I don't have 20% to put down, I can afford a 15y mortgage

[steve85]

I know everyone says to put down 20% when buying a house.
Putting 20% into the down payment wouldn't leave me with enough liquid savings to feel comfortable.
I'm on track to retire at 55, currently 25yo.
Income: 120k
Debt: 12k on my car, nothing else.
Ill probably be putting 15-20k down.
Offer price on the house will be 211k, comps have sold for 240-260k in worse condition.
I can easily do a 15year mortgage, any reason not to go for it?

[JoshuaHeckathorn]

I'm not quite as conservative as some of the other posters here, so I would say go for it if you have stable employment and really love the place. You have little debt, a decent income, and it sounds like you must live in an area with a rather low cost of living too. Make your offer and go for it while continuing to build your EF as much as possible prior to closing.

[bjl584]

I would advise you to make sure that you hold back enough cash for those unexpected and expected costs that you will incur as a homeowner. With your income and current debt you can easily not have a 20% down payment, but you didn't give any information as to your other assets or savings. Make sure to have at least a 6 month emergency fund in place before buying your house.

[Seeker]

Just one thought to throw in here....

Why the 15 year mortgage?

I would suggest that you go with a normal 30-year and just pay extra toward your mortgage each month that you can afford to.

That way if/when something "unplanned" does come up, you won't have to struggle too much to make a monthly payment for a 15-year mortgage versus the lower amount (usually) of payment that represents one month on a 30-year mortgage.

With a 30 year mortgage - you can still make the "required" payment if you need a portion of the money for something else.

[steve85]

I plan to hold back about 25k in my EF.
I have fantastic job security and don't plan to move anytime soon.
The 15y vs 30 year only costs me $286 more in my monthly payment and hits the crossover point after the first payment. The interest rate is significantly lower and you don't pay PMI. The seller is offering a 2year home warranty, even without it I don't expect a problem paying for any typical homeowner expenses.

[MrPolarZero]

Yup, it would be better if you go for it rather than wait for you to raise the 20 % down. Anyway, that down is actually not fixed, so you can practically put any amount as down.

[onlyoneuno]

Go for 15yr all the way!! Aim to pay it down early as well by adding that 13th payment each year. Since you don't have much dept and you have a high income this should be cake for ya. Good luck

[jpg7n16]

If you make so much extra, why do you still have debt on the car?

Given the rest of your situation, you may be one of the few who could pull it off - and you say you avoid PMI either way. The housing level isn't enough to be prohibitive to your income, you won't have PMI, and you're well under the 28% guideline. (these are the main benefits of putting 20% down)

I assume you had it appraised yourself, not just taking their word for it, right? And inspected to make sure there's no underlying foundation issues etc.? I know you've got a 2 year warranty, but a foundation problem in 3 years could lower the home value.

If you've done your due dilligence, I think you're one of the odd ones where it's okay.

[littleroc02us]

If you make 120k a year, shouldn't you be able to save that in like 6 months or so? If not, what are you spending your money on?

[MonkeyMama]

My initial reaction is "what is the rush?"

IT all sounds fine and dandy, but how steady is your job? Why couldn't you just wait a few more months to save 20%?

I have watched too many people rush into home ownership with little down and high paying jobs. For most, has spelled disaster.

If your job is really steady, is another story, but I don't see how it could hurt to wait a while longer and buy with a more substantial down payment.

[steve85]

Originally Posted by MonkeyMama

My initial reaction is "what is the rush?"

IT all sounds fine and dandy, but how steady is your job? Why couldn't you just wait a few more months to save 20%?

I have watched too many people rush into home ownership with little down and high paying jobs. For most, has spelled disaster.

If your job is really steady, is another story, but I don't see how it could hurt to wait a while longer and buy with a more substantial down payment.

The job is extremely steady.
If there are layoffs they go from bottom up, I'm #3 on my shift and top 1/3 overall.
The company is expanding and currently understaffed, no plans to lay people off anytime soon.

The rush is because it's the right house at the right price and interest rates are really good right now. It's time for some more space, we're sick of the apartment/condo lifestyle.

[steve85]

Originally Posted by jpg7n16

If you make so much extra, why do you still have debt on the car?

Given the rest of your situation, you may be one of the few who could pull it off - and you say you avoid PMI either way. The housing level isn't enough to be prohibitive to your income, you won't have PMI, and you're well under the 28% guideline. (these are the main benefits of putting 20% down)

I assume you had it appraised yourself, not just taking their word for it, right? And inspected to make sure there's no underlying foundation issues etc.? I know you've got a 2 year warranty, but a foundation problem in 3 years could lower the home value.

If you've done your due dilligence, I think you're one of the odd ones where it's okay.

The Car debt is at 0%, I see no reason to pay it off any faster.
KBB value puts it at 20k, if I wanted to get rid of it I'd have no problem.

Appraisal and inspection will absolutely be done.

[steve85]

Originally Posted by littleroc02us

If you make 120k a year, shouldn't you be able to save that in like 6 months or so? If not, what are you spending your money on?

My savings we're wiped out selling my condo in november. I think I've done extremely well saving since then.

[steve85]

Thanks for all the comments!
It's nice to see all the different viewpoints, I'll post an update when I have one.

[maat55]

Originally Posted by MonkeyMama

My initial reaction is "what is the rush?"

IT all sounds fine and dandy, but how steady is your job? Why couldn't you just wait a few more months to save 20%?

I have watched too many people rush into home ownership with little down and high paying jobs. For most, has spelled disaster.

If your job is really steady, is another story, but I don't see how it could hurt to wait a while longer and buy with a more substantial down payment.

I was thinking the same thing. IMO, prices still have a little ways to fall and interest rates are going to stay low for a while.

[steve85]

Originally Posted by maat55

I was thinking the same thing. IMO, prices still have a little ways to fall and interest rates are going to stay low for a while.

I'm not 100% certain rates will stay low. There's even a chance they might go lower after QE2 expires, but who knows. I don't think the housing market will go up anytime soon, but it is showing a lot of signs of stabilizing in my area.

[Chesterkill1]

Sounds like you already made your decision.

[steve85]

Originally Posted by Chesterkill1

Sounds like you already made your decision.

Yes, the decision has been made and the offer was submitted.

[canada94]

Originally Posted by steve85

I know everyone says to put down 20% when buying a house.
Putting 20% into the down payment wouldn't leave me with enough liquid savings to feel comfortable.
I'm on track to retire at 55, currently 25yo.
Income: 120k
Debt: 12k on my car, nothing else.
Ill probably be putting 15-20k down.
Offer price on the house will be 211k, comps have sold for 240-260k in worse condition.
I can easily do a 15year mortgage, any reason not to go for it?

People think that the shorter the mortgage ,the better it is, as long as you do your comps on a property, and you are getting agood discount on the comp prices(as Above), then get a repayment only mortgage for 25 years, when the equity in the property goes up, you can then take out the difference,remortgage the property and do it again, you then have a lump sum to re-invest in another property, google Robert Shemin and he will tell yaalso, re-investing it in property saves you paying capital gains tax

[Frugal]

I would say go for it. We had 20% to put down, but not nearly as high of an income as you. You have a high income for someone 25 years old. At your age, a house could be an excellent investment, especially if you could rent it out later as a rental income (property is the BEST and most stable form of investment, in my opinion) once you move on past your "starter" house.

This is what I would have done, if I had had the resources at your age.

You should of course consult with a financial advisor before you make any decisions, especially since this is probably your first time buying a home. I know I talked to my father, and my uncle, who is financially very successful (he also bought his first home at about 24 and later turned it into a rental investment...now, years later, he was able to go back and live there again--turned out nice to have).

As for a 20% downpayment wiping out your savings, I understand. It wiped out three-four years of my personal savings (prior to getting married) that I had literally watched every dollar to build up. It also took my husband's savings completely, as well as financial help from a relative who wanted to help us get a start when loans are hard to get without a 20% downpayment anymore. That being said, it was very tough and left me shell-socked to see the balance in my account gone after everything I had worked for. However, as I take care of, and carefully clean our new house, I know that it is an asset, something that is critical for our future should we have children, etc. We don't own cars worth very much, although we do own them outright. It is a good feeling to own your own home, even with a mortgage debt (which I hate!). I know that if anything happened, we could always sell it and move to find a job. A home is kind of like a form of equity-leverage. If you can sell it in the market you are in, it could be an asset. In our situation, we could sell ours at any time, and it is in demand, in a newer area. However, other areas of the country are terrible right now re: the real estate/resale market. Investigate the conditions in your part of the country, before you make any decision. Buying a house is always a risk, and there is never a 100% guarantee of making a profit when you resell it...in ANY market.

Hope this helps. I hope your house-buying situation works out. These are only my opinions, of course, not professional advice, but I have learned a thing or two about home-buying.


p.s. If you buy a brand-new home, sometimes you can get a very nice WARRANTY. We have already used this and had the dishwasher and sink replaced due to minor defects. It really helps in the first year or so.