Home purchase with a minimal down payment

[skruggie]

Originally Posted by jsk

I was recently talking to an loan officer of a small bank -- he was saying that some banks give conventional loan even with 5% down-payment.

Other suggestion i heard is: u can take a loan against 50% of ur 401k a/c and use that against 20% downpayment. Of course, the gain in interest payment must be comparable and am not sure if it is a good idea to take a loan against 401k.

I'm working with both BOA and my credit union from work - both banks would give me a conventional loan with as little as 5% own. I think it depends on your credit rating and overall debit to income ratio.

Im not rushing into anything right now, want to continue to save a bit more before making a move, will probably put this on hold until January. I will be putting down between 15-20%, depending on what the final purchase price ends up being. If prices keep inching downward, 20% will be a realistic goal for me.

I've also reconsidered the neighborhoods I've been looking at so that I can get into something that won't have me squeezed quite as tightly as the prime neighborhoods I have been focusing on.

[skruggie]

To add some closure here, my new condo closed this week

Despite where I started, I ended up putting 20% down and got a really good deal for the area I live in. The place needs quite a bit of updating, but at the end of the day when I'm ready to move onto bigger & better (and the market eventually rebounds), I"ll make a nice profit off of this.

It's so funny, I started off thinking the polar opposite of what I ended up doing. After what I have been through, and the research I did, there is no way on the planet I would ever pay PMI, or walk into this kind of investment without a decent amount of equity, and a mortgage that is easily affordable. I am only paying $200 a month more in PITI than I am in my rent right now.

The one thing I did that I know is not advisable is take a 401k loan for part of the down payment, but I walked into that with my eyes wide open, and it will not be a hardship to get it aggressively paid back. I felt that for my situation, it was the right thing to do. it was my own fault for focusing so much of my savings in retirement vehicles, and I learned that lesson loud and clear -it is just as important to have non-retirement nest eggs as it is in retirement. So that won't happen again.

All in all, although I'm not emotionally attached to my purchase, I believe I did the right thing. It is my stepping stone to get me where I want to go.

[snafu]

Congratulations Skruggie. Did you close on the short sale offer you mentioned in July? Did you get the features you desired like location 91/505,506, etc., 1,600 sf, 2B/2Bth, W/D hook-up?
What updating do you feel necessary? Perhaps if you list items and your prioritizes, you can glean information from experienced owners to avoid the errors we made. If cosmetic, are you willing to DIY? A lot of tasks are not as difficult as imagined if you are willing to learn. Inexpensive tasks like painting add value for not much effort for example. The big box DIY stores run regular, free, non obligatory home improvement seminars which are extremely helpful.

If you are willing to buy re-furbished or gently used appliances you can save significant sums. People often upgrade and show home furnishings go to auction.

[skruggie]

Originally Posted by snafu

Congratulations Skruggie. Did you close on the short sale offer you mentioned in July? Did you get the features you desired like location 91/505,506, etc., 1,600 sf, 2B/2Bth, W/D hook-up?
What updating do you feel necessary? Perhaps if you list items and your prioritizes, you can glean information from experienced owners to avoid the errors we made. If cosmetic, are you willing to DIY? A lot of tasks are not as difficult as imagined if you are willing to learn. Inexpensive tasks like painting add value for not much effort for example. The big box DIY stores run regular, free, non obligatory home improvement seminars which are extremely helpful.

If you are willing to buy re-furbished or gently used appliances you can save significant sums. People often upgrade and show home furnishings go to auction.

I got everything except the square footage - I'm in 91506, 1250 square feet, 2 bedroom with washer/dryer. In a very nice complex, very lush with greenery, and quiet. And the unit comes with a washer/dryer and stove, I just need to replace the dishwasher - I have a fridge already that I'm taking with me from my current apartment.

I didn't end up with the short sale - and that one was pretty horrendous, but I am paying the same price I was offering for the short with a standard sale, and the inspection came back almost completely clear. This one is a much better value for my money.

I am so not the DIY type The place is very cosmetically outdated, just moving in I am putting down laminated floors, removing the popcorn ceiling and of course repainting everything. there is a lot more I want to do as I can afford to have done, those are the basics I need to move in. And I'm hiring a contractor to take care of it, well worth the expense to me.


I also have a friend who's husband is a handyman, and I will be hiring him to take care of some other stuff for me as well.

Like I said, I'm not at all emotionally attached to the place - it is the best I could have done in my price range and when the time comes I will upgrade to what I really want. But in the interim for the next few years, this will be a good investment for my situation.

[snafu]

While I understand hiring a tradesman for popcorn ceilings and updating electrical fixtures or taps [electric & plumbing] I'm disappointed that you would not consider painting since it's a skill worth learning. Perhaps consider working with the contractor as his assistant. At the least you can tape baseboards, door/window frames. I'd compare price for handyman painting.

I think it's important to make-up a simple contract with whoever you hire that details the task to be done, who will do the work, start date & time, completion date, time and payment details. Never, ever pay in advance. If you must pay for supplies, have them write out a list and make it clear you will insist on the print-out from the supplier. Contractors pay about 20% less than the public, more if they have an ongoing relationship with the supplier.

Since you are looking at future value, I suggest you work with a colorist as they have 5 year lead for trends.

[jsk]

Congratulations skruggie..u r the one who got me thinking about conventional loan with 10% downpayment !!

Originally Posted by skruggie

To add some closure here, my new condo closed this week

Despite where I started, I ended up putting 20% down and got a really good deal for the area I live in. The place needs quite a bit of updating, but at the end of the day when I'm ready to move onto bigger & better (and the market eventually rebounds), I"ll make a nice profit off of this.

It's so funny, I started off thinking the polar opposite of what I ended up doing. After what I have been through, and the research I did, there is no way on the planet I would ever pay PMI, or walk into this kind of investment without a decent amount of equity, and a mortgage that is easily affordable. I am only paying $200 a month more in PITI than I am in my rent right now.

The one thing I did that I know is not advisable is take a 401k loan for part of the down payment, but I walked into that with my eyes wide open, and it will not be a hardship to get it aggressively paid back. I felt that for my situation, it was the right thing to do. it was my own fault for focusing so much of my savings in retirement vehicles, and I learned that lesson loud and clear -it is just as important to have non-retirement nest eggs as it is in retirement. So that won't happen again.

All in all, although I'm not emotionally attached to my purchase, I believe I did the right thing. It is my stepping stone to get me where I want to go.

[Frugal]

The problem with such a low downpayment is that you will have much more loan, and end up paying more interest. We had to try really hard to make a 20% downpayment, and were able to do it although I got laid off. It is possible, just much harder!! I would personally be wary of a downpayment so low as what you mentioned.

[skruggie]

Originally Posted by Frugal

The problem with such a low downpayment is that you will have much more loan, and end up paying more interest. We had to try really hard to make a 20% downpayment, and were able to do it although I got laid off. It is possible, just much harder!! I would personally be wary of a downpayment so low as what you mentioned.

Having gone through this experience, I concur. There is no way this would have made sense financially without 20% down. Despite how much I tried to fight that fact.

[docstudent]

I took the plung in Oct of '09, and I went the FHA route. I live in the southern California basin as well, and the prices are great at the moment! The only downside is I purchased my place for $235,000---a studio condo, great neighborhood, now the same unit sold for $170,000 (the forclosure crisis) though a typical unit went for $330,000 at the height of the boom...go figure! I'm planning on staying in the area for another 5 years or so, plus I plan on renting out the property...I visited my hometown for a couple of months, and cleared a cool $5000 over the summer, you can def make your property work for you in the right neighborhood.

If I could do it over again, I would have saved up a bit more in my saving's account...I'm back to where I was financially before I got my place...I will admit that things were tight for a year or so.....Homeownwer's insurance, emergency plumbing, appliances going out...and there is no landlord to call....and a ton of other things that simply came up. However, I take great pride in ownership, and it gives you a different perspective as well...On the bright side, I still take a mandatory trip out of the country once a year....it was worth it...

[snafu]

Fact is if you're not having to move or having to re-finance, the gyrations of home values is only affecting your net worth on paper. The media is promoting fear once again, I've been changing the channel when they tell me to talk to my doctor about brand name drugs, or Greece can't pay it's bills [fact is the population isn't paying taxes for the services they demand] or X company missed analyst's expectations by .02.