculator if that would help.

mortgagecalc

Have you been out and about going to open houses and looking at property for sale? I'm not sure if the prices you mentioned still exist in Staten Island. Think about talking to a realtor just to get a feel for what's out there. From what I've seen (going by the mortgage calculators) is that for a $300k 30 year fixed rate mortgage, the monthly payment comes to under $2k. I can't find the calculator we were looking at last nigiht, but I think the aim is for the mortgage payments to be no more than 28% of household income.

Also, after looking amortization schedules of different mortgages, on a 30 year mortgage you end up paying 3x the amount you borrowed

.

 

[Independent Gal]

Are you sure you can get a townhouse on Staten Island for 250-300K? I''ve never looked there, but that just seems incredibly low to me for anywhere NYC.

There are lots of calculators you can use to determine your payment and how much you can afford. If you go on bankrate.com, you can find several.

Keep in mind that it''s not just closing costs, condo fees, extra money in case of emergency, and the downpayment that you need to take into account. There are also property taxes.

I just used the bankrate.com calculator, and if you had 25K to put down (leaving nothing for closing fees, emergencies, etc., so hopefully, you''ll scrounge up another 10K for those things), your payment would be $1829 on a 300K home. Just as a rough estimate, your property taxes are likely to be at the minimum about $3000 a year, so add $250 / month. Then say $250 for condo fees (no idea how much those are on a townhouse so that''s a low guess). And you''re looking at $2329/month.

Most financial experts say that housing shouldn''t run you more than 30% of your income, so if the two of you have a combined income of $95,000 or more, you should be OK.

 

[LitigatorChick]

I always worry about the 30% number, since it is generally based upon gross income. I don''t know about you, but a decent chunk of that gross amount doesn''t hit my bank account......

So personally, I would budge on the numbers that you actually use, your income after taxes. And then I can cope with 30%. But just my opinion on the issue.

 

[Independent Gal]

Litchik has a point. I''m not sure whether that 30% is net or gross.

Also, you have to take into account what other expenses you have. For instance, we don''t own a car, nor do we have any non-mortgage debt. Things like that need to be taken into account in figuring out what you can afford.

Always better to underestimate than overestimate. You don''t want to be lying awake at night worrying if you''re going to lose the house, or if you''ll be able to fix the roof.

 

[rockzilla]

I would definitely recommend buying a Suze Orman book to help you start saving and be on the right path for this beforehand. Suze is great about giving financial advice in a way that makes it easier to understand. She understands the financial pitfalls that young people often don''t expect, so she can help you steer clear of them!

 

[Fancy605]

That sounds like a good down payment. A lot of companies will actually give a 100% loan to people with excellent credit, which could be a good option if you plan on only living in a house for the short term 2-3 years. You get to write off all of the interest on taxes anyway, so it''s sort of like renting--only you build a little equity and get a tax break. In my research, I actually found this suggested a lot for people who planned to upgrade quickly. Rather than make a large down payment on a house, several sources suggested paying off other bills that carry a higher interest rate of using the money to purchase furniture or even a car or something that you otherwise might have to finance or something. Of course, payments will be a bit higher, but if you haven''t got any other bills to pay (car, loans, credit cards, whatever) then it may not hurt. It seems to me this is a good option for a small slice of the population that falls into a certain set of criteria.
Of course, if you plan on living in the house for a good long time (as in long enough to pay the thing off), I would think putting down a larger down payment would be better because you''ll end up saving money long term. Plus it lowers monthly payments obviously.
As far as PMI goes (private mortgage insurance) it really isn''t all that bad a thing. It makes up a very small percentage of the monthly payment typically.

Before you decide what option to take, you should think about how long you are going to be in this home and (as others have suggested) what you need to budget for other areas. Once you have those things pretty well solidified, you will be able to better research the best loan options for your situation.

Happy saving!

 

[cara]

Uhh, no money down is what has many people underwater right now. Its all hunky-dory to take out a loan for 100% of the house value and use the "downpayment" money to pay off other debt and closing costs until you NEED to sell the house in a few years in a declining market and have no extra savings lying around to cover your loss. Buying a house with no money down is a risky, highly leveraged position! (especially in certain regions of the country where prices are still droppping/are more volatile)

If you have sufficient savings lying around to cover any loss of value to the house when you need to sell it, then you are in a financial position to take the risk. Or if you can make the payments and never need to move. But otherwise you could end up stuck.

 

[Dancing Fire]

Date: 7/9/2008 6:31:33 PM
Author: Fancy605
That sounds like a good down payment. A lot of companies will actually give a 100% loan to people with excellent credit, which could be a good option if you plan on only living in a house for the short term 2-3 years. You get to write off all of the interest on taxes anyway, so it''s sort of like renting--only you build a little equity and get a tax break. In my research, I actually found this suggested a lot for people who planned to upgrade quickly. Rather than make a large down payment on a house, several sources suggested paying off other bills that carry a higher interest rate of using the money to purchase furniture or even a car or something that you otherwise might have to finance or something. Of course, payments will be a bit higher, but if you haven''t got any other bills to pay (car, loans, credit cards, whatever) then it may not hurt. It seems to me this is a good option for a small slice of the population that falls into a certain set of criteria.

Happy saving!

0% DP got us into this housing mess

tax write off ??? you''ll never come out ahead. for every dollar you paid on interest the avg couple get 30 cents back .

don''t buy a home b/c of write off. stop fooling yourself.

build equity??.... what equity ? look what''s been happening in the pass 4 yrs.

no guarantee that your home will increse in value.

 

[Diamond Confused]

If you put less than 20% down you are likely to have to pay get mortgage insurance. Not sure what the cost of that is but definitly antoher expense to consider

 

[sap483]

Not sure if Bank of America is still running this promotion, but if you''re a customer of theirs they will pay all of your closing costs (minus escrow) and you can put down between 5-10% (depending on your credit score) without paying PMI or having two separate loans. It''s nice to not have two separate loans, because when you do the 80/10/10 you often pay a much higher interest rate on the smaller loan.

 

[Haven]

It''s so great that you''re planning this already. When we decided we wanted to buy a house we contacted a mortgage broker. We gave him our information and asked him to give us a preapproval for the amount for which we would be mortgage-able. This gave us a really good idea of how much we could afford. We had to know our gross monthly income, the amount we''d have for a down payment, an estimate of our credit rating (excellent, very good, etc), and an estimate of how much our monthly taxes would cost.

Then, when we were really serious about buying a house we contacted three different lenders, two were mortgage brokers, and one was a rep from a specific bank. We gave them my social security number, pay stubs, tax info, and a whole slew of information. Then they came back to us with mortgage packages and approvals for a particular amount. It was nice to compare the different mortgages and rates. (We decided that we only wanted to purchase as much as we could afford on my income alone. I earn less than my hubby, and we felt it was the most responsible thing to do for us, rather than stretch and buy something that would be a bit harder for us to maintain.)

We put 20% down on our 350K home. Our yearly taxes are around $7,000, and our mortgage rate is 5.75%. Our monthly payment, including taxes, is just under $2200 for a 280K mortgage. We never asked about putting less than 20% down, so I''m not sure how that works. I do think you have to pay PMI if you do that, though.

Good luck! It''s a great feeling to own a home.

 

[iheartscience]

Date: 8/14/2008 5:57:07 PM
Author: sap483
Not sure if Bank of America is still running this promotion, but if you''re a customer of theirs they will pay all of your closing costs (minus escrow) and you can put down between 5-10% (depending on your credit score) without paying PMI or having two separate loans. It''s nice to not have two separate loans, because when you do the 80/10/10 you often pay a much higher interest rate on the smaller loan.

You have to put down 10% now-I just talked to them a few weeks ago!

 

[movie zombie]

things are changing and $ is getting tighter. loans are getting harder to get and lenders requiring more $ down. you''re ahead of the game by planning ahead. any $ you save will be of great value.

movie zombie

 

[moremoremore]

Sure that's enough for a down payment, but don't forget about closing costs....I actually consider closing costs to not just be technical closing costs since anything that takes money away from me/out of my pocket is a closing cost to me...I would say that depending on the price of the townhome around 300k,

title charges which include mortgage tax ($2000 for required bank and owner policy, mortgage tax in nyc is a b*tch and while I don't know if off hand I'd say count on at least $4000 for mortgage tax...plus recording and bs fees and closer attendance...I'd say safe to assume 8 grand)
your own atty fee (at least a grand)
bank atty fee (at least $750)
escrows at closing - taxes and insurance 2-3 months of each
home owner's insurance you'll need to take out for a year despite escrows
misc bank fees even if you're not paying points (underwriting fee, wire fee, toilet paper fee, pencil fee LOL)
and any taxes due within 90 days of closing must be paid by you and are added to your title bill or if they have been paid by the seller u credit them.

I say have at least 12 thousand available not including if you are paying any points...

 

[indecisive]

Date: 8/14/2008 8:41:13 PM
Author: Haven
It''s so great that you''re planning this already. When we decided we wanted to buy a house we contacted a mortgage broker. We gave him our information and asked him to give us a preapproval for the amount for which we would be mortgage-able. This gave us a really good idea of how much we could afford. We had to know our gross monthly income, the amount we''d have for a down payment, an estimate of our credit rating (excellent, very good, etc), and an estimate of how much our monthly taxes would cost.

Then, when we were really serious about buying a house we contacted three different lenders, two were mortgage brokers, and one was a rep from a specific bank. We gave them my social security number, pay stubs, tax info, and a whole slew of information. Then they came back to us with mortgage packages and approvals for a particular amount. It was nice to compare the different mortgages and rates. (We decided that we only wanted to purchase as much as we could afford on my income alone. I earn less than my hubby, and we felt it was the most responsible thing to do for us, rather than stretch and buy something that would be a bit harder for us to maintain.)

We put 20% down on our 350K home. Our yearly taxes are around $7,000, and our mortgage rate is 5.75%. Our monthly payment, including taxes, is just under $2200 for a 280K mortgage. We never asked about putting less than 20% down, so I''m not sure how that works. I do think you have to pay PMI if you do that, though.

Good luck! It''s a great feeling to own a home.

We are in the process of getting a construction loan and are looking at something like this but I was worried about having that many inquiries on our credit score, as that can have a negative effect. My credit is very good but my husband''s is lower because he doesn''t have much credit history (no credit cards, no debt except 1 of our cars). Did you give them your credit reports and tell them not to do a credit inquiry until you decided which you wanted to go with or did they all do the credit check on their own?

 

[gogosi]

I''m also in Canada and I guess things are slightly different here but not by much. There are lots of calculators out there that will tell you how much you can afford and also if you should be renting or buying. Sometimes, depending on the area you live in and rent rates, you''re better off putting 5-10% down and getting a $2000/month mortgage rather than paying $2000/month rent. Some of these are on Excel Online Templates, if you go to create a new file in Excel there will be a window poping up on the left and one of the options is Templates On Office Online , click on the link and go to "More Template" and then calculators there are all sorts of them. Most banks have them also under their mortage section, what I like about the ones on excel you can save them.

Also, I would suggest the bi-weekely rapid payments vs monthly, it knocks off 3-4 off your mortgage and save about $40,000(based on a $320,000, 25 year mortgage). Another thing that I would sugest when it comes to selecting a mortgage, make sure the lender allows you to either increase your monthly payments or make yearly bulk payments. Those payments go directly against your principal, so early in your mortgage when 60-70% of you payments go towards intrest) you can knock off considerable time and $$$ if you make extra payments. Our lender allows us to do both, 20% monthly and 20% once a year. Since our income increased considerably since we purchased 2 years ago, we uped or our monthly payments by 20% ($400). It''s knocking off around 10 years off our mortgage and $100,000 off intrest. It''s a great option to have, even $50 more a payment knoks off 2 years off your mortgage and about $10,000 off your intrest.

Also, going back to Excel templates, they have great budgeting templates as well. Some of the calculators allow you to see what happens with extra payments and you can manipulate them in any way you want. It''s a great resource that''s free! Hope this helped good luck!

 

[Haven]

Date: 8/15/2008 9:40:23 AM
Author: indecisive

Date: 8/14/2008 8:41:13 PM
Author: Haven
It''s so great that you''re planning this already. When we decided we wanted to buy a house we contacted a mortgage broker. We gave him our information and asked him to give us a preapproval for the amount for which we would be mortgage-able. This gave us a really good idea of how much we could afford. We had to know our gross monthly income, the amount we''d have for a down payment, an estimate of our credit rating (excellent, very good, etc), and an estimate of how much our monthly taxes would cost.

Then, when we were really serious about buying a house we contacted three different lenders, two were mortgage brokers, and one was a rep from a specific bank. We gave them my social security number, pay stubs, tax info, and a whole slew of information. Then they came back to us with mortgage packages and approvals for a particular amount. It was nice to compare the different mortgages and rates. (We decided that we only wanted to purchase as much as we could afford on my income alone. I earn less than my hubby, and we felt it was the most responsible thing to do for us, rather than stretch and buy something that would be a bit harder for us to maintain.)

We put 20% down on our 350K home. Our yearly taxes are around $7,000, and our mortgage rate is 5.75%. Our monthly payment, including taxes, is just under $2200 for a 280K mortgage. We never asked about putting less than 20% down, so I''m not sure how that works. I do think you have to pay PMI if you do that, though.

Good luck! It''s a great feeling to own a home.

We are in the process of getting a construction loan and are looking at something like this but I was worried about having that many inquiries on our credit score, as that can have a negative effect. My credit is very good but my husband''s is lower because he doesn''t have much credit history (no credit cards, no debt except 1 of our cars). Did you give them your credit reports and tell them not to do a credit inquiry until you decided which you wanted to go with or did they all do the credit check on their own?

We were worried about this, too, but we went ahead with it because we were more concerned with getting a good mortgage. Each lender did run a credit check, they refused to use one we provided and told us that it was policy that they had to run them. My score varies among the three agencies, but I did not see a difference between the first report and the third report that was run. I think each time I had one around 74, one around 780, and one in the 790s. I have no idea what they mean, but our mortgage broker told us that I had "excellent" scores, which is all we cared about, because that affected our rate. Hubby''s scores were higher than mine, but I took out the mortgage alone so that didn''t matter, and our broker assured us that we wouldn''t get a better rate if we included his name on the mortgage because my scores were high enough.

The whole mortgage industry is a big, confusing, murky world to me. We did a lot of research and I''m still not sure if we got the best deal possible.

Good luck purchasing your home!