House down payment

Kdanson

muffyvonmuff said:

huntjul said:

muffyvonmuff said:

3.5% for our 1st and 5% for our second. There's no guarantee you will sell a house for what you paid. For that reason I put the minimum down and keep my savings acct high.... This will also allow us to buy another investment property next year.

@muffyvonmuff I understand putting less down means more capital to buy another--that makes sense to me.  But can you explain why the house dropping in price is why you want to put less down?  Not being assured of a selling price is exactly why I would consider putting MORE down.

This will be Tl;Dr

I guess I'll use my recent client as an example.  He purchased his condo 5 years ago for $135,000 with 20% down but was pre approved for a 3.5% FHA 30 year fixed.Therefore he put down about $22,000 EXTRA then the $4,700 he was required. This lowered his monthly payment by about  $160 a month.  160(per month saved)x60 (months of ownership)=$9,600 total saved in 5 years with monthly payments. 

20% down:

$27,000 down payment-

$9600 saved on monthly payments =

$17400 still invested in property out of pocket at time of sale

IF he would have gone with 3.5% down:

$4700 down payment +

$9600 (added to monthly payments)=

$14,300 total spent with down payment and additional charges per month.

His job moved and he needs his condo to sell asap but in this market I have it listed at $120 and honestly hoping It will sell at $115.  This final price on the loan was $108,000  with his 20% down ($135,000 list price).  If the condo sells at $115 and then you add in the cost of real estate agents(6%) $6,900 He will have made $108,100 on the sale.  Leaving him with $100 more then his loan but never seeing his 20% returned.  

----Freakin mobile quote shenanigans

I get this, but I understand why people would want to put down more in an uncertain economy/market.

If he had put $4,700 down on a $135K condo 5 years ago, then the market crashes and that $135K condo is worth $90K, and he unfortunately loses his job or needs to sell it for whatever reason. His loan is going to be about $120ishK on a home he is lucky to get $85K for after closing costs/realtor fees. Where is he supposed to come up with the extra $35K to pay off that loan?

I think that's much worse than paying an extra 5K over 5 years.

Kdanson

To be fair, I have a conventional loan and only put 5% down on my home. However, the market up here is solid and only growing stronger. My home has gone up roughly $100K since I bought it two years ago.

muffyvonmuff

jennlin said:

Doing this via mobile so forgive me-- If he did 3.5%, 4700 down, means he owes 130,000 still. If he sells his house, he will get 108,000 as you say. He still owes the bank 22k, and will need to pay that just so he can move. @muffyvonmuff

If his house payment (and Ill just use a fake number) was $1000 per month x 5 years=  $60000 paid toward the loan.  Depends on interest rate but after 5 years lets hope he took a bit off the principal.  So while he might owe a little at closing it wouldn't be $22,000.  

Heres the thing, If you're moving into your forever home putting more down makes sense. If you don't plan on paying your loan for 30 years because you are in a short term house (myself currently) then putting down less is a smaller risk.  But in this market for him to have gotten that 20% investment back the condo would need to sell for original list of $130,000.  

vargasgurl

20% and we dbl up no payments whenever possible to pay on the principal. It's a sacrifice.

muffyvonmuff

Kdanson said:

huntjul said:

muffyvonmuff said:

3.5% for our 1st and 5% for our second. There's no guarantee you will sell a house for what you paid. For that reason I put the minimum down and keep my savings acct high.... This will also allow us to buy another investment property next year.

@muffyvonmuff I understand putting less down means more capital to buy another--that makes sense to me.  But can you explain why the house dropping in price is why you want to put less down?  Not being assured of a selling price is exactly why I would consider putting MORE down.

This will be Tl;Dr

I guess I'll use my recent client as an example.  He purchased his condo 5 years ago for $135,000 with 20% down but was pre approved for a 3.5% FHA 30 year fixed.Therefore he put down about $22,000 EXTRA then the $4,700 he was required. This lowered his monthly payment by about  $160 a month.  160(per month saved)x60 (months of ownership)=$9,600 total saved in 5 years with monthly payments. 

20% down:

$27,000 down payment-

$9600 saved on monthly payments =

$17400 still invested in property out of pocket at time of sale

IF he would have gone with 3.5% down:

$4700 down payment +

$9600 (added to monthly payments)=

$14,300 total spent with down payment and additional charges per month.

His job moved and he needs his condo to sell asap but in this market I have it listed at $120 and honestly hoping It will sell at $115.  This final price on the loan was $108,000  with his 20% down ($135,000 list price).  If the condo sells at $115 and then you add in the cost of real estate agents(6%) $6,900 He will have made $108,100 on the sale.  Leaving him with $100 more then his loan but never seeing his 20% returned.  

----Freakin mobile quote shenanigans I get this, but I understand why people would want to put down more in an uncertain economy/market. If he had put $4,700 down on a $135K condo 5 years ago, then the market crashes and that $135K condo is worth $90K, and he unfortunately loses his job or needs to sell it for whatever reason. His loan is going to be about $120ishK on a home he is lucky to get $85K for after closing costs/realtor fees. Where is he supposed to come up with the extra $35K to pay off that loan? I think that's much worse than paying an extra 5K over 5 years.

He wouldn't, it would be a short sale

MtnChickaD

Aaaaaand I'm confused.

bkeane619

I just wanna say banks are A holes. Esp citi. I am in foreclosure with a 1 bedroom condo we lived in when O was born.We bought for 289k at peak in like 2006 I think it was. Luckily condo was only in my name. We needed to move out when O was born and this sucker was sooooo underwater it wasn't funny. I had FHA on it. At the time I think I owed 270k. It was worth about 190k. We had a cash buyer for short sale at 200k with contract signed. I had quit my job to SAH and DH was in contract to buy our current home. The day O was born the bank called and said they wanted another 20k (that I didn't have). The deal fell through because they didn't want 200k. Idiots. It is still sitting empty today, 3 years later and worth even less. Glad I didn't put money into it.

bkeane619

MrsLoraP said:

@bkeane619 - why didn't you just choose to rent it out for a few years then since it is not selling? At least then you could cover the cost of the mortgage until the market is stable enough to try selling it again?

Couldn't rent it for the mortgage payment plus the monthly maintenance fees. We would have taken a $600 loss every month at least.

jennlin

muffyvonmuff said:

Kdanson said:

muffyvonmuff said:

huntjul said:

muffyvonmuff said:

3.5% for our 1st and 5% for our second. There's no guarantee you will sell a house for what you paid. For that reason I put the minimum down and keep my savings acct high.... This will also allow us to buy another investment property next year.

@muffyvonmuff I understand putting less down means more capital to buy another--that makes sense to me.  But can you explain why the house dropping in price is why you want to put less down?  Not being assured of a selling price is exactly why I would consider putting MORE down.

This will be Tl;Dr

I guess I'll use my recent client as an example.  He purchased his condo 5 years ago for $135,000 with 20% down but was pre approved for a 3.5% FHA 30 year fixed.Therefore he put down about $22,000 EXTRA then the $4,700 he was required. This lowered his monthly payment by about  $160 a month.  160(per month saved)x60 (months of ownership)=$9,600 total saved in 5 years with monthly payments. 

20% down:

$27,000 down payment-

$9600 saved on monthly payments =

$17400 still invested in property out of pocket at time of sale

IF he would have gone with 3.5% down:

$4700 down payment +

$9600 (added to monthly payments)=

$14,300 total spent with down payment and additional charges per month.

His job moved and he needs his condo to sell asap but in this market I have it listed at $120 and honestly hoping It will sell at $115.  This final price on the loan was $108,000  with his 20% down ($135,000 list price).  If the condo sells at $115 and then you add in the cost of real estate agents(6%) $6,900 He will have made $108,100 on the sale.  Leaving him with $100 more then his loan but never seeing his 20% returned.  

----Freakin mobile quote shenanigans

I get this, but I understand why people would want to put down more in an uncertain economy/market.

If he had put $4,700 down on a $135K condo 5 years ago, then the market crashes and that $135K condo is worth $90K, and he unfortunately loses his job or needs to sell it for whatever reason. His loan is going to be about $120ishK on a home he is lucky to get $85K for after closing costs/realtor fees. Where is he supposed to come up with the extra $35K to pay off that loan?

I think that's much worse than paying an extra 5K over 5 years.


He wouldn't, it would be a short sale

---

Not all banks approve short sales, and to qualify for one, you have to prove financial hardship--usually by missing payments. After qualifying for a short sale, it is a mark against your credit history for 7 years making it difficult to be qualified for a good loan again. So if you're in a house with intention to move, I wouldn't reccomend going the short sale route.

muffyvonmuff

jennlin said:

Kdanson said:

huntjul said:

muffyvonmuff said:

3.5% for our 1st and 5% for our second. There's no guarantee you will sell a house for what you paid. For that reason I put the minimum down and keep my savings acct high.... This will also allow us to buy another investment property next year.

@muffyvonmuff I understand putting less down means more capital to buy another--that makes sense to me.  But can you explain why the house dropping in price is why you want to put less down?  Not being assured of a selling price is exactly why I would consider putting MORE down.

This will be Tl;Dr

I guess I'll use my recent client as an example.  He purchased his condo 5 years ago for $135,000 with 20% down but was pre approved for a 3.5% FHA 30 year fixed.Therefore he put down about $22,000 EXTRA then the $4,700 he was required. This lowered his monthly payment by about  $160 a month.  160(per month saved)x60 (months of ownership)=$9,600 total saved in 5 years with monthly payments. 

20% down:

$27,000 down payment-

$9600 saved on monthly payments =

$17400 still invested in property out of pocket at time of sale

IF he would have gone with 3.5% down:

$4700 down payment +

$9600 (added to monthly payments)=

$14,300 total spent with down payment and additional charges per month.

His job moved and he needs his condo to sell asap but in this market I have it listed at $120 and honestly hoping It will sell at $115.  This final price on the loan was $108,000  with his 20% down ($135,000 list price).  If the condo sells at $115 and then you add in the cost of real estate agents(6%) $6,900 He will have made $108,100 on the sale.  Leaving him with $100 more then his loan but never seeing his 20% returned.  

----Freakin mobile quote shenanigans I get this, but I understand why people would want to put down more in an uncertain economy/market. If he had put $4,700 down on a $135K condo 5 years ago, then the market crashes and that $135K condo is worth $90K, and he unfortunately loses his job or needs to sell it for whatever reason. His loan is going to be about $120ishK on a home he is lucky to get $85K for after closing costs/realtor fees. Where is he supposed to come up with the extra $35K to pay off that loan? I think that's much worse than paying an extra 5K over 5 years.

He wouldn't, it would be a short sale

--- Not all banks approve short sales, and to qualify for one, you have to prove financial hardship--usually by missing payments. After qualifying for a short sale, it is a mark against your credit history for 7 years making it difficult to be qualified for a good loan again. So if you're in a house with intention to move, I wouldn't reccomend going the short sale route.

Im an agent not a loan officer but I did just co-broke on a house for a couple that had a short sale only 2 years ago and they got a surprisingly low interest rate. Short sales are less harsh on your credit then a foreclosure.  I believe in the fictitious scenario above there was a serious appraised deprecation implied as well as a job loss making the attempt at a short sale an option before foreclosure.  

jennlin

@muffyvonmuff‌ - as a real estate agent, you're trained to get people I to a house with as little as possible, so I don't blame you for your opinions

If your couple from above short saled 2 years ago, and are buying again just now, they paid rent (ie not earning any equity) for 2 years..

IMO, best case in a declining market would be high down payment, enough to keep monthly payment low. If you lose your job, it's easier to keep making payments. If you're relocated, you can rent it out with enough to cover the mortgage. That way you do not have to sell your house when the value is low.

muffyvonmuff

jennlin said:

@muffyvonmuff‌ - as a real estate agent, you're trained to get people I to a house with as little as possible, so I don't blame you for your opinions If your couple from above short saled 2 years ago, and are buying again just now, they paid rent (ie not earning any equity) for 2 years.. IMO, best case in a declining market would be high down payment, enough to keep monthly payment low. If you lose your job, it's easier to keep making payments. If you're relocated, you can rent it out with enough to cover the mortgage. That way you do not have to sell your house when the value is low.

I mean I don't care what anyone puts down in terms of being my client.  My professional advice has less to do with down payment and more to do with fixed interest rates, but I'm not the underwriter.  If you want a 20% down conv. 30 year fixed I say go for it if the rate is low.  But I see 0% down VA loans with better interest rates then conv. loans on the reg.  I have clients that take what they would have put down on a house and used it to start businesses or just invest it in a high yield 10 year CD.  

Not putting 20% down on both our homes gives us an additional income of $3000 a month because we are flipping that savings into a business.  If we would have put our whole savings into our house we couldn't have bought another as fast.  Nor would we be able to do it again next year, especially with the amount you need in reserves.  But again if you are moving into your forever home and plan on paying that mortgage to the end by all means get it paid off as fast as possible with a higher percent down.  Then have a mortgage burning party with lots of booze, and invite me because I love any excuse to party.  Every scenario is different with the common factor being, no matter what shop for the best rate.