How to buy a house with no money down?

[Independent Gal]

Date: 5/12/2008 12:33:46 PM
Author: sumbride

Date: 5/12/2008 5:07:13 AM

Author: Dancing Fire

Date: 5/9/2008 8:46:17 PM


Author: robbie3982




The sad truth is that for many people 20% down on a first home isn't a possibility. By the time we would've been able to save enough for 20% down AND a large enough emergency fund, what we'd saved would no longer have been enough for 20% down!

why not?

my grandparents did,my parents did,i did.


the sad truth is that people with no money down cause this housing mess that we see today.if my english were better i would write in detail explainning to you what cause this housing bubble.

My parents' house cost $30k. Mine cost $275k and is about half the size. My down payment, if I'd had 20%, would have paid for their house almost twice, yet they had a 30 year mortgage. See the difference? Wages have not gone up (by age group) to make up the difference in housing prices. Proportionally it is still a significant stretch. Situations are different for different people and there is no way to say 'well, I did it so you should be able to...' The judgment is up to the individual and their lending group.

Just to echo this, its not an even inflation, . My parents bought the house I grew up in for four times their income when they were my age. The same house now costs FOURTEEN times my income, for the same kind of 'entry level' professional job.

So that's why our parents and grandparents had an easier time putting down a large downpayment than we do.

Still, I bought my condo with about 30% down. Took me 8 years of saving / lucky investing to get there, though.

My condo cost about 5.5x my income. Just for comparison, it's a tiny 1 bedroom. I could never raise kids here. My parents were able to buy a large 4 bedroom house in a very desirable neighborhood for a lesser percentage of their income.

Housing markets here and where I grew up are comparable, btw.

So when you ask "why not?" that is why not. I will never NEVER be able to afford a home as nice as the one I grew up in, even though I make way more money than my parents did until recently.

 

[applequeen]

I''m a late comer to this disucssion but I wanted to add another voice for the young couples that bought a house without 20%. My husband and I will close on our first house next week (yey!). We are putting only 5% down and we know we''ll have to pay mortgage insurance due to that but we''re planning to pay extra on our payment each month to reach that point fairly quickly (basically instead of putting the $ in savings for the house we''ll put it towards the mortgage). Now I know that this isn''t ideal and it would have been better to wait but we really needed (and yes wanted) to move.

To be honest, we live in a low cost of living area where the housing market has remained stable (housing prices weren''t inflated to start with). We''re purchasing our house for $125,000 (3 bed 2 bath with a huge yard in a great location... it''s not a huge house but it''s not tiny either... 1500 sq ft). Our downpayment will only be around $6300 be we also have around $5000 to put towards closing costs and moving expenses. My husband has been a full time student until recently (he started his new job last week... the same day we made our offer). During the time he was in school we were able to budget and to save quite a bit. We would have had more $ for a downpayment had we not contributed the max to our ROTH accounts this year ($4000 each). We could have withdrawn enough from our ROTH accoutns to reach a 20% downpayment but chose not to... obvously it''s worth more there than in our mortgate. Our mortgage payment (and related taxes) will be around $1000 ($740ish mortgage plus taxes) a month which we are comfortably able to afford while still maintaining an acceptable debt to income ratio.We were able to get a 30 year fixed rate mortgate at 5.85%

So anyway... my point is that in some cases it''s not the worst thing in the world to go ahead and buy the home if you are able to afford it. I feel that my husband and I are financially responsible people and while our 5% downpayment isn''t ideal we have a plan (and the means) to deal with it. I do think it''s important to not overspend though. We could "afford" a much larger and much more expensive house but we chose to buy one that can be ours sooner rather than later. Our goal it to pay off the house in 10 years. I just think people need to take a hard look at their financial situation and decide if it''s a smart move for them. Obviously if we lived in a high cost of living area we probably would not be able to afford a home just yet.

 

[movie zombie]

Date: 5/13/2008 3:00:48 AM
Author: Dancing Fire
MZ
remember what i posted 3 yrs ago?

i said,within the next few yrs... we will see the biggest mortgage default in history....and now, here we are 3 yrs later.

and.....IO sub-prime loans took this housing market to the stratosphere and it will bring it back down to reality.

Hmmm....maybe DF ain't so DUMB as people think.

i remember our getting beat up for taking that position!

people still don't get it: houses are more expensive now but wages are higher. it wasn't easy for our parents...or us for that matter.....to save to come up with a down payment [eta: whether that down payment was 5% or 20%] , but we did it. the industry was regulated and there were standards to underwriting. people used to raise families in homes of 1000 square feet or less....and were happy to do so because they were in their own home. people bought a home and lived in it until they died, handing that home down to their children. and some people didn't buy a home until they were in their 40's because it took that long to save money. and i knew many people that opted to not have an engagement ring but to put that $ into a house deposit.

deregulation and the idea that homes were ATM's and/or a way to make money and step up to a newer and bigger home within 3-5 years helped to create that bubble and the problems we've got now. the industry needs to be regulated and consumers need to live within their means. no where is it written that one has the right to own a home. it has always been part of the american dream to work towards.

movie zombie

eta: underwriting is supposed to assess the ability to afford a home. being able to afford a home used to mean having a deposit and the means to make a monthly payment AND still have savings for a rainy day. i believe the industry also looked at the home market as a cash cow and milked the buyers for every cent they could when they abandoned good underwriting practices and authorized so-called creative loans.

 

[butterfly 17]

It is really hard nowadays to save 20% for a new home. My parents were able to pay their house in full in 1978, but it was only $17k, so it is nothing compared to what home prices are today.

When we bought our first home, we only had 10% to put down. We paid $330K for it in 2002. It would have taken us another 2 years to save the other 10% to put a full 20% down.

I just so happens that in the same 2 years, the value of the house went up to $380K. So, in essence, I would have to come up with an additional $10K on top of the 10% that I would have saved, otherwise, I would not be able to put 20% down to purchase the house at the higher price.

That would have meant waiting at least another 6 months to save that money(remember also, that all that time I would also be paying rent), and then what if the price of the house was even higher at that point. It would be a never ending saga of trying to save 20% only to find out that the house is even more money.

Also, in those two years, I would have had the potential equity of 50K since the value was now $380K, so to me, it would have been about the same. 33K (10%) plus 50K would make the equity 83K by 2004, if I had purchased the house in 2002. If I bought the house in 2004 for 380K, I would have only $76K in immediate equity from the initial 20% that I put down.

Think about that as well, buy a house now with 10% down at 330K or in 2 1/2 years with 20% down but at 380K. Which makes more sense?

I wound up selling my house last year and sold it for $470K. I was in it for 4 years and 8 months. I actually sold my house for a less than the market value because I wanted to purchase another house. I was able to put 20% on the new house thanks to the sale of my old house.


Who knows if I had waited to save the whole 20% if I would even have been able to save it anyway. Things happen, life changes and goes on.

I am happy that I decided to purchase my house when I did as it just worked out for me in the end.

Oh, as far as PMI, you can actually have that removed. I did that when I refinanced a year after I bought the first house. I had the bank reappraise the house and because it was now valued at a higher amount, they removed the PMI payment. I just had to pay the appraisal fee.

 

[UCLABelle]

Robbie-Thanks for clarifying....I do know not all are ARM, however, nearly 100% of those I know who bought with no down do have ARMs...for obvious reasons.

 

[movie zombie]

PMI is removed upon request and proof of having 20% principle paid on a loan. a refi with a higher appraisal made those numbers happen. not having to pay PMI reduces one''s payment by a considerable amount.

movie zombie

 

[Independent Gal]

Date: 5/13/2008 11:17:06 AM
Author: movie zombie

Date: 5/13/2008 3:00:48 AM

Author: Dancing Fire

MZ

remember what i posted 3 yrs ago?

people still don't get it: houses are more expensive now but wages are higher. it wasn't easy for our parents...or us for that matter.....to save to come up with a down payment [eta: whether that down payment was 5% or 20%] , but we did it.

 

[Independent Gal]

I agree with most of what you are saying above except, as I noted above, salaries have nowhere near kept pace with the rise of house prices. As I mentioned above, where I grew up, the home my parents bought cost 4 times their income. It now costs 14 times the income for a similar job.

Sure, the income for that job is much higher than it was 30 years ago, but it is nowhere near the same percentage higher as the house is.

And again, I DID save the 30% downpayment through equal parts sweat, sacrifice and...uh, sheer dumb luck. But I understand why others have trouble doing so. It really is NOT the same as our parents generation. My parents say that thy can't believe how much harder things are for us than they were for them at the same age.

 

[Dancing Fire]

Date: 5/13/2008 11:14:23 AM
Author: applequeen
I''m a late comer to this disucssion but I wanted to add another voice for the young couples that bought a house without 20%. My husband and I will close on our first house next week (yey!). We are putting only 5% down and we know we''ll have to pay mortgage insurance due to that but we''re planning to pay extra on our payment each month to reach that point fairly quickly (basically instead of putting the $ in savings for the house we''ll put it towards the mortgage). Now I know that this isn''t ideal and it would have been better to wait but we really needed (and yes wanted) to move.

To be honest, we live in a low cost of living area where the housing market has remained stable (housing prices weren''t inflated to start with). We''re purchasing our house for $125,000 (3 bed 2 bath with a huge yard in a great location... it''s not a huge house but it''s not tiny either... 1500 sq ft). Our downpayment will only be around $6300 be we also have around $5000 to put towards closing costs and moving expenses. My husband has been a full time student until recently (he started his new job last week... the same day we made our offer). During the time he was in school we were able to budget and to save quite a bit. We would have had more $ for a downpayment had we not contributed the max to our ROTH accounts this year ($4000 each). We could have withdrawn enough from our ROTH accoutns to reach a 20% downpayment but chose not to... obvously it''s worth more there than in our mortgate. Our mortgage payment (and related taxes) will be around $1000 ($740ish mortgage plus taxes) a month which we are comfortably able to afford while still maintaining an acceptable debt to income ratio.We were able to get a 30 year fixed rate mortgate at 5.85%

So anyway... my point is that in some cases it''s not the worst thing in the world to go ahead and buy the home if you are able to afford it. I feel that my husband and I are financially responsible people and while our 5% downpayment isn''t ideal we have a plan (and the means) to deal with it. I do think it''s important to not overspend though. We could ''afford'' a much larger and much more expensive house but we chose to buy one that can be ours sooner rather than later. Our goal it to pay off the house in 10 years. I just think people need to take a hard look at their financial situation and decide if it''s a smart move for them. Obviously if we lived in a high cost of living area we probably would not be able to afford a home just yet.

AQ...congrat
yep, sure sounds like you and your husband are very financially responsible people.

for people that max out their ROTH IRA .

 

[butterfly 17]

I forgot to add that I live in NY and prices here are ridiculously ridiculous. There is no such thing as purchasing a home in my neighborhood for under 450k and they would be townhomes, not even semi-detached homes.

The house I sold for $470k was a semi-detached home.

I also live in Staten Island, which is much cheaper than the other boroughs. If I had to buy even a townhouse in Brooklyn or Queens, even with the slow market, it would cost me a minimum of $700K and that would be in not such a great neighborhood.

 

[Dancing Fire]

Date: 5/13/2008 11:17:06 AM
Author: movie zombie

Date: 5/13/2008 3:00:48 AM
Author: Dancing Fire
MZ
remember what i posted 3 yrs ago?

i said,within the next few yrs... we will see the biggest mortgage default in history....and now, here we are 3 yrs later.

and.....IO sub-prime loans took this housing market to the stratosphere and it will bring it back down to reality.

Hmmm....maybe DF ain''t so DUMB as people think.

i remember our getting beat up for taking that position!

people still don''t get it: houses are more expensive now but wages are higher. it wasn''t easy for our parents...or us for that matter.....to save to come up with a down payment [eta: whether that down payment was 5% or 20%] , but we did it. the industry was regulated and there were standards to underwriting. people used to raise families in homes of 1000 square feet or less....and were happy to do so because they were in their own home. people bought a home and lived in it until they died, handing that home down to their children. and some people didn''t buy a home until they were in their 40''s because it took that long to save money. and i knew many people that opted to not have an engagement ring but to put that $ into a house deposit.

movie zombie

oh yes,we (household of 5) grew up in a 1000 sq ft home. and... you know whats funny?....i get to hear our daughters complaining that our 2350 sq home is too small. i ask them....would you rather live in your grandpa''s 1000 sq ft house? todays kids

 

[applequeen]

Date: 5/13/2008 12:05:10 PM
Author: Dancing Fire

Date: 5/13/2008 11:14:23 AM
Author: applequeen
I''m a late comer to this disucssion but I wanted to add another voice for the young couples that bought a house without 20%. My husband and I will close on our first house next week (yey!). We are putting only 5% down and we know we''ll have to pay mortgage insurance due to that but we''re planning to pay extra on our payment each month to reach that point fairly quickly (basically instead of putting the $ in savings for the house we''ll put it towards the mortgage). Now I know that this isn''t ideal and it would have been better to wait but we really needed (and yes wanted) to move.

To be honest, we live in a low cost of living area where the housing market has remained stable (housing prices weren''t inflated to start with). We''re purchasing our house for $125,000 (3 bed 2 bath with a huge yard in a great location... it''s not a huge house but it''s not tiny either... 1500 sq ft). Our downpayment will only be around $6300 be we also have around $5000 to put towards closing costs and moving expenses. My husband has been a full time student until recently (he started his new job last week... the same day we made our offer). During the time he was in school we were able to budget and to save quite a bit. We would have had more $ for a downpayment had we not contributed the max to our ROTH accounts this year ($4000 each). We could have withdrawn enough from our ROTH accoutns to reach a 20% downpayment but chose not to... obvously it''s worth more there than in our mortgate. Our mortgage payment (and related taxes) will be around $1000 ($740ish mortgage plus taxes) a month which we are comfortably able to afford while still maintaining an acceptable debt to income ratio.We were able to get a 30 year fixed rate mortgate at 5.85%

So anyway... my point is that in some cases it''s not the worst thing in the world to go ahead and buy the home if you are able to afford it. I feel that my husband and I are financially responsible people and while our 5% downpayment isn''t ideal we have a plan (and the means) to deal with it. I do think it''s important to not overspend though. We could ''afford'' a much larger and much more expensive house but we chose to buy one that can be ours sooner rather than later. Our goal it to pay off the house in 10 years. I just think people need to take a hard look at their financial situation and decide if it''s a smart move for them. Obviously if we lived in a high cost of living area we probably would not be able to afford a home just yet.

AQ...congrat
yep, sure sounds like you and your husband are very financially responsible people.

for people that max out their ROTH IRA .

Thanks... we try to be.We have a budget that we follow religiously. On payday we pay all our bills and put the majority (minus a few hundred for groceries, gas, etc.) into savings (for our ROTHS and lately for our home purchase). We have some serious financial goals (like paying off our house in 10 years) and try to make it a priority. We have very little debt (well I guess that''s not true anymore since we now have a mortgage

) . To be honest most of our friends think we''re broke because we never have the "extra" money they seem to have. I''m still driving the car I bought 7 years ago when I finished grad school and plan to keep it as long as I can (I have a company car for work so I don''t really use it that much). We are trying to do things the right way financially... we realize that a higher downpayment would have been better and had originally planned to wait several months to save it up but this house sort of fell into our laps and we couldn''t pass it up. It''s a great first house (and may be our last house since the yard is so large we may stay forever and build on should we outgrow what is there) and I''m ready to settle down (I''ve moved 10 times in 7 years).

As I said before, we are extremely fortunate to live in an area with such a low cost of living. My sister lives in DC and rent for her 500 sq foot apartment will still be several hundred dollars higher than our mortgage payment. I know we wouldn''t be able to save as much if we lived in a place like that rather than here.

I really wanted to be able to say that we had a 20% downpayment but when it came down to it it just didn''t work out that way... but I think we''ll be ok and I think this house was the right one for us. We looked at several last summer (when we had even less to put down) and luckily none of them felt "right". The house we''re buying feels right and I think we''ll be very happy there. The timing feels right too... everything has just fallen into place... we''ve been very blessed and have a lot to be thankful for.

 

[Tacori E-ring]

Date: 5/13/2008 12:01:16 PM
Author: movie zombie
PMI is removed upon request and proof of having 20% principle paid on a loan. a refi with a higher appraisal made those numbers happen. not having to pay PMI reduces one''s payment by a considerable amount.


movie zombie

From our experience it is a PITA to get it removed too.

 

[UCLABelle]

Dancing Fire- I could not agree more with the size issue. I was fortunate enough to grow up in a 3500sq+ home as a kid (total of 4), but my mom grew up with a family of 6 in 1300----She always reminded me (everyday!) how the house I grew up in was big to most and I should NEVER complain about my 370sq bedroom that I had to myself....

Today, when we bought our condo (just myself and husband-to-be) it is about 600sf (small, I know) but everyone we knew told us it was a waste of money b/c it was too small....but it works for us (who really learned to live in cramped quarters in Manhattan)....It goes back to the issue we bought what we could afford...and our 600sf condo was it and we make it work (darn OC prices!!!!).....

 

[Haven]

I grew up in a 1500 square foot home and I LOVED IT! My mother always said she wanted everyone nice and close, and we certainly were close.

When my FI and I were house hunting we had a constant debate over size--he was positive that a larger house meant a better house, and I wanted a smaller home with a nice open layout. We ended up purchasing a 1300 sq ft home in a great location, and I couldn''t be happier. We close on the 30th of this month!

Have you read The Not So Big House by Susan Susanka? It''s wonderful. There are several books in the series, and they''re all great.

 

[UCLABelle]

Haven- I will look up the book! Sounds interesting. I live in an area where bigger typically means better (not Texas, but Los Angeles/Orange County)....Tough to not be rich here

 

[violet02]

The way we''re avoiding PMI is by doing an 80/15/5 loan. 5% down, 15% separate loan, and 80% home loan. So that gives us a 20% down so to speak and we''re only borrowing 80% for a home loan.

 

[Dancing Fire]

Date: 5/14/2008 2:47:10 AM
Author: violet02
The way we're avoiding PMI is by doing an 80/15/5 loan. 5% down, 15% separate loan, and 80% home loan. So that gives us a 20% down so to speak and we're only borrowing 80% for a home loan.

aren't those on a adjustable rate?

 

[violet02]

Date: 5/14/2008 2:53:31 AM
Author: Dancing Fire

Date: 5/14/2008 2:47:10 AM
Author: violet02
The way we''re avoiding PMI is by doing an 80/15/5 loan. 5% down, 15% separate loan, and 80% home loan. So that gives us a 20% down so to speak and we''re only borrowing 80% for a home loan.

aren''t those on a adjustable rate?

No... they''re all fixed rate loans.

 

[Haven]

Thanks for sharing all of this information about different ways to purchase a home. FI and I are in the process of buying our first home together, and I never even thought of buying something without putting 20% down. I''m happy that we can do it, but I do admit that I''m not excited about handing off all that cash I''ve been working so hard to save when we close on the 30th. I know it''s good to put 20% down, but boy, does it hurt to spend it all in one fell swoop!

 

[applequeen]

Date: 5/14/2008 9:21:38 AM
Author: Haven
Thanks for sharing all of this information about different ways to purchase a home. FI and I are in the process of buying our first home together, and I never even thought of buying something without putting 20% down. I''m happy that we can do it, but I do admit that I''m not excited about handing off all that cash I''ve been working so hard to save when we close on the 30th. I know it''s good to put 20% down, but boy, does it hurt to spend it all in one fell swoop!

I feel you on the hating to hand off all you''ve been saving... that''s the part I''m dreading!!! Luckily our savings won''t be totally wiped out but it''s been nice knowing we had a comfortable savings account. We''ll be loosing a lot of that cushion while at the same time taking on the huge responsiblity of home ownership. I remind myself that we were saving all that while my husband was in school and not bringing in a lot of $. Now that he''s working full time again we should be able to build our savings back up fairly quickly. We''ve made a point to keep all our living expenses to a level we can afford at one income but it''s still a huge step for us. We currently pay $425 a month for our 2 bed 2 bath condo that we''re renting... so the mortgage will be a huge leap but SO worth it. I keep opening up my pictures of the yard and thinking how nice it will be this summer (I haven''t had a yard in 7+ years and this house has a great one). My opinion on the yard could change quickly once we have to start mowing it.

Our house will also need a lot of updating and it''s going to be tempting to try to do it all at once rather than saving up to do one project at a time. The house is in great shape but the interior hasn''t been updated since the house was built in the 70s... it''s like walking into a weird timewarp! On the other hand, once we complete some improvements the house should be worth quite a bit more which may help us if we go the refinance route in a year or so to get rid of the mortgage insurance. My husband is very handy and my dad always did all the work on our house (he built it himself) so we''re hoping to do most of the work ourselves.

As for the size of the house... ours is pretty small (1500 sq ft) but I remind myself that bigger houses usually meant bigger energy bills and more upkeep.

 

[MichelleCarmen]

Date: 5/14/2008 9:42:06 AM
Author: applequeen


As for the size of the house... ours is pretty small (1500 sq ft) but I remind myself that bigger houses usually meant bigger energy bills and more upkeep.

Bigger houses are a pain in the butt, especially if they have a lot of windows. We''re moving from a 2,600 sq. foot with a solarium to a 1600-1800 sq. foot townhome. I''m thrilled our heating bills will go down! Also, no more maintaince costs like our current house has. Big relief.

My husband and I are talking of having a timberframe home built. A highly efficient compact one that utilizes every square inch of space so we don''t waste energy or building materials.

 

[NewEnglandLady]

Date: 5/14/2008 9:21:38 AM
Author: Haven
Thanks for sharing all of this information about different ways to purchase a home. FI and I are in the process of buying our first home together, and I never even thought of buying something without putting 20% down. I''m happy that we can do it, but I do admit that I''m not excited about handing off all that cash I''ve been working so hard to save when we close on the 30th. I know it''s good to put 20% down, but boy, does it hurt to spend it all in one fell swoop!

I agree that plopping down all the money you''d been saving for many years is VERY difficult--I think it''s going to be the hardest part of buying a house, haha. I know that''s what the money is for, but it doesn''t make it any easier!

 

[Allison D.]

Date: 5/13/2008 11:17:06 AM
Author: movie zombie

people still don''t get it: houses are more expensive now but wages are higher.

Honestly, I think people do "get it".

Wages have not increased by the same multiple that home prices have.

In 1978, my parents bought their house for $37K; it''s worth nearly 200K today. That''s a nearly six-fold increase over 30 years.

The salary rate for their jobs today is only three times what it was 30 years ago.

 

[Allison D.]

Date: 5/14/2008 2:53:31 AM
Author: Dancing Fire

Date: 5/14/2008 2:47:10 AM
Author: violet02
The way we''re avoiding PMI is by doing an 80/15/5 loan. 5% down, 15% separate loan, and 80% home loan. So that gives us a 20% down so to speak and we''re only borrowing 80% for a home loan.

aren''t those on a adjustable rate?

Not necessarily, DF. If your credit is solid, you can get a HELOC with a fixed rate as well.

When hubby and I bought 3.5 years ago, we did an 80/10/10 and avoided PMI. Our 80% primary loan was a 30-yr fixed at 5.625%. Our 10% HELOC was also a 30-year fixed at 7.625%. We put down 10%, and we did so by taking withdrawlals from our 401Ks to add to what we''d already saved.

Here we are 3.5 years later......best decision we EVER made. Prior to buying, we were spending nearly 19K annually in rent and getting no tax break for it.

We worked really hard and paid off the HELOC in 2.5 years....which was a HUGE accomplishment for us.

During these 3.5 years, our house has essentially held its value, and we''ve enjoyed the tax advantage (which is our only deduction and much needed).

 

[hairgirl95]

Just throwin out my 2 cents on this..

My husband and I bought our home in July 06. That was when the market was starting to slide here in Kansas City. We bought a brand new spec home in a new development. Because we bought early in the development process, the prices were really low. The homes built at the end of the development sold for nearly $70K more than ours did. Even with the market being crappy, our home has increased in value by $55K. Yes, we financed 100% in a 80-20 loan, no PMI, no ARM, both loans are 30 year fixed. We re-financed this spring when interest rates tanked out and with the additional equity in our house we were able to do it with one loan, not the 80-20. We also pay our mortgage bi-weekly rather than monthly as it will shave roughly 7 years off our mortgage.

When it comes to 100% financing, there are soooo many factors. In our situation, our mortgage broker knew the market was becoming very soft, and encouraged us to get the most *perks* we could. Such as, our builder paid closing costs, the HOA waived the dues for the first year, and because we have good credit with stable employment, we opted to keep our money in savings earning a little interest. We are fortunate that we are not in the negative with our home loan as many people are, but its really about buying responsible. You have to look at neighborhoods and cities that have fared better than others during this housing crisis. If I had to buy a house today, I would buy into a new development like we did 2 years ago. Where we live is not our first choice of areas to live in, but it was near the top of our list.

I also think its a matter of personal responsibility. If either of us were to lose our jobs, become disabled, die, or whatever, we have mortgage insurance to cover that. Its roughly $15 per month to cover us from these things in life that can and do occur. If either of us die or become 100% disabled, our home is paid off in full. If either of us lose our job, they pay our mortgage for a year, then a sliding scale for the next year. That is plenty of time to gain employment again. I feel comfortable that we are covered for all the what-ifs, locked in a low interest rate with a fixed loan, and we have equity in our home.

 

[KCCutie]

Date: 5/14/2008 2:08:07 PM
Author: Allison D.

Date: 5/13/2008 11:17:06 AM

Author: movie zombie
people still don''t get it: houses are more expensive now but wages are higher.

Honestly, I think people do ''get it''.

Wages have not increased by the same multiple that home prices have.

In 1978, my parents bought their house for $37K; it''s worth nearly 200K today. That''s a nearly six-fold increase over 30 years.

The salary rate for their jobs today is only three times what it was 30 years ago.

MZ I too I was wondering when someone else was going to agree with this! I read today that other costs (ie food, utilities etc) alone have gone up more than the average salary. I think the average pay increase this year was 3 to 3.5% and that just barely covered inflation and that''s if you were lucky enough to get that kind of increase. That''s why I left my last job they gave me a 2.5% increase and I was essential losing money working there. Everything seems to be getting much more expensive much faster now than I can ever remember.

I''m at the point where I will just barely qualify to buy a home and if I saved for years to have 20% to put down the home prices would probably be too high. I can live comfortably renting but I just feel like I''m throwing money away. Personally I can''t justify throwing away that much money just so I can save up to have a down payment, but maybe that''s just me.

 

[Dancing Fire]

Date: 5/14/2008 2:15:34 PM
Author: Allison D.

Date: 5/14/2008 2:53:31 AM
Author: Dancing Fire

Date: 5/14/2008 2:47:10 AM
Author: violet02
The way we''re avoiding PMI is by doing an 80/15/5 loan. 5% down, 15% separate loan, and 80% home loan. So that gives us a 20% down so to speak and we''re only borrowing 80% for a home loan.

aren''t those on a adjustable rate?

Not necessarily, DF. If your credit is solid, you can get a HELOC with a fixed rate as well.

When hubby and I bought 3.5 years ago, we did an 80/10/10 and avoided PMI. Our 80% primary loan was a 30-yr fixed at 5.625%. Our 10% HELOC was also a 30-year fixed at 7.625%. We put down 10%, and we did so by taking withdrawlals from our 401Ks to add to what we''d already saved.

Here we are 3.5 years later......best decision we EVER made. Prior to buying, we were spending nearly 19K annually in rent and getting no tax break for it.

We worked really hard and paid off the HELOC in 2.5 years....which was a HUGE accomplishment for us.

During these 3.5 years, our house has essentially held its value, and we''ve enjoyed the tax advantage (which is our only deduction and much needed).

is this really my old friend "Alj" ?

 

[absolut_blonde]

Date: 5/13/2008 12:03:13 PM
Author: Independent Gal
I agree with most of what you are saying above except, as I noted above, salaries have nowhere near kept pace with the rise of house prices. As I mentioned above, where I grew up, the home my parents bought cost 4 times their income. It now costs 14 times the income for a similar job.

Sure, the income for that job is much higher than it was 30 years ago, but it is nowhere near the same percentage higher as the house is.

And again, I DID save the 30% downpayment through equal parts sweat, sacrifice and...uh, sheer dumb luck. But I understand why others have trouble doing so. It really is NOT the same as our parents generation. My parents say that thy can't believe how much harder things are for us than they were for them at the same age.

Totally agree. Wages are SOMEWHAT higher in my area but they do not even remotely off-set the difference in housing prices. Average single family home price here is $450k and rising relatively steadily. This is further compounded by the fact that housing prices have more than doubled in the past 8-10 years here so older buyers who were already in the housing market have a significant advantage in that they gained a lot of equity in their existing residences quickly and at no cost.

As for renting and "saving" money while doing so, not a chance. If SO and I did that, we'd be lucky to sock away a few hundred (maybe 200) a month because rents are nearly as bad as a low-end mortgage payment. Therefore, we will be purchasing our first house with 20% or less down. We can afford payments based on that and we will be earning more eventually. We both have steady jobs in good fields (I'm gov't and unionized, he's a tradesman) and we will not to get ourselves into a mortgage we will be unable to pay down the road.

I would rather own a home of our own that we can stay in as long as we need to rather than spend virtually the same amount of $ renting and building someone else's equity.

 

[zoebartlett]

My FI and I bought our condo (just over 1000 sq. ft) 2.5 years ago. There was no way we could have saved up 20% to put down. We live in the northeast--Alj is familiar with the area. We moved at a time that was right for us -- my FI''s lease in his rental was up and he was moving to the area where I had moved a few months earlier for a new job. I was staying with my parents and was definitely ready to move out again. We bought our condo in a high market and got what we could afford at the time. It''s small and it feels cramped now, but it''s ours. We feel proud that we entered the housing market and are able to live comfortably.

I don''t think that just because someone has credit card bills means that he/she isn''t financially responsible. Yes, it might depend on how high the bills are but in general, you can still be financially responsible and not have enough to put down 20% for a house.