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

[steve85]

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]

Sounds like you already made your decision.

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

[canada94]

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.

[cschin4]

Yes, there are lots of reasons NOT to get a 15 yr mortgage. I would encourage you to get a 30 yr. Why? Flexibility. Think about possible life scenarios. First, if you want to pay off a 30 yr in 15, you can do so with no prepayment penalty. So, you already have that option there. But, in real world issues, think about it. IF you are laid off, ill, disabled, have a period of decreased or reduced income, you will have an easier time swinging it for awhile and getting by if you are not locked in to the higher 15 yr payment. The 30 yr offers you some breathing room and the time you need breathing room is when things are tight. So, it is kind of like a bit of insurance on your house and your ability to keep current. Right now, you might not ever forsee any problems paying the mortgage, but I can tell you that time and nature and fate and circumstances have a way of popping up when you least expect it. So, i advise the 30 yr.
Having said that, we paid off our 30 yr mortgage in 7 yrs.

[canada94]

Well done Steve, you wont lose money with that deal, dont you jus love it when a plan comes together

[jicasey]

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?

211k house on a 120k income is actually living really modestly. I wouldn't sweat that decision at all. As long as you leave yourself with 5- 6 months emergency fund, I don't see any reason not to do it and not to go with the lower rate 15 year.

[jicasey]

Yes, there are lots of reasons NOT to get a 15 yr mortgage. I would encourage you to get a 30 yr. Why? Flexibility. Think about possible life scenarios. First, if you want to pay off a 30 yr in 15, you can do so with no prepayment penalty. So, you already have that option there. But, in real world issues, think about it. IF you are laid off, ill, disabled, have a period of decreased or reduced income, you will have an easier time swinging it for awhile and getting by if you are not locked in to the higher 15 yr payment. The 30 yr offers you some breathing room and the time you need breathing room is when things are tight. So, it is kind of like a bit of insurance on your house and your ability to keep current. Right now, you might not ever forsee any problems paying the mortgage, but I can tell you that time and nature and fate and circumstances have a way of popping up when you least expect it. So, i advise the 30 yr.
Having said that, we paid off our 30 yr mortgage in 7 yrs.

I agree in theory with your comment but not if you can comfortably afford the 15 year. If the interest rate is the same or similar, then by all means go with the 30 year.. But if the 30 year rate is something like 4.75% and the 15 year is around 4% and you aren't concerned about being able to easily afford the payments, it's smarter to go with the 15 year. Otherwise you are paying 75 basis points a year on a large loan unnecessarily. Great job on paying off in 7 years. Sure you paid more interest over that time than you likely had to because of a higher 30 year loan rate, but still, nice going.

[ukgaz]

This week the government introduced plans to make it a requirement that prospective homeowners have to put down a minimum of 20%

Consumers, lobbyists and others will now have until June 10 to submit comments to the Federal Reserve board regarding the new rules

[krantcents]

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?

If you feel uncomfortable with having enough liquid assets, you should delay buying a house. It is not an issue of 15 or 30 year mortgage, but the amount of your liquid assets.

[maat55]

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?

I don't know where you live, but if I had your income, I would be able to pay for my house with cash in 3 years(after living expenses). And you are telling us that you cannot save up 20%?

Here is the beauty of the 20% downpayment. Those like you who are in a hurry, would have to settle for less house(or wait longer), which would allow you to save up more money and move up quickly.

You need to rethink your mentality towards money. Adhering to sound barriers will allow you to prosper at all times.

[maat55]

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.

If I were you, I would not worry about prices or rates. I would follow a sound plan at all times. You have plenty of income to save for a 20% down if you want it bad enough. The key to prospering is good priorities and sticking to them.

[cschin4]

I agree in theory with your comment but not if you can comfortably afford the 15 year.

But, that IS my point. That you can comfortably pay it NOW. That there are circumstances and issues and illness and job downsizings and disability and on and on that can then make it difficult or uncomfortable and that the 30 yr gives you breathing room and flexibility. And, there is no prepayment penalty so why not? The only real difference is that you will get a slightly higher interest rate on the 30 yr. But, if you are paying it off early that addresses that. So, yeah, I might have a paid a bit more interest in paying off my 30 yr loan in 7 yrs versus a 15 yr loan, but i viewed it as an insurance policy of sorts. And, you don't need insurance policies for good times, you only need it for hard times. So, don't financially strap yourself if you don't have too.

[AtoZ]

Home ownership should not be rushed. Remove the emotion from the purchase if possible and you will find little harm in waiting. In the amount of time it takes you to save your 20% and a 6 month reserve for unexpected items it is likely nothing will have changed and you might even get the same home for a better price. Best of luck.