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Thread: 20% down?

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    Default 20% down?

    Are first-time home buyers really able to put 20% down on a house?

    Here are my local figures for home prices...
    Overall median home price (new and resale, attached and detached) $472,000 94,4000
    Average price of a new detached home . . . . . . . . . . . . . . . . . . . . . $835,794 167,158
    Single-family resale home median price . . . . . . . . . . . . . . . . . . . . .$540,000 108,000
    Resale condo median price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $380,000 76,000
    Median price for newly-built houses, condos and condo conversions .$395,000 79,000

    Most first timers won't be buying new or resale SFD, but even for a condo....80 grand?
    How is anyone supposed to save up that much money, and be saving for retirement at the same time?

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    Banned jasmine's Avatar
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    Default Re: 20% down?

    We just started living off my day-job income and sinking all of my dancing money into the bank and almost all of my husbands income as well. Everything went into the bank, nothing went to retirement at the time. It wasn't a fun time, we did absolutely nothing that cost extra money, but in less than 18 mos we had enough. Our market is much lower, but our home price is pretty much comparable to what you listed, btw.

    It can be done if you are truely determined!

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    Banned i.breathe.in's Avatar
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    Default Re: 20% down?

    also theres a lot to be said for owner financing, my bf got his house this way, not a dancer, but still, lol.

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    Default Re: 20% down?

    I forgot to mention PMI (private mortgage insurance). If you don't have the entire downpayment, in many cases you can still get the loan, by paying PMI. I think you pay it monthly untill you have 20% down and at that time you can request to have it removed, at 25% down the bank HAS to remove it.

    My numbers may be off since it's been a while since I looked into this. When we bought our house we thought we were going to be about $10,000 short of 20% and were going to have to pay $91/mo PMI. Our builder actually was late with closing though so we had the full amount so I really don't have that much info.

    HTH!

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    Default Re: 20% down?

    also don't forget closing costs and other fees will likely add another 3-5% cash requirement on top of the 20% down payment.

    For a fact the mortgage lenders are 'sick' of taking losses on shaky mortgages. As such, a 20% down payment requirement is more and more commonplace in order to provide the mortgage lender with some assurance that further falls in real estate market prices won't put the homeowner 'underwater' i.e owing more in outstanding mortgage balance than the current market value of the property.

    You are also correct that the 20% down payment requirement, in conjunction with a requirement for income verification / documentation, has knocked a whole lot of would-be home buyers out of the game. This is obviously contributing to the continuing decline in real estate market prices, since fewer and fewer would-be buyers can obtain 'affordable' mortgage financing.

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    Default Re: 20% down?

    It's been that way in Australia for as long as I've been paying attention. You can borrow with less than 20% deposit, but have to pay steep "mortgage insurance"
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
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    Default Re: 20% down?

    I would also point out that the 'monoline' auxiliary mortgage insurers like PMI and MGIC are now experiencing record high levels of defaults from mortgage borrowers. This of course is understandable given that the homeowners most likely to 'walk away' from their underwater mortgage are those who have the least equity - which also makes them PMI or MGIC customers !!!

    This is getting so serious that PMI and MGIC have had their own credit ratings downgraded. As such, PMI and MGIC are now taking a much closer look at the credit risk they are assuming when they approve a new 'equity gap' loan. Thus there is no guarantee that PMI or MGIC 'equity gap' financing will continue to be available for high risk borrowers i.e. self-employed persons, persons with sketchy financial paper trails, persons working in high risk occupations (like adult entertainment) ...


    How is anyone supposed to save up that much money, and be saving for retirement at the same time?
    well this speaks directly to the 'rude awakening' in store for most Americans. For a fact, ever since globalization began in earnest in the 90's, the pay rates received by Americans have been increasingly 'arbitraged' downward (fancy word for being pressured because of a differential between the rate in one location and the rate in a different location) by lower labor costs in other countries. At the same time, prices for many necessary items most notably oil / food / health care / have been slowly but steadily rising. So in order to maintain the same apparent standard of living, many Americans first stopped saving. Next they started spending borrowed money via home equity loans or equity extraction mortgage re-fi's. Next they started spending more borrowed money via credit cards. Lately they have started spending borrowed money from their 401k's. But the available sources of new loans are not limitless !

    However, we are now at the point where American pay rates have remained stagnant for so long, and prices for necessary items have risen so far, that the people who borrowed and spent money via helocs / credit cards / refis etc. can no longer obtain additional borrowed money to spend (because lenders are cutting off their credit in reaction to record high default rates). This is now resulting in many Americans finally facing the fact that they can no longer obtain additional borrowed money to spend, thus are FORCED to limit their spending to a level that their after tax incomes can provide for, thus they can no longer afford to maintain the lifestyle / standard of living to which they have become accustomed in the past. For many unskilled and semi-skilled Americans, this will mean that home ownership has now become an unobtainable dream.

    ~
    Last edited by Melonie; 06-10-2008 at 11:06 AM.

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    Default Re: 20% down?

    Just wanted to update this a bit. The beach home that we are buying.... Well, we probably are going to back out. The financing that we secured 3 weeks ago at 6.1% is still available, but they want an additional 10% down with a new rate of 6.67%. If we can't pony it up, then they are going to raise our interest rate to 8.2 or 8.3% (sorry I can't remember which), PLUS $75/mo PMI (and she keeps assuring us that is very low due to our low risk). ARRRRGG! Over 8% !!!!!! It's not a fucking Codotel.

    The lady tells us that the market has changed dramatically since then! This is sooooo pissing me off, because we were going through Wells Fargo who handles our other mortgage. It's not just them either, Wachovia, who we have both banked with since college, 10yrs or so, is telling us the same crap. These are 2 banks that know our reliability and ability to pay.

    Good financing is apparantly getting fucking insanely difficult to obtain.

    Edited to add: Originally because of our credit score and income we were going to be able to get financing with 5 or 10% down, now they want the full 20%. I didn't want to make it sound like they wanted 30% or something.

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    Default Re: 20% down?

    ^^^ much of this has to do with new regulatory requirements for mortgage lenders having recently gone into effect, as well as new 'loan compliance' rules being put into effect by Fannie Mae / Freddie Mac / secondary market buyers of mortgage backed securities. It also has LOT to do with the passage of 'subprime bailout' legislation which will dump losses from 'underwater' mortgages directly on the mortgage lenders (with little or no recourse against the bankrupt homeowner)m and will also give bankruptcy judges the power to arbitrarily alter the terms / outstanding balance of existing subprime mortgage loans (resulting in even more losses for the lenders).

    Putting all of these factors together means that any affordable new mortgage is going to come with a 20% equity requirement (over and above fees and closing costs), a proof of income requirement, etc. Any other loans made towards the purchase of real estate that involves equity levels of less than 20%, that involves a leap of faith in regard to the borrower's future income levels / future ability to repay etc. are now being treated about the same as 'unsecured' consumer loans ... thus the 2%+ interest rate premium to cover the lender's additional risk of loss.

  10. #10
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    Default Re: 20% down?

    What about a FHA loan? 3% down and seller pays closing costs for first time home buyers?

    Also, they dont go by ficos either - tho they say 580 is the lowest theyll take, must have 12 months of prestine credit.

    These loans are still going on... you dont need 20% to buy a home. This is what were doing... you will need 2 years of tax returns tho if youre using dancing income to buy the home. You will have to pay PMI just like any other loan where you dont put 20% down.

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    Default Re: 20% down?

    What about a FHA loan? 3% down and seller pays closing costs for first time home buyers?
    as far as I know, this gov't subsidized mortgage program for qualifying first time home buyers IS still in existance. Basically the FHA steps in as guarantor, and also pays down the difference between the 3% subsidized interest rate and the current market rate. But I suspect that the 'qualifying' factor is now being closely scrutinized, both in terms of the first time homebuyer's finances and in the location / classification of the property.

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    Default Re: 20% down?

    ^ Check into it. FHA has also tightened up on their lending, as well.

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    Default Re: 20% down?

    it's tough, but I think the best way to get 20% down for an "average house" is to buy a less desirable house and wait it out to build equity either by making payments/improvements, and/or hoping for appreciation. I'm assuming you don't qualify for lower down payment options discussed above, but maybe you do. But even so, it's still always better to have 20% down (i.e. cheaper.)

    You can buy houses in many areas for $100,000 or less. It may not be your first choice, but that's why they are often advertised as starter houses. Then move on to "average" when the time is right.

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