Home purchase with a minimal down payment

[dagaul101]

Well first off congrats on the aggressive payment scheme, never too late to start, I think you have covered all the potential holes

[couchrobt]

It may look fine cos you will be able to acquire the house that you dream of. But by paying just the minimum payment is shouting lots of interest! Think about it. I would go for paying more downpayment (if i am able that is) then have the little balance be paid off next.

[MonkeyMama]

I think the 20% down is important. I may feel extra so living in California with high home prices. I don't think the 2.5 income rules means anything to anyone who lives in (most of) California. Ignore that, and focus on a decent down payment. We wouldn't be in this current housing mess if people actually saved money down when they bought properties that cost 10 times their income. BTW, I don't recommend buying a property 10 times your income. The inability to save 20% down is a clue that it is too much. But, being conservative, I know you can easily spend 5 times your income on a home. If you put 20% down and get a low fixed rate, will probably be fine. Californians are used to spending a huge chunk of income on rent. When you translate that into a mortgage with tax breaks, and don't treat your home like an ATM, it usually works out a little better.

For reference, my house cost $300k, and my mortgage is $1100/month at current. That is cheaper than any studio apartment (even on the wrong side of the tracks) that we looked at a decade ago. To not buy this home because it cost 6 times my income would have been ridiculous. We put 25% down on this home. We don't treat our house like an ATM. To be fair, the cost of the house was 3 times our combined income when we bought, but we knew we could easily afford it on one income, and that we would live on one income. We moved to a low cost area so that we could afford more. But we always felt comfortable with a $300k purchase price with 20% down. (Whether we made $50k or $100k). I felt very uncomfortable paying any more than $300k, personally. We owned a $260k condo in the Bay Area and later bought a $300k home in Sacramento. I wouldn't spend more. Most our friends and family paid $500k - $800k for really old/small homes. I could never stomach those prices. Regionally, we are extremely conservative, even if others are cringing at the idea of buying a house that cost 6 times their income.

I think you are on the right track to focus on taking your time to save a decent down payment. I think saving a proper down payment may take years. Maybe not in your case, but I think people need to learn patience. IT's okay to save up years for the right home.

[MonkeyMama]

My top line list:

Must haves:
Zip codes - 91505, 91506, 91423, 91604 (this is my biggest challenge as there aren't many deals in these zip codes)
2 bedroom/2 bathroom
kitchen with eating area - or enough space to move around in. Not a kitchenette.
at least one bedroom must be very large
square foot minimum of 1200, but I prefer closer to 1600
washer/dryer hookups
Urban area with walking distance to grocery, starbucks, etc.
Prefer not to have neighbors above me
HOA fees not more than $300-350


And in general, I'm looking for a condo that is in relatively good condition and does not much in way of structural changes. I expect that I will upgrade appliances as I can afford to, but I don't want a fixer upper either.

Not asking for much

I think that's fine. When we bought our condo in the Bay Area we were rather picky, on the things that mattered to us. Size, location, etc. Newer end unit was a must. We have had really good luck with move-in ready homes/remodeled to the hilt (the opposite of fixxers).

That said, what we didn't care about what was what got us a deal. The condo we ended up buying was far cheaper than we were imagining we could find such a nice 3-bedroom for. #1 - Terrible selling realtor (kind of our unintended home buying M.O. after home shopping 3 times - keep stumbling onto these properties that are under-marketed and a great deal). That aside - the place also only had one assigned/covered parking space and no laundry hookup. That said, the laundry room was right outside the unit, and I delighted in doing all our laundry at once. It was a good fit for our lfiestyle at the time. We also drove past the place different days/times and found the parking more than ample. I wonder how many people thought, "1 parking space!?!" and just never considered it. In other neighborhoods there likely is no parking and would have been a deal breaker. But we thought about it and decided it was worth the discount - that we didn't care.

Make note of the things that don't matter to you and that matter to other people. That's how you find a bargain.

We were a little concerned that these things would make our condo less marketable when we sold, but not to worry. It took us less than one day to sell when the time came. The previous owners took 6 months with their terrible realtor (which was unheard of at the time - homes were selling in minutes). We almost walked away because we just thought something was wrong, but during escrow it became apparent what was wrong. Their realtor was completely MIA - they gave us everything that we asked for. They confided in our realtor about the whole thing - how terrible he had been and how little they paid him. I share so you can keep your eyes open! We didn't compromise on anything from our wish list.

[TBH]

We are in our second home. Both times we put 20% down. The first time we got luck with our timing in terms of the market, and the house appreciated a lot in value in the 5 years we owned it. The second time we knew we were buying for the long term. The house has dropped quite a lot in value since we bought it in 2009, but I'm not too worried. Putting down 20% meant it would have to drop a lot further before we are upside down on the loan. We have a good interest rate on a 30 year fixed, and we'll just keep plugging away at it.

Even though I have no intention of selling this house for a long time, it does make a difference to me psychologically that I could sell if I wanted to. If I owed more than the house was worth I would feel trapped.

So that's another reason to put down 20%. It insulates you from swings in the market, and allows you to sell the house more easily if you needed to. Sure you wouldn't want to sell it when the value was down, but if you had to sell it would be better not to have to write a check at closing to get out of the situation.

I admire how carefully you're thinking this through. I think you're making good decisions. I also think you should save hard and just wait for a little while, looking at a few things, so when you find that $250K condo with all your must-haves you can snap it up. It does seem like what you want is a tiny bit out of your price range, but a seller who's in a hurry or another dip in the market could work out in your favor. Save, watch the listings, and be ready to pounce when you find it.

Good luck!

[Bardolf]

Hi,
I would consider buying with 4% down only if the payment were no more than 20% of take home pay on no more than a 20 year note.I know this is a hard pill for California but I value financial security over housing.

[jerrycates]

Who would not want to be able to get a home for a less downpayment? That would be great. It is hard to find a home loan that would do that.

[skruggie]

Well I should probably update this thread title to home purchase with a 20% down payment

I made an offer on a short sale, which was accepted by the seller. In the same neighborhood that I currently live in, and I will be putting down 20% - paying more than I wanted to, but I also did a really honest assessment of what I can and can't afford - and what neighborhoods I'm willing to live in. If I get the property at the price the seller agreed to it will still be a steal for the neighborhood - I have my doubts though that the bank will let it go so cheaply, even in its current distressed state.

Now the fun begins as I patiently wait for the bank to respond. I'm predicting this will be at least a 6 month process.

Wish me luck

[uRabbit]

Here's my question: You're single. Why do you want to own a house?

My wife and I want to own a house for: pets, garden, personal touches to the home.
We do not want to own a house for: everything is up to YOU, YOU are responsible for EVERYTHING

[MonkeyMama]

Well I should probably update this thread title to home purchase with a 20% down payment

I made an offer on a short sale, which was accepted by the seller. In the same neighborhood that I currently live in, and I will be putting down 20% - paying more than I wanted to, but I also did a really honest assessment of what I can and can't afford - and what neighborhoods I'm willing to live in. If I get the property at the price the seller agreed to it will still be a steal for the neighborhood - I have my doubts though that the bank will let it go so cheaply, even in its current distressed state.

Now the fun begins as I patiently wait for the bank to respond. I'm predicting this will be at least a 6 month process.

Wish me luck

Good Luck!!!

[skruggie]

Here's my question: You're single. Why do you want to own a house?

My wife and I want to own a house for: pets, garden, personal touches to the home.
We do not want to own a house for: everything is up to YOU, YOU are responsible for EVERYTHING

Is this a serious question?

First, I couldn't afford a single family house in my dreams - this is an attached townhouse.

Second, why in the world would I want to rent the rest of my life?

[carolan]

I vote no also, since you are asking. Why do you want a house? Wouldn't you rather spend your money on other things? You never just pay for the house, there are always repairs, maintenance, taxes...the list goes on and on. If I were single and had no children, I would definitely save for retirement and spend my money on experiences like travelling.

[skruggie]

I vote no also, since you are asking. Why do you want a house? Wouldn't you rather spend your money on other things? You never just pay for the house, there are always repairs, maintenance, taxes...the list goes on and on. If I were single and had no children, I would definitely save for retirement and spend my money on experiences like travelling.

I want stability, I want an additional tax shelter above and beyond my 401k, I want roots, and that in the long run over a 30 year stretch is very likely to increase my net worth. I want something that is my own and I don't want to pay rent for the rest of my life.

Why would someone who is single not want all these things? I don't see what any of this has to do with being married vs. being single. If I don't ever get married, I don't ever get to own property? Not seeing the correlation.

Also - I'm not looking at houses. I'm looking at condos and townhouses.

I also have no intention of giving up travel, or anything else for that matter - is there a reason why I can't do both?

The question of whether or not I'm going to buy property isn't something that's on the table - I am indeed doing this. I'm more concerned about staying in my price range and not buying more than I would be comfortable with to achieve all of my goals.

[cypher1]

I want stability, I want an additional tax shelter above and beyond my 401k, I want roots, and that in the long run over a 30 year stretch is very likely to increase my net worth. I want something that is my own and I don't want to pay rent for the rest of my life.

Why would someone who is single not want all these things? I don't see what any of this has to do with being married vs. being single. If I don't ever get married, I don't ever get to own property? Not seeing the correlation.

I am or was in the same situation. I bought a house at 28, single, with no interest in starting a family anytime soon. 2 years later still in the same boat with no complaints. If I wanted to travel I have money saved up. Granted if I didn't have mortgage I could save more than 15% of income for retirement and buy more toys. I pay more for privacy overall and foundation to call home.

[Hector]

why would someone who is single not want all these things? I don't see what any of this has to do with being married vs. being single. If I don't ever get married, I don't ever get to own property? Not seeing the correlation..

I think, it doesn’t matter your are single or not, take mortgage it if you could afford it.

I also have no intention of giving up travel, or anything else for that matter - is there a reason why I can't do both?

There is no reason you cant do both if you could afford both. In fact a lot of us do both even though we cant afford.