Purchasing home with less than 20% downpayment experiences?

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TomCat96
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Purchasing home with less than 20% downpayment experiences?

Post by TomCat96 » Wed Jun 12, 2019 6:06 pm

I was wondering, for those of you who purchased a home with less than a 20% downpayment, what was your experience like?

Did the costs end up being higher than you anticipated? Were there hidden issues that you did not foresee??
Were your rates higher as a result? And would you recommend it?

I am considering purchasing a home for less than a 20% downpayment, but I want to know people's thoughts on it before further considering it.

buhlaxtus
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Re: Purchasing home with less than 20% downpayment experiences?

Post by buhlaxtus » Wed Jun 12, 2019 6:14 pm

I bought a house with 5% down. I was immediately able to reduce the LTV to 90% thanks to the tax credit that was available at the time. Then I paid ahead on the mortgage and reached a more comfortable 85% or so pretty quickly. The extra cost was about $60/mo in extra mortgage insurance. It worked out especially well because the local market only appreciated while I was in it. If I buy another house I don't know if I would take that risk - but would probably be buying a more expensive house as well.

rascott
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Re: Purchasing home with less than 20% downpayment experiences?

Post by rascott » Wed Jun 12, 2019 7:45 pm

TomCat96 wrote:
Wed Jun 12, 2019 6:06 pm
I was wondering, for those of you who purchased a home with less than a 20% downpayment, what was your experience like?

Did the costs end up being higher than you anticipated? Were there hidden issues that you did not foresee??
Were your rates higher as a result? And would you recommend it?

I am considering purchasing a home for less than a 20% downpayment, but I want to know people's thoughts on it before further considering it.
Bought my first home with 0 down (2003). LOL. I actually did a piggy back loan (80% 1st, 20% HELOC).

Rates aren't higher based upon amount down. Rates are based upon credit score. Your PMI is higher, however....the less you put down, higher the PMI will be. Unless you do a piggyback...then no PMI. Back then that was a tax benefit. With the tax law change, mortgage interest deduction is less beneficial, now.

Beyond that? No hidden issues. Other than you may quickly end up upside down.... which is a big problem if you have to sell, for whatever reason.

jb1
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Re: Purchasing home with less than 20% downpayment experiences?

Post by jb1 » Wed Jun 12, 2019 8:21 pm

Put 10% down on my home for a 180k loan. I pay 1200 a month, $50 of that being PMI.

I also have 3 roommates that pay $350, $350, $500, so that covers the above expenses.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by willthrill81 » Wed Jun 12, 2019 8:23 pm

We put 10% down on our home 4.5 years ago. No problems at all.
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JoeRetire
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Re: Purchasing home with less than 20% downpayment experiences?

Post by JoeRetire » Thu Jun 13, 2019 6:34 am

TomCat96 wrote:
Wed Jun 12, 2019 6:06 pm
I am considering purchasing a home for less than a 20% downpayment, but I want to know people's thoughts on it before further considering it.
Are you not able to afford 20% ?

Nissanzx1
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Nissanzx1 » Thu Jun 13, 2019 6:43 am

I did zero down FHA when I purchased my first home.

Lived there for 10 years. Made every payment on time. Refinanced twice, one to remove girlfriend and another to move for 15 year vs 30. Never took any cash out. After ten years walked away with $7000 upon sale. Make $675 payments for 10 years. I paid about $81000 and took home $7000.

Home also needed $21000 in repair during that ten year period. A/C, roof, windows, garage door, etc etc. I had to cash flow those repairs and left them sitting in the street with out $1 extra in value to the home upon sale. Sold for a few hundred less than I bought.

Safe to say renting would have been way way less expensive...

bigred77
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Re: Purchasing home with less than 20% downpayment experiences?

Post by bigred77 » Thu Jun 13, 2019 7:01 am

5% down on first property. FHA loan.

10% down on second property with a 10% piggyback loan (HELOC) and 80% primary mortgage, no PMI.

Both times expenses were a little higher at closing than I originally thought they’d be. Closing also took forever (about 60 days each time with a lot of drama) but that could have been my lenders fault, not necessarily indicative of the loan products themselves.

All in all it was a positive experience. Allowed me to purchase properties years before I would have been able to afford 20% down. Both properties appreciated quickly after I bought them, although I didn’t bank on that being the case. My current home/neighborhood I would have been priced out of if I had waited until I had 20% to put down up front.

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simplesimon
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Re: Purchasing home with less than 20% downpayment experiences?

Post by simplesimon » Thu Jun 13, 2019 7:20 am

In the current market you should have no issues as long as you're willing to pay more.

Quirkz
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Quirkz » Thu Jun 13, 2019 10:57 am

If you get a loan with PMI, read the section very carefully that describes how you get rid of it later. I've been burned by a casual reading that made it look like once you're at 80% value it just disappears, when it was actually a time-based countdown and paying off early didn't help. I had to refinance to get rid of it.

TXGator
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Re: Purchasing home with less than 20% downpayment experiences?

Post by TXGator » Thu Jun 13, 2019 11:10 am

On our most recent house we put 10%; lender paid PMI of 1/8 pt on the rate. Plan is refi next year after bonus time to a lower rate and lower LTV to below 80%

buhlaxtus
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Re: Purchasing home with less than 20% downpayment experiences?

Post by buhlaxtus » Thu Jun 13, 2019 11:14 am

A counterpoint to my good experience is a friend's poor experience. He used an FHA mortgage with something like 3% down, bought around the same time I did but missed the tax credit, and is paying something like $250 per month in PMI costs and barely knocked down the principal at all in the first 5 years. Then lost his job and has been scrounging to make ends meet and still keep up with the mortgage + PMI every month. He's lucky to be in an area that has seen high appreciation, and still has the house, but it was a really bad deal financially speaking.

FinancialRookie
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Re: Purchasing home with less than 20% downpayment experiences?

Post by FinancialRookie » Thu Jun 13, 2019 11:25 am

We put 10% down (the minimum for a condo in my state) but we were doing an arm's length sale from a family member with a gift of equity that got us to ~18%. I do have to pay PMI but only for a year or two. Didn't have any issues.

LawEgr1
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Re: Purchasing home with less than 20% downpayment experiences?

Post by LawEgr1 » Thu Jun 13, 2019 12:19 pm

We did about 13% down.

Then we did some modifications to the house, market went up, and I realized our PMI language allowed us to get a BPO. If the BPO indicated we were 78% LTV then PMI was removed.

BPO indicated we were 75% LTV, so PMI was removed. 3 month payback for the BPO cost.


In summary, I told myself I'd never purchase another home without 20% down again to avoid PMI / process of ridding PMI. It was purely wasted money for about 3 years (>$2,000) because I didn't prioritize downpayment / have patience.

We'll see if what I told myself holds true. I do understand how doing <20% allows $$$ to be put elsewhere, but at this time that isn't entertaining to me.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by Glockenspiel » Thu Jun 13, 2019 12:27 pm

We bought our first house in 2010 with 10% down and our credit union did not charge us PMI. We also got the very best rate available at the time.

A few months later, the credit union offered us a mortgage rate readjustment for $200 (as rates continued to decrease). Then, 2 years later, we refinanced to a 15-year fixed rate at 2.5%, with the same credit union. We rolled the closing costs into the mortgage but they were still quite low.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by KyleAAA » Thu Jun 13, 2019 12:30 pm

We put 10% down for the house before this one. We didn't pay a higher rate because we had very good credit. Had to pay PMI, but it was nominal compared to the value of keeping more liquid cash reserves. We ended up needing the extra reserves, so no regrets. My first condo I bought with 5% down. No PMI but I had a 2nd 15% mortgage at a higher rate, which I paid off within 2 years. Sold the condo for less than it was worth because of the housing crash. If I hadn't paid off the 2nd mortgage so quickly I would have been underwater. Worked out in the end, but could have been bad.

Van Down By Da River
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Van Down By Da River » Thu Jun 13, 2019 12:43 pm

Just do it. Now.

We bought our first house with 5% down and had to pay PMI... (then getting an appraisal to get rid of the PMI after year 3)

Then we bought our current house with 10% down and 10% HELOC (which we are finally paying off after 2 1/2 years)

I know conventional wisdom says to wait until you have 20% down, the old adage 'time in the market' applies. 6 years of home ownership, we now have over 100k in home equity thru appreciation, good ol' elbow grease DIY home improvements and aggressive pay down of the HELOC. That is all money that I would not have had I waited 5+ years until I had saved enough for a 20% down payment.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by MI_bogle » Thu Jun 13, 2019 12:49 pm

Bought a few years ago with 10% down. Wanted to buy when interest rates were rock bottom. PITI was less than rent in a place half the size... crazy rental market in my town. PMI is like 35 bucks a month. Way lower than I was fearing.

I was very hesitant to not do 20% down, and hate the idea of PMI, but we came out way ahead by buying when we did given it saved several years of rent payments and allowed us to lock in a very low interest rate

megabad
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Re: Purchasing home with less than 20% downpayment experiences?

Post by megabad » Thu Jun 13, 2019 12:52 pm

TomCat96 wrote:
Wed Jun 12, 2019 6:06 pm
I was wondering, for those of you who purchased a home with less than a 20% downpayment, what was your experience like?

Did the costs end up being higher than you anticipated? Were there hidden issues that you did not foresee??
Were your rates higher as a result? And would you recommend it?

I am considering purchasing a home for less than a 20% downpayment, but I want to know people's thoughts on it before further considering it.
I would caution against an FHA loan. Since you can never remove MIP from the loan, you are forced to get a completely new mortgage to get rid of the insurance. Basically, this necessitates a refi at an unknown rate sometime in the future which is a few too many unknowns for me when FHA loans can be easily avoided. I have done 10% down loans (non-FHA) with no PMI/MIP in the past. No issues at all other than a slightly higher cost.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by 8foot7 » Thu Jun 13, 2019 12:54 pm

I put 3% down on my first home ($4,200 on $140,000). Worked out OK because I was still in college and qualified based on my college working income for the home, so as soon as I got a real job I had more than enough income to service the mortgage comfortably. I subsequently refinanced into a 15 year mortgage without putting anything additional on the principal. Stuck it out for several years which quickly resulted in a lower LTV margin. I don't know if I would recommend what I did or not, but it worked out for me; more importantly, I'm not sure a kid still in college could get a mortgage like I did in 2003 these days, so it may not even be possible.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by RobLyons » Thu Jun 13, 2019 12:58 pm

A close friend purchased his home with 5% down and within 5 years was able to dump PMI based on skyrocketing home values. PMI was around $150/month and didn't bother him.
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dm200
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Re: Purchasing home with less than 20% downpayment experiences?

Post by dm200 » Thu Jun 13, 2019 1:00 pm

Goes back 40 years, but shortly after getting married, bought a house with only about 1-2% down. Got a VA mortgage. Still in the same house - paid about $74,000 and it is now "worth" between $650,000 and $700,000. Not bad :)

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8foot7
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Re: Purchasing home with less than 20% downpayment experiences?

Post by 8foot7 » Thu Jun 13, 2019 1:06 pm

The big things to think about are:

(a) in a downturn when you lose your job and need to move to get another job, and your house price has fallen 20%, will you have to write a check to get out of your mortgage?
(b) are you paying PMI monthly? I find PMI a complete waste--money paid to someone else to give them a benefit in case you fail to pay your bills.

20% seems a real tough figure in some markets to the point you're paying more for the same house because it takes so long to save up. If you can get away with 10% and no PMI via a higher rate, it may well make sense to pull the trigger.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by sergio » Thu Jun 13, 2019 1:15 pm

We put 10% down and pay $26/month PMI on a 15-year mortgage. The PMI term is only for 30 months after which it falls off automatically. We had very good cash flow but didn't have a ton of money saved up for a down payment.

If we had waited another year or two to get to 20% down, we would've paid probably $20k more for the place we bought. So the PMI (total of $780) was beyond well worth it.
Last edited by sergio on Thu Jun 13, 2019 1:22 pm, edited 4 times in total.

Broken Man 1999
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Broken Man 1999 » Thu Jun 13, 2019 1:18 pm

A local credit unions offers a 100% loan, ($0 down payment and no PMI). Looks like firefighters, law enforcement, nurses, EMTs, school employees qualify.

The loans are available as 10, 20, 30 years fixed, and several options for ARMs as well.

OP, are you one of the list of workers I posted?

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Re: Purchasing home with less than 20% downpayment experiences?

Post by cherijoh » Thu Jun 13, 2019 1:53 pm

TomCat96 wrote:
Wed Jun 12, 2019 6:06 pm
I was wondering, for those of you who purchased a home with less than a 20% downpayment, what was your experience like?

Did the costs end up being higher than you anticipated? Were there hidden issues that you did not foresee??
Were your rates higher as a result? And would you recommend it?

I am considering purchasing a home for less than a 20% down payment, but I want to know people's thoughts on it before further considering it.
Most of the positive stories about buying before getting priced out are from people who bought in the last few years since the housing market rebounded. Is the real estate market softening in your area? If so, you might want to wait a little while.

Is it a matter of not being willing to put down 20% (i.e., would have to liquidate investments) or not being able to come up with a 20% down payment? Houses are always more expensive than you think - if you are having problems scraping together a down payment that could be a sign that you aren't ready for a house.

Are you confident in your job security or that there are other opportunities in your area? If not, buying a house is probably a bad idea - especially with a small down payment since a sale within a few years could leave you underwater (i.e., having to bring money to closing as the seller).

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dm200
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Re: Purchasing home with less than 20% downpayment experiences?

Post by dm200 » Thu Jun 13, 2019 2:03 pm

Broken Man 1999 wrote:
Thu Jun 13, 2019 1:18 pm
A local credit unions offers a 100% loan, ($0 down payment and no PMI). Looks like firefighters, law enforcement, nurses, EMTs, school employees qualify.

The loans are available as 10, 20, 30 years fixed, and several options for ARMs as well.

Broken Man 1999
Yes - I see such 100% loans (NO PMI) advertised a lot by several area credit unions.

Do not know the details of how they do it..

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Re: Purchasing home with less than 20% downpayment experiences?

Post by Jags4186 » Thu Jun 13, 2019 2:06 pm

Should you be able to put 20% down before buying a house? Yes. Must you put 20% down on in order to buy a house? No.

Being able to save 20% down demonstrates you are fiscally responsible. Choosing not to put down 20% in this scenario shows you’ve looked at all the loan options, your tax situation, and your cash flow. It may or may not be a wise thing to do, but you’ve analyzed and made a decision.

Putting 3%, 5%, 10% down because that’s all the money you can scrape up is asking for problems IMO.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by Jags4186 » Thu Jun 13, 2019 2:06 pm

dm200 wrote:
Thu Jun 13, 2019 2:03 pm
Broken Man 1999 wrote:
Thu Jun 13, 2019 1:18 pm
A local credit unions offers a 100% loan, ($0 down payment and no PMI). Looks like firefighters, law enforcement, nurses, EMTs, school employees qualify.

The loans are available as 10, 20, 30 years fixed, and several options for ARMs as well.

Broken Man 1999
Yes - I see such 100% loans (NO PMI) advertised a lot by several area credit unions.

Do not know the details of how they do it..
Higher rate on the loan and then they use the higher rate to buy their own insurance likely. No free lunch.

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simplesimon
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Re: Purchasing home with less than 20% downpayment experiences?

Post by simplesimon » Thu Jun 13, 2019 2:07 pm

One thing to be aware of is that offers with a lower down payment are considered weaker in competitive markets with multiple bids. Even if you have a pre-approval letter, it is not a bank's commitment to lend. A buyer with a lower down payment is considered a higher risk of not closing which may scare sellers to go with someone with a higher down payment even if their offer is lower.

It doesn't sound like you're debating between a 10% and 20% down payment...so this is just FYI.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by surfstar » Thu Jun 13, 2019 2:14 pm

We would only purchase what we could more easily afford with 20% down and no PMI. Despite being "qualified' for more.

You don't get PMI back, doesn't go to equity, etc - its a fee/insurance and should be avoided, IMO.

If you qualify for an option that allows less than 20% down and no PMI, that's something I would consider.

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TomCat96
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Re: Purchasing home with less than 20% downpayment experiences?

Post by TomCat96 » Thu Jun 13, 2019 4:22 pm

Thanks everyone for your responses.

I have enough to put a 20% downpayment, but this would come at the expense of liquidating certain assets which would be a taxable event. (some of these assets have been growing for a number of years)

I want to be able to balance the conventional wisdom with the costs of putting a lower downpayment. So I am viewing the endeavor like a math equation.

I'd rather put a lower downpayment if possible, but its been hard to accurately gauge the costs of the lower downpayment. I will have to take some time to read a little more into what everyone is saying, particularly with the FHA loan stuff.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by boglenomics » Thu Jun 13, 2019 6:00 pm

Tricky situation that I am also facing as well. I have the assets to meet the 20% requirement and a lot more in tax advantaged accounts and some taxable account holdings. Pulling from either would be a massive taxable event and greatly outweigh the PMI cost. Tapping into my emergency fund is a no go in my book.

Saving 30% of my income in these accounts makes it hard to reach the 20% (+5% closing) recommended for a down payment. Rents in my area are higher than comparable mortgages. If I wait I'd lose a few years of equity buildup which would likely be more expensive than the PMI cost. If I stop my contributions to the IRS max I lose that tax advantaged space forever.

If you have assets to back the majority or a significant part of the home value that wouldn't be to your advantage to tap into (i.e. sale of taxable, 401K, or Roth) I think putting down less makes sense knowing that if things absolutely hit the fan in the worst disaster case scenario you wouldn't be at risk of foreclosure.

Also, despite the plan for the fed to cut rates again. I don't see the potential for rates to ever be this low again. If rates go up even slightly in the future taking on PMI to lock a low rate would have been a no brainer in hindsight.

With rates and the utilization of tax advantaged accounts taken into the consideration this becomes more of a grey area. If the downpayment was less than 10% I might be more concerned about affordability and getting the best rate.

Under my assumptions I have determined that if I plan to stay in a home long term that putting 10% (+5% closing) down to take advantage of current rates and tax advantaged fund placement far outweighs the cost of PMI (assuming this is a primary residence).

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Re: Purchasing home with less than 20% downpayment experiences?

Post by buhlaxtus » Thu Jun 13, 2019 6:20 pm

TomCat96 wrote:
Thu Jun 13, 2019 4:22 pm
particularly with the FHA loan stuff.
The insurance costs for FHA loans - partly up-front and rolled into the loan, and partly paid monthly - have become onerous. I haven't looked lately, but I rather doubt an FHA loan is a good idea for anyone, anymore.

The biggest reason to put down 20% instead of 5% is to avoid being underwater if the market dips and you need to sell. If you have other assets, they can cushion that risk for you. Of course it's possible that your house and your other assets could lose value at the same time.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by wtjbatman » Thu Jun 13, 2019 6:32 pm

In 2016, we purchased a new construction home with 0% down using a USDA loan. So far has worked out very well, but we haven't sold it yet. I believe PMI on a USDA loan is fairly small, .4%.

If/when we do sell, the house has already appreciated 15% in value so I'm not too worried at the moment.
Last edited by wtjbatman on Thu Jun 13, 2019 6:33 pm, edited 1 time in total.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by Miguelito » Thu Jun 13, 2019 6:32 pm

We bought our 1st home with a 10/10/80 loan (never paid PMI). We only had 5% of our own and borrowed from family for the other 5%. But it was a good size home and we were starting out our good careers and had just married. Within one year we paid back the family loan and in the next 3 years paid back all of our hefty college loans and the remainder of the 10% loan. Shortly after, we refinanced the "80" loan to 15 years. At that point we were making at least 50% more than what we were when we bought the house - and we had sufficient income for all the payments when we bought it.

My point is, I personally think it's fine, but where you are on your career and income curves matters.

We would never do such a thing where we are in our lives now. 15+ years later, our income is not likely to go much higher and we would want something we could comfortably afford and for which we have saved 20%+ for a down payment. When we bought our current, nicer home 8 years after the first house, we put 20% down and could comfortably afford the 15-year mortgage. Now halfway done with that, and with the appreciation and improvements, we have nearly 70% equity on the house. Makes up for what we lost on the first house.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by rascott » Thu Jun 13, 2019 7:49 pm

Jags4186 wrote:
Thu Jun 13, 2019 2:06 pm
Should you be able to put 20% down before buying a house? Yes. Must you put 20% down on in order to buy a house? No.

Being able to save 20% down demonstrates you are fiscally responsible. Choosing not to put down 20% in this scenario shows you’ve looked at all the loan options, your tax situation, and your cash flow. It may or may not be a wise thing to do, but you’ve analyzed and made a decision.

Putting 3%, 5%, 10% down because that’s all the money you can scrape up is asking for problems IMO.

I think that's all very life reverent. If you are young and have rationale expectations of large salary increases.... that's different than just scratching by with no expectation of large increases coming.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by Jags4186 » Thu Jun 13, 2019 8:08 pm

rascott wrote:
Thu Jun 13, 2019 7:49 pm
Jags4186 wrote:
Thu Jun 13, 2019 2:06 pm
Should you be able to put 20% down before buying a house? Yes. Must you put 20% down on in order to buy a house? No.

Being able to save 20% down demonstrates you are fiscally responsible. Choosing not to put down 20% in this scenario shows you’ve looked at all the loan options, your tax situation, and your cash flow. It may or may not be a wise thing to do, but you’ve analyzed and made a decision.

Putting 3%, 5%, 10% down because that’s all the money you can scrape up is asking for problems IMO.

I think that's all very life reverent. If you are young and have rationale expectations of large salary increases.... that's different than just scratching by with no expectation of large increases coming.
If you’re expecting large salary increases you certainly can wait a year or two, get the salary increase, and save the 20%. It’s thinking like this that gets many people into trouble. Again, it could work out, but why put yourself in an uncomfortable situation that a little patience would avoid?

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Re: Purchasing home with less than 20% downpayment experiences?

Post by MrCastaway » Thu Jun 13, 2019 9:48 pm

Wife went this way putting only 3.5% down back in house we live in now several years back before we were married. It's a relatively inexpensive home so I don't see any issue with not putting 20% down. Has not affected us in the slightest other than ~50$ a month in PMI. PMI + Mortage + insurance = 9% of our gross income so in current situation where we both are employed I do not see any issue. Next home we buy will be larger one in which we will be putting 20% down but that will be more for piece of mind rather than it makes money sense.

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Re: Purchasing home with less than 20% downpayment experiences?

Post by AerialWombat » Thu Jun 13, 2019 10:07 pm

Since 2015, I’ve done 0%, 0%, 5%, 10%, and closing in a month on a 20%.

So far, the mortgage process itself has been just as smooth each time. Fees may be a tiny bit connected to LTV, but I haven’t noticed anything I didn’t expect. I knew going in to the first two that the VA funding fee would be there, and on the current application the origination fee is a whopping 1.5%, but it’s a portfolio loan for a rental property, so I knew that would be a bit higher than my owner-occupied loans.

A month ago, I also did a refi on the 10% down house, using Better.com. Their documentation demands were outrageous, but the fees were dirt cheap and the rate amazing. I put in an extra 10% to eliminate PMI, wish I had just done that from the beginning.

Next year, I will likely use my FHA loan slot, and I expect that one to be slightly more challenging, but it’s all about going into it understanding the underwriting criteria.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

mesaverde
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Re: Purchasing home with less than 20% downpayment experiences?

Post by mesaverde » Fri Jun 14, 2019 5:52 am

The extra interest you pay (and PMI or prepaid PMI in the form of a higher interest rate) is simply the price you pay for using someone else's money. That's it, it's simple. Who knows, even if you can put a full 20% down maybe that isn't the best decision- maybe you'd be better off leaving that money LIQUID and invested in something, who knows?

Depending on where you are buying, if putting only 0, 3, or 5% down means buying earlier than you otherwise could, it can be a very sound financial decision. In my case I bought a condo one year ago in Arlington, VA with just 5% down. The fact that Amazon is opening a 2nd HQ here has caused the value to increase by 45k since I bought it. I'm refinancing to a lower rate now, & will easily have 80% LTV largely because of the increased value.
"Learn from the past, live in the present, plan for the future"

Oddball
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Oddball » Fri Jun 14, 2019 8:04 am

Nissanzx1 wrote:
Thu Jun 13, 2019 6:43 am
I did zero down FHA when I purchased my first home.

Lived there for 10 years. Made every payment on time. Refinanced twice, one to remove girlfriend and another to move for 15 year vs 30. Never took any cash out. After ten years walked away with $7000 upon sale. Make $675 payments for 10 years. I paid about $81000 and took home $7000.

Home also needed $21000 in repair during that ten year period. A/C, roof, windows, garage door, etc etc. I had to cash flow those repairs and left them sitting in the street with out $1 extra in value to the home upon sale. Sold for a few hundred less than I bought.

Safe to say renting would have been way way less expensive...
How much would you have paid to rent the same type of house? Based on your numbers you paid about $792 a month over 10 years to live in the house. That doesn't include any tax benefit you receive for the mortgage interest.

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F150HD
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Re: Purchasing home with less than 20% downpayment experiences?

Post by F150HD » Fri Jun 14, 2019 10:53 am

avoid PMI at all costs, IMO a waste of $$. Take out a piggyback loan for a downpayment if you can.....

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dm200
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Re: Purchasing home with less than 20% downpayment experiences?

Post by dm200 » Fri Jun 14, 2019 11:04 am

F150HD wrote:
Fri Jun 14, 2019 10:53 am
avoid PMI at all costs, IMO a waste of $$. Take out a piggyback loan for a downpayment if you can.....
In my opinion, though, if buying now makes 100% sense AND you can afford to do - then paying PMI can sometimes make sense. I do agree that you should try to avoid it.

I believe as well, unfortunately, it has become more difficult to get rid of PMI - and that it can take longer as well.

Look into some of these "first time buyers" programs with low (or no) down payments needed or other "creative" options. Sometimes, for the right home and for the right price, a seller might take back 20% or so as a second trust. never hurts to ask. It can help if that taken back 2nd trust is not long term.

I think, still, a VA loan (if qualified) can be the best way of not needing down payment.

Dottie57
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Dottie57 » Fri Jun 14, 2019 11:17 am

I put down 2%! :shock: in 1987.

The city I live in had a special financing program for a condo development created for first time owners. I put down 2%, had a primary FHA mortgage (10%) and a secondary simple interest(5%) in amount of 5k.

The city thought it would sell to young couples with or without kids. They were WRONG, The condo satisfied a need for homes for single women who could not quite afford their own home.

joe3411
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Re: Purchasing home with less than 20% downpayment experiences?

Post by joe3411 » Fri Jun 14, 2019 11:34 am

When I bought in 2013, I did a prepaid PMI, or single payment mortgage insurance.
It worked out well because it wasn't reliant on getting an appraisal when I had 20% equity. It also didn't matter if the house was worth less than we paid for it because PMI was already paid for.

Santhony511
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Santhony511 » Fri Jun 14, 2019 11:38 am

I bought a house two years ago with 20% down in southern California. I watched the prices go up for 5 years as my philosophy is to buy high and panic sell low. I could have purchased in 2012 with 5% down or less. In retrospect that would have been the smart move. To me home ownership in general is the biggest scam I have come across where so many people willingly dive in without checking the depth. The first 6% increase in value of your home goes to the realtors and making the house presentable for sale. You might have to move out of the house before its sold and that could cost too. The bank owns 95% of your house and you are responsible for 100% of the costs to repair it, update it and maintain insurance on it. What a great deal for the bank. If you are pretty certain that you can commit to owning it for a decade or more and the area doesn't show any signs of deteriorating because of the local economy etc and your wife or husband promises not to divorce you it might worthwhile. When your equity is that low in a home you are renting no matter how you look at it. You either rent the money or the house. If you don't believe that don't pay your mortgage for a couple months and see if the bank doesn't remind you. Keep in mind you have to pay interest on the mortgage which is more than the rate of inflation and possibly the rate your home is increasing in value. What complicates things is the emotional side of it all: spouses, children etc.... I realized long ago any time emotion is involved whether it is homes, funerals, weddings, engagement rings, divorces, cars etc... the deck is stack against you.

Lets say it all goes south for you or you needed to move in less than 10 years. Could you afford to convert this into a rental and cover the expenses that are see and unforeseen?

Good Luck

msk
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Re: Purchasing home with less than 20% downpayment experiences?

Post by msk » Fri Jun 14, 2019 11:57 am

I put 5% down on 3 homes in 3 different countries, all at the same time. That way I could say honestly that I had nil debt obligations, at that instant. I was 32; the innocence and gullibility of youth... All my friends were making :moneybag And then borrowed to buy furniture so that I could move into one of them. Rented out the other two. Kept all 3 some 20 years. Two turned out to be fabulous investments, one just kept up with inflation. Had a few months off and on when I had to use most of my salary just to meet mortgage payments, when I was between tenants. Overall, the endeavor launched my RE investing life. Could have turned sour...

Nissanzx1
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Nissanzx1 » Fri Jun 14, 2019 12:21 pm

Oddball wrote:
Fri Jun 14, 2019 8:04 am
Nissanzx1 wrote:
Thu Jun 13, 2019 6:43 am
I did zero down FHA when I purchased my first home.

Lived there for 10 years. Made every payment on time. Refinanced twice, one to remove girlfriend and another to move for 15 year vs 30. Never took any cash out. After ten years walked away with $7000 upon sale. Make $675 payments for 10 years. I paid about $81000 and took home $7000.

Home also needed $21000 in repair during that ten year period. A/C, roof, windows, garage door, etc etc. I had to cash flow those repairs and left them sitting in the street with out $1 extra in value to the home upon sale. Sold for a few hundred less than I bought.

Safe to say renting would have been way way less expensive...
How much would you have paid to rent the same type of house? Based on your numbers you paid about $792 a month over 10 years to live in the house. That doesn't include any tax benefit you receive for the mortgage interest.
We have a rental now just Behind that home that we own and rent out for $650. It wasn’t a good financial decision to buy that first house for me. I did learn from it so all is not lost...

Quickfoot
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Re: Purchasing home with less than 20% downpayment experiences?

Post by Quickfoot » Fri Jun 14, 2019 12:52 pm

TomCat96 wrote:
Wed Jun 12, 2019 6:06 pm
I was wondering, for those of you who purchased a home with less than a 20% downpayment, what was your experience like?

Did the costs end up being higher than you anticipated? Were there hidden issues that you did not foresee??
Were your rates higher as a result? And would you recommend it?

I am considering purchasing a home for less than a 20% downpayment, but I want to know people's thoughts on it before further considering it.
Look at credit unions. We did a 400K loan with 8% down, local credit union loan that they do not sell and they offered much lower PMI rates, we got 3.99% with 4.05% APR on a 30 year term. PMI is less than half the normal rate.

Be aware of what your options are to drop PMI, houses are still expected to appreciate pretty quickly, many loans make you hold the loan for 5 years before you can drop PMI even if the loan drops below 80%. Refinancing to drop PMI before that is an option.

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