How much would I need to make a down payment on a HOME...

[Savingmonster]

Whats a realistic figure on the down payment on a house thats b/t $350,000 and 400,000.

In the next 5-10 yrs, I will seriously looking into purchasing a home, how much you think I should have saved up for such a purchase on average?

I don't understand how people do it, but I know I can if I put real effort into it.

[tinapbeana]

most folks will recommend you put 20% down to avoid PMI.

[Savingmonster]

Originally Posted by tinapbeana

most folks will recommend you put 20% down to avoid PMI.

Wow, so I guess if wouldn't be relistic if I have less than $70,000 for a down payment huh?

I guess I better set that goal for when I am 45, about 13 yrs from now.

[disneysteve]

Originally Posted by tinapbeana

most folks will recommend you put 20% down to avoid PMI.

Count me among "most folks." Yes, I believe you should put down 20%. There are lots of creative financing deals out there that let people buy homes with as little as 0% down, but I don't think they are good ideas from the buyer's standpoint.

[zetta]

One option I hear a lot about is to put 10% down, and to take out 2 loans -- the primary one for 80%, and the second one for 10%. If structured right this avoids PMI. Then work like crazy to pay off the 2nd loan as quickly as possible. This strategy would allow you to get into a house sooner while still having some equity as protection against getting upside-down during a market downturn.

That said, I've always put 20% down myself.

[Coleroo]

I think it depends on your comfort level, ability to manage finances, credit history, and how well you can deal with a mortgage / high monthly payments. I also believe that the down payment is only a small part of the picture... someone may think they have tons of money "coming in", put 20% down on a 300k house, yet still not be able to afford the monthy payments because of poor financial habits, too many car payments / leases, high debt to income, etc (not saying you are like that though).

20% has been the tradition in the past.. but in today's "want it now" environment, as low as 0% down is adequate in some lenders eyes. Are you disciplined enough to save - and then put all that hard-saved money onto one house...and still have a hefty mortgage? (years of saving 60, 70k... you would still have a 200k+ mortgage, which is a lot of monthly moola even on a 30 year conventional loan). Do you want a 30 year mortgage to start at age 45? Personally, with my comfort level, I would rather have the peace of mind to know i'd be mortgage free by 45 (so I bought young).

Are 300 to 400k houses your only option? Have you considered that the 300 - 400k style houses you are aiming for now, with inflation, could very well cost double or triple that 13 years from now (unless the housing market nosedives to the bottom of the barrel!). How about considering a cheaper house to purchase sooner, spend those years building equity & inflation value, then sell and trade up? Also, have you done a thorough evaluation on how much house you truly can afford (after the downpayment)? Will your job / income level / debt level at 45 be able to handle it? Will a 200k - 300k mortgage at 45 be "doable" 15 years later when retirement hopes come creeping?


My husband (fiance at the time) and I purchased our first home on March 31, 2006. I had just turned 23 and he was 22. We spent 4 months scouring the market for appropriate houses in our price range... before we even started looking we pulled our credit, reports from all 3 bureas, figured our current annual income and subtracted our yearly savings goals, calculated our debt to income ratio, and came up with a house payment we could comfortably afford. With estimated PMI (we had nothing to put down), taxes, insurance, and mortgage we came up with a comfortable payment of no more than $750 a month. This put us in the house price range of 75k to 100k. We are right outside our state capital, which is a fast growing high tech urban area. Rent prices around here were skyrocketing at the time - one and two bedroom apartments were going for 750+ a month, and houses were more.. it made me SICK to think of wasting years and years and years on rent just to scrape a downpayment together. So we set our goal at 3 bedrooms, 2 baths, half acre of land, in a good low crime neighborhood near my parents. We spent 3 months with a realtor looking at hundreds of houses over the internet and in person - he kept telling us we wouldnt find anything.. but we perservered and found one..a perfect one owner 1150 sq. ft home from 1987 for 83k. Next step - we went to a suggested mortgage broker. We told her our terms and she found what we wanted - a 30 year fixed, no money down, NO PMI loan. We didnt want escrow withheld because we had a savings account for it. Since hubby did not have 2 years of income statements for them, we also had to ask for a no doc loan just in my name (I had a 740 credit score). She found us a great loan too - we financed 100% loan on $83,500 for 30 years fixed, 8.99% with an ending payment of $671 a month. We would have been paying $100+ MORE than that in just RENT on a smaller place if we had decided to wait. THAT made me sick to think about.

I know for some people a 0% down loan seems shocking but I think its a great tool for people who have positive credit history, and are dedicated payers. Being young, and having a personal goal of "no mortgage after 40", I am an advocate of non-conventional loans IF you can handle the cons that go with them. There are lots of other factors that if you DO go for less than a 20% there are things you have to consider:

1. How long are you going to be in the house? I do not recommend a low down payment if you plan to stay less than 10 years due to the possibility of turning "upside down" on your loan.

2. How much income did you base your payment calculation ability off of? Can your lifestyle / habits really afford a 300k to 400k house, even after down payment? Are you sure the income will stay steady enough to meet that (higher) payment that occurs because of a lower down payment?

3. Do you have adequate insurance to cover the payment should any sort of damage or emergencies happen? (disability, flood, fire, home invasion, death of other income source, job loss, etc?)


Pros of Higher 20%+ Down Payment -

Instant equity
Peace of mind if you are purchasing a house at an older age
Get the house paid off even faster
Slim chance of turning upside down on the loan
Lower payments for the same house than if the DP was lower
Great way to aquire a MORE expensive home if your monthly payment comfort level caps a price at a 300k mortgage.

Pros of a lower down payment (0% to 15%)

Enables (capable) young people to purchase houses early and get head start on owning a home
Faster home ownership and independance
No wasted money on rent
Longer lifespan to allow equity & inflation to build (buy at house at 20, pay it off by 35, keep till past retirement and the land will be worth a LOT more)
Great tool in furthering a credit portfolio & score (which helps in many business situations)
Great way to purchase a "cheaper" home


With that said, i guess I could sum it up like this... if you have a great credit history, a steady income, low debt to income ratio, and high financial management skills - and are planning to stay in the home for 10+ years, a smaller down payment is fine.

Oh and on final note, I think education on all these topics are the MOST important of all - I believe that the failure to educate oneself about home ownership / loan pros and cons are the biggest cause of foreclosures / bankruptcy.... unscrupulous lenders tell people how much "house" they can "afford" with big advertisements like 300k loan for 645 a month!! or some other unbelievable deal.. and then when that ARM adjusts in 2 years and payments go up $300 a month, people go into dumbfounded shock, not able to understand why they now can't "afford" that nice new 5 bedroom home in the brick neighborhood.

[Fern]

What housing market do you live in? Does it have to be in that price range?

Don't forget it's not just about the down payment. It's also about how much you can afford to fork over each month toward your mortgage. If you have a modest salary, you will need a down payment that's larger than 20%.

That was my situation 10 years ago; i saved until i could put down nearly half on a $209,000 home.

[PrincessPerky]

IF you have infinite patience go for 100%

if not, that house will cost more by the time you have what 20% would be now...

I set 20% as a goal for my kids.....but the oldest is 5, he has time.

For an adult, it depends on patience, current living situation, and how fast you think the market will go up for the house you want.

And ditto Fern, you gotta be able to make payments for any less than 100%, dunno where but there has to be a calculator somewhere for a rough guess that you can play with.

[ren]

I don't know -- when you can get a 100% loan that's $671, that's pretty safe. But I just threw $350,000 for a single family home in CA (cause I had to pick somewhere) into eLoan's finder and their best deal was an 80/20 that would run $2542 a month. That's an awful lot of cash and may be more than OP's rent.

[MonkeyMama]

I wouldn't consider it without 20% down myself.

If you can't afford it I Would start small, condo townhouse, and move up. In California everyone in our families did this, we all owned a HOUSE at 25 (all in the $600k range - that is a starter house out here today) while our friends are still trying to figure out (yet turn up their nose at living in a condo - they still rent an apartment then - sure that makes sense).

Where there is a will there is a way. Get a 2nd job to save, start smaller, etc., etc. These are all things we did to make it in a crazy market. Waiting 10-15 years was not an option with real estate rising 20% per year. But for now you can take advantage of the slow market and wait wait wait and save save save.

With 20% down and a fixed rate we have never sweated our mortgage, and never been scared by falling prices. I know too many people with ARMs and no down payments who are just running scared today. Be careful. If you can put a little less down with a fixed mortgage, I don't think it is the worst getting in before the magic 20%. But I Would try to be awfully close.

Good luck!

[Savingmonster]

Originally Posted by ren

I don't know -- when you can get a 100% loan that's $671, that's pretty safe. But I just threw $350,000 for a single family home in CA (cause I had to pick somewhere) into eLoan's finder and their best deal was an 80/20 that would run $2542 a month. That's an awful lot of cash and may be more than OP's rent.

WAYYYYYY MORE!!!!!!!!!

[vsjhoc]

You also have to scrape together a few thousand for closing costs, moving expenses, utility deposits, etc.

[LivingAlmostLarge]

$350 is a steal in CA. Seriously we sold a 1 bd condo in CA for not that much less. To the person who bought a house for $75k Dear Lord, I'd do it too. I bought in CA at 21 because we just decided to do it.

I would reccomend putting something down because then it takes discipline to save something. We put down 10% and had cash reserves for stuff breaking, which it inevitably does within the first year.

Depends on level of tolerance, job security etc in this decision.

[disneysteve]

Originally Posted by vsjhoc

You also have to scrape together a few thousand for closing costs, moving expenses, utility deposits, etc.

Plus furniture, appliances, repairs, maybe HOA dues, lawn care, snow removal, trash, sewer, taxes... A lot of people look only at the acquisition cost without fully thinking through the carrying costs.

[Ima saver]

I agree with the 20 % down also. I also agree with buying a cheaper house and trading up every 10 years or so.

[Hot dog]

Definitely buy now don't wait till you have 70000 if you have 20000 buy a 100000 house and continue saving the extra money for your next home then you will have that plus all of the equity you acquire on your smaller house to put down. Especially if you are renting put that money to pay down your principle and not the landlord's (but don't tell my tenants I said that )

[safari]

If I had waited until I had 20% for a downpayment, I would have never become a homeowner. I live in Southern California, where real estate costs an arm and a leg. I started looking for a condo back in 2000, and every month the prices were going higher and higher. I took a risk in the summer of 2001 and bought a condo for $340,000 with 5% down and took out two mortgages -- the first mortgage had a variable APR, which was around 7% at that time and was changing every month, and the second mortgage was fixed at 11%. My income was only $72,000 at that time. After paying the downpayment I only had about $3,000 left in my emergency fund, but I was counting on several things: 1) my income increasing, 2) interest rates going down, 3) house appreciating in value. The risk paid off. In 2003 my condo was valued at $420,000, and I was able to consolidate both loans into one and refinance at 5.375% 30 year fixed. Today my condo is valued at just under $700,000, and I wouldn't be able to buy it now, if I had waited, even though my income has increased quite a bit since then.

[poundwise]

Ideal: 20% or more

Bottom-line: Never less than 10%

Shop for a lender; there are some with little or even no-closing costs.

Avoid interest-only payments, period.

Check your income to house payment ratio. I know people who need 1/2 of their take-home pay just to pay the mortgage; that's just looking for grief IMO.

[disneysteve]

Also remember the rule of thumb that your mortgage debt shouldn't exceed 28% of income. That's another guide to help decide if you can afford the home you are looking at. An additional one is that you shouldn't spend more than 3 times your income on your home.

[tinapbeana]

Originally Posted by poundwise

Check your income to house payment ratio. I know people who need 1/2 of their take-home pay just to pay the mortgage; that's just looking for grief IMO.

i feel this part is more important that one's downpayment, but that's just me. what's the point in saving for 20% down on a house when you still won't be able to afford the resulting monthly payments anyways?

when i started looking for a house, i calculated how much we were willing to pay per month. then i used an online loan calculator and the highest end of the average interest rate for my area to calculate my highest comfortable purchase price.

it worked out well for us. we found a house we liked, bought for about 20% below appraised value, and our mortgage payment is now less than 15% of our net income.