YAHT: How much down payment is recommended?

[FrustratedUser]

I am considering buying a house if there are no cheap apartments to get when I move to VA.

What amount is the normal down payment when buying house or condo? Is 10% a good amount or should I try to get the payment included in the loan. I've heard that one way of doing it?

I plan to have ~$15k by June 04.

 

[Banana]

I think if you put less than 20% down, you have to pay PMI, which is not a good thing.

 

[FelixDeCat]

20% to avoid PMI (private mortgage insurance)

 

[radioouman]

20% will get you into a conventional loan without having to pay PMI. HOwever, there are other ways to finance more than that. I just bought a house over the summer with 100% financing and I'm not paying PMI. I have an equity line of credit to finance 20%, and a conventional loan to finance the rest.

 

[Alchemist99]

PMI would be nice to avoid but it based on a slidng scale dependant on how much you put down.
These days you don't even need a down payment if your a first time home buyer, good luck

 

[FrustratedUser]

Why is PMI so bad? I mean 20% of 200k is 40k. Who the hell has that amount of money. That'll take years to get.
Paying $900+ in rent is worse than paying PMI isn't it?

 

[FoBoT]

depends on how much $ you have

5% , 10% , 20%

if you pay at least 20% you can get a conventional loan and not pay PMI as ^ said

i'll be going with a VA loan, so i avoid PMI anyway, i am putting 5% down

also, if you plan on moving again fairly soon, put more down, that way any declines in the real estate market won't put you upside down in your mortgage

 

[Banana]

Continuing along what FoBot said: If you plan to move within the next 2-3 years, you should consider an adjustable rate mortgage.

 

[FrustratedUser]

The reson I am considering a house instead of apartment is that the apartment market in Charlottesville $ucks.
To get the same space and utilities I have now in Tucson I need to pay close to $1k/month in rent compared to $600 now.
Our bastard management decided to close down the Tucson operations and relocate to the 'main' site in C-ville.
Everything is more expensive and we get nada compensation. At the same time our new director bought a 800k house and saying the market is good in the same breath (bastard).

What is a VA loan?

 

[CrazyDe1]

I paid 10k down and did an 80/10/10 which is basically take out 2 loans to avoid PMI...

 

[FrustratedUser]

LOL! I need to read up on all the terms. What is a 80/10/10 loan?

 

[tm37]

Originally posted by: FrustratedUser
LOL! I need to read up on all the terms. What is a 80/10/10 loan?

10 % down, 80% conventional, 10 % finaced through a second mortage.

a VA loan is a loan program whjere the va "Garentees" the loan so 0 down and no PMI. You of course would need to be a honorably discharged vet.

now having said that you may want to check into FHA or fannie may.

 

[CrazyDe1]

There was no way I was gonig to afford 50k for a downpayment for 20%. I also did a 5 year arm cause I knew I'd be gettign paid more in the future and probably wouldn't stay in the place for more than 7 years...

 

[FrustratedUser]

Thank you for your reply guys. I'll have to look into this. Feels kind of 'bad' to have to pay 20k of hard earned money in to a down payment when they could come in handy for upgrading the house and stuff.

 

[Jombo]

80/10/10, get loan 80% of the house to avoid pmi. the 10/10 are two loans taken out to make the 20% downpayment.

i'm not sure how much pmi is, but it seems everyone is trying their best to avoid it like a plague.

since the interest rate is so low right now, it might be good to get a 5 year loan, if you are planning on moving soon. it works by basically financing x amount and paying 5 year portion of that at a lower interest rate then a full blown 15 or a 30 year loan rates. at the end of the 5 years, rest of the money for the house is due, so you'll either have to finance again to live there, or sell the property and pay back what you owe to the bank. (this is really good if you know that you'll only have to place for 5 years or under, as you can invest in the house, while getting a cheaper rate than you would've otherwise.)

VA loan is for those that served in the military. govt backed loan for the vets so to speak.

 

[FrustratedUser]

Mmmm... A 15/30 year fixed rate looks pretty good now when the rates are low.

Basically I see it like this:
Imagine paying 1k in rent, that is = waste of money.
I'd be happier paying 1k on a loan even if there is PMI involved. I see the interest and PMI as the 'rent' (ie lost money) but the rest is like a savings account. Hopefully I can get most money back (or even more) if and when I decide to sell. People say the prices for houses in C-ville are steadily going up.

My situation is a little different from most people here. I am on a H1B visa (yeah flog me if you like ) and I've been here for close to 2 years now (2 thumbs up) so the maximum time I can be here on the visa is 6 years, leaving 4 years to go. I can't see further into the future than that.

I'll figure the chance of getting out ahead is still bigger by getting a house despite slightly poorer conditions.

 

[toant103]

Originally posted by: FrustratedUser
I am considering buying a house if there are no cheap apartments to get when I move to VA.

What amount is the normal down payment when buying house or condo? Is 10% a good amount or should I try to get the payment included in the loan. I've heard that one way of doing it?

I plan to have ~$15k by June 04.

where in VA. Northern VA can cost you an arm and a leg.

 

[FrustratedUser]

Originally posted by: toant103

Originally posted by: FrustratedUser
I am considering buying a house if there are no cheap apartments to get when I move to VA.

What amount is the normal down payment when buying house or condo? Is 10% a good amount or should I try to get the payment included in the loan. I've heard that one way of doing it?

I plan to have ~$15k by June 04.

where in VA. Northern VA can cost you an arm and a leg.

DOH! I know!. Charlottesville isn't exactly the cheapest place to live. I spent close to a week looking at options and my impression was that good houses start at $200k.
According to on-line calculator I can afford around $160k :|

:disgust:

 

[CrazyDe1]

PMI is like 200-300 bucks a month...depending on the cost of your home... I couldn't justify doing that...

 

[FrustratedUser]

Originally posted by: CrazyDe1
PMI is like 200-300 bucks a month...depending on the cost of your home... I couldn't justify doing that...

If it's that much I'd say I agree.

 

[flot]

10% is a reasonable amount to put down.

I second the merits of the 80/10/10 loan.

80% - Main mortgage
10% - Down payment
10% - Line of credit, or 2nd mortgage, or outright loan

I have one of those, and I don't pay PMI - but I do pay $75 a month for my extra "10%" line of credit. That is the interest-only payment, IE I will never pay off that loan at $75 a month. However, that compares favorably to PMI (which was looking like $150-$200 a month, for 2 years minimum) and the $75 a month is tax deducatable, which means it's really only about $50 a month at the end of the year.

You really have to sit down with a notepad and a calculator and do lots of "what ifs" on paper to see how the #s compare for down payment, monthly payments, etc, and how they compare based on how long you think you'll be living in the house.

Edit: It does seem kind of odd that you'd be looking at a house when you're here on a work visa. Think hard about that - because if you're only here for 4 more years you're probably right at the edge of making it worthwhile to buy, unless you happen to get lucky and buy in an area *Before* it starts to appreciate, and happen to own it through a stretch of increasing prices. Everyone says "oh you're throwing your money away on rent" but they are full of BS. That's what uninformed people say to justify their home purchase. Here is how it looked for me:

$920 a month rent included water, and my electric bills were about $80 a month (apartments will almost always save energy, since your neighbors will offset some of your heating/cooling $)

Now I pay:

$950 a month 1st mortgage (this is the # that the loan calculators give you.. they don't mention the info below)
- PLUS -
$75 a month line of credit (my 2nd 10%)
$50 a month water/sewage
$100 a month insurance (required)
$40 a month more on my electric bill (~$120 total)
$200 a month TAXES

So the way I see it, I am "throwing away" $465 a month right now, that I wasn't "throwing away" before. Now some of that will be offset by tax breaks, but I'm not 100% sure how much yet.

Now it's all good if my house happens to appreciate... but at the same time, $465 put into the bank every month would be $22,000 at the end of 4 years. Will my house appreciate $22,000??? Guess I'll have to wait and see.

 

[FrustratedUser]

I really appreciate the input here. :beer:

The move is like a big monkey wrench thrown into my life. Tucson is just so great and my plans were to get a house here. A nice house, not a huge one, can be had for ~$150k here. The selection is big too.

 

[CrazyDe1]

Originally posted by: FrustratedUser

Originally posted by: toant103

Originally posted by: FrustratedUser
I am considering buying a house if there are no cheap apartments to get when I move to VA.

What amount is the normal down payment when buying house or condo? Is 10% a good amount or should I try to get the payment included in the loan. I've heard that one way of doing it?

I plan to have ~$15k by June 04.

where in VA. Northern VA can cost you an arm and a leg.

DOH! I know!. Charlottesville isn't exactly the cheapest place to live. I spent close to a week looking at options and my impression was that good houses start at $200k.
According to on-line calculator I can afford around $160k :|

:disgust:

According to an online calculator I could only afford 160k too yet I paid 260k=P

I'm living fine. I go out all the time, I have plenty of money for toys, I'm saving about 800 a month of my salary, 2800 a month after ebay. I'll do thing such as bring my own lunch to work and preparty before going out but still, if you watch what you spend it's not a problem. Not to mention the last 3 monthes an average of 150 bucks a month on speeding tickets. If I didn't have a roommate or ebay I'd be cutting it close saving only 2-300 a month. Keep in mind I'm single with no obligations, no car payment, no landline and usually no other unexpected expenses.

I have to save about 10k for landscaping this summer and probably living room furniture.

 

[FrustratedUser]

CrazyDe1:
It looks like the online calculators is a bit conservative then. Luckily the car will be payed off by Feb 04 and a new house will be the only main expense.

 

[CrazyDe1]

Originally posted by: FrustratedUser
CrazyDe1:
It looks like the online calculators is a bit conservative then. Luckily the car will be payed off by Feb 04 and a new house will be the only main expense.

They usually do 3.5 - 4x your income is acceptable assuming you have no debts. That's usually a good estimate for the normal person because you have other things to pay for such as family, and random miscellaneous items. Also, you want to have sufficient money leftover for problems it does a pretty good job. I think in california it's custom for people with 2 incomes to get houses more than 6 times their income.

Most people have car payments or will need to have a car payment sometime in the future. I budgeted my money around 1k of car repairs a year. If my car dies completely I'm going to be struggling for money if you look at my regular salary pretty quick. Seeing as how it only has 57k miles on it though, I'm hoping it doesn't do that. Oh yeah, I also don't have blinds in most of the rooms in my place..