How much should you really put down?

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[quote author="momopi"]
My friend in Austin TX, on the other hand, just bought a brand new house for $130k with $10k down and borrowed the rest via USDA loan at 4.5% 30 year fixed rate, no PMI. Yup, you heard it -- USDA loan to repopulate rural areas (20 min outside of Austin). There was no bidding war and very little competition. I had no idea USDA offered home loans.
[/quote]
USDA? Did he buy a farm?
 
[quote author="irvinehomeowner"]
[quote author="momopi"]
My friend in Austin TX, on the other hand, just bought a brand new house for $130k with $10k down and borrowed the rest via USDA loan at 4.5% 30 year fixed rate, no PMI. Yup, you heard it -- USDA loan to repopulate rural areas (20 min outside of Austin). There was no bidding war and very little competition. I had no idea USDA offered home loans.
[/quote]
USDA? Did he buy a farm?[/quote]

Nope, brand new 3 bed 2 bath house. You can read about it here:
http://taiwantotexas.blogspot.com/2009/11/we-now-own-house.html
 
Great thread. I have a question for SGIP or anyone else in a position to know. I'm a veteran and plan to (hope to) use either the VA or Calvet VA loan for my home purchase --- ideally later in 2010. I am definitely of the school of thought that less down in this low interest rate environment will help me make better use of my cash reserves elsewhere.

The advantage of the VA or Calvet as I see it is essentially $0 down with no PMI --- but what concerns me is whether there may be any limitations to using this loan in the marketplace. Is a buyer less likely (or more likely with gov't back?) to accept an offer using a VA loan? Does it matter? Is it problematic to find a lender who works with VA loans? Any other thoughts? I know the VA loans are not very common in this area, so just want to make sure this will not severely limit my options. Thanks in advance.
 
Thanks for your service on our behalf.

The CalVet loan rates are fantastic for the most part, but the process is long and arduous - a Death March in some respects. I'd get your loan in line early, meaning January 1st. Because my company does not offer CalVet I don't know if you can dual process a VA loan and a CalVet. If you can, do it.

The next issue is convincing a seller you can close with minimum down. Your offer to purchase needs to include information about what VA or CalVet might require of the seller because most Realtors have no idea how VA loans work. Don't rely on their lack of knowledge to get your deal through because, well, it's obvious. You won't get the house.

Might also want to show your overall cash strength so that in a worse case scenario you could transition into a conventional loan, but that for the offers purpose you are using a VA or CalVet loan that is already approved and ready to close.

Best wishes,

SGIP
 
But... what if the payments are manageable with 10, 5 or 0% down (as in the case of CK)?

At these current rates, the difference in monthly payment between 20% and 10% down is nominal (well, that depends on the price of the house), so if your income can afford it... why risk tying up the cash in this questionable economy?
 
[quote author="irvinehomeowner"]But... what if the payments are manageable with 10, 5 or 0% down (as in the case of CK)?

At these current rates, the difference in monthly payment between 20% and 10% down is nominal (well, that depends on the price of the house), so if your income can afford it... why risk tying up the cash in this questionable economy?
[/quote]

I think you need to start with how much in emergency funds are reasonable right now and then figure out the down payment.

Say you have 20% to put down and a substantial emergency savings, but you still decide to put only 5%. The flaw in this is you might be tempted to spend that 15% down the road on something unneeded. It's just typically behavior I observe all the time. 95% of the people that behavior like they are allergic to debt have the greatest wealth. Those that try to use leverage to their advantage rarely come out ahead.
 
[quote author="Strom"]My wife and I are asking ourselves the same thing.

We're in a situation where our income quadrupled in the last few months. We were saving previously, but only have enough for about 5-10% down in the Newport area. We could afford a 100% LTV loan easily on these homes (from a monthly payment perspective), but we want to be prudent with our money. We have a growing family, are older than an average first-time homebuyer, and would really like to settle down, but we can't decide whether to wait for the full 20% to be saved (another year or so) or just go for it.

My thought is that, due to our income, we could pay the loan down rather quickly if we really want to reduce the LTV.[/quote]
You know what you guys could do, especially with the higher priced homes that have a lot of equity? Ask the seller to carryback 10% of the purchase price. If they even somewhat motivated, they'll probably do it especially if you agree to pay it back in a few years. One of my friends did the same thing (he had volatile income peaks which he used to pay off the seller financing).
 
[quote author="mcdonna1980"]Okay no more Talk Irvine for me.. I'm moving on Saturday and I'm only 60% packed. Yikes <!-- s:o -->:o<!-- s:o -->[/quote]
Are you excited? My mom went to town on cleaning your house and used the word "disgusting" several times (referring to the pet hair everywhere). That being said, the place is now sparkling clean to her high standards and ready for you guys to move in.
 
[quote author="USCTrojanCPA"]
[quote author="Strom"]My wife and I are asking ourselves the same thing.

We're in a situation where our income quadrupled in the last few months. We were saving previously, but only have enough for about 5-10% down in the Newport area. We could afford a 100% LTV loan easily on these homes (from a monthly payment perspective), but we want to be prudent with our money. We have a growing family, are older than an average first-time homebuyer, and would really like to settle down, but we can't decide whether to wait for the full 20% to be saved (another year or so) or just go for it.

My thought is that, due to our income, we could pay the loan down rather quickly if we really want to reduce the LTV.[/quote]
You know what you guys could do, especially with the higher priced homes that have a lot of equity? Ask the seller to carryback 10% of the purchase price. If they even somewhat motivated, they'll probably do it especially if you agree to pay it back in a few years. One of my friends did the same thing (he had volatile income peaks which he used to pay off the seller financing).[/quote]

That's a good idea. I have to give you a call - we're going thinking about our options, and I'd like to get your advice and possibly begin looking at houses.
 
One school of thought is to borrow as much as you absolutely can for 30 years at a fixed rate. Given our low inflation rate at present, the only thing it can really do is go up. And if the inflation rate does go up, you get to make those fixed payments in inflation adjusted dollars.

My choice would be to borrow a lot and put the money that could have gone into a larger downpayment into dollar protected investments such as gold or index funds made up of foreign stocks.....but that's just my choice.......
 
Like you, I buy used cars too, but when it came to a house, I have always gone the traditional way with a 20% down. For us it was more of a psychological thing- it's easy to have only one loan, and an affordable one at that, and have lower monthly payments, almost close to rent.
 
Ehh... for me, its how cheap can i get away with before I feel the pain. I have a lot tolerance for financial pain. For rentals its usually 28-35%. My next home is probably going to be about the same. Engineering is just so volitile you really can't depend upon a good check anymore.
 
[quote author="biscuitninja"]Ehh... for me, its how cheap can i get away with before I feel the pain. I have a lot tolerance for financial pain. For rentals its usually 28-35%. My next home is probably going to be about the same. Engineering is just so volitile you really can't depend upon a good check anymore.[/quote]
Tell me about it, 2 out of my 4 rentals are underwater but they all still generate positive cash flow...some more than others....so I can wait things out for a long time while my loan balances keep going down.
 
I have the same question as IHO. Assume the following:

- I'm on the priority list for new construction so competing with high downpayment/all-cash folks is not an issue.
- I have more than enough for a 20% downpayment.
- I can easily afford payments on a 100% LTV home.
- Debt doesn't bother me, especially with such low interest rates.

Assuming I am going to buy a new house (no rent scenarios please)... my biggest concern is protecting my finances when the housing outlook is still mixed. So should I put down the least amount possible so that if there is another major housing drop, I'll take the credit hit and still have most of my cash? I know it's not an ethical plan but from a financial standpoint does it make sense?
 
I'm wondering if the new home builders are more open to less than 20% down? I spoke to one recently but it seems like even their own in-house lending still abides by the stricter lending requirements (as they should)... although they did mention that might change soon.

So superwrat's scenario may not even be possible unless he can secure outside lending.
 
New home builders didn't rank their priority lists by amount of down payment, unless things have changed recently. They take them "first come, first served, as long as you play along with our own lenders pre-qual terms". Get the builders priority list requirements in writing and then work around any issue from there.
 
According to the loan officer working at the sales office I went to, 20% down isn't a requirement anymore. She told me 3.5% is sufficient (FHA) and even a DTI of 50% is okay! Kinda scary...

Like SGIP said, priority lists aren't affected by downpayment amounts, so with the interest of protecting my cash from a potential housing downturn, I think a small downpayment is ideal.
 
Ahh... the 3.5% FHA... aka... Ninja Loan 2.

I think I'll pay down to whatever Jumbo Conforming is ($729k?). But that's why I want prices in Irvine to drop down to $750k instead of hovering around $1mil.
 
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