The truth about downpayments now?

jenswrensJanuary 31, 2009

I readily admit that I understand very little about the financial aspects of buying a house (although we currently own two). Much of what is discussed here by triciae and Dave and others reads like a foreign language to me, and trying to decipher what is said in the news these days about the economy and banking, etc., makes my head spin.

My question is simple, I think, and IÂd like a KISS answer. Is it really true that now, in this new post-subprime-lending economy, the only way to buy a house is to put 20% down? Are there really no other lending options available to a non-first-time home buyer?

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dave_donhoff

Hi Jenswrens,

My question is simple, I think, and IÂd like a KISS answer.

Okey doke!

Is it really true that now, in this new post-subprime-lending economy, the only way to buy a house is to put 20% down?

Nope, not at all true. In fact, it is so UN-true I can never understand how anyone in the media reports it.

Are there really no other lending options available to a non-first-time home buyer?

Experienced home buyers get MORE and BETTER financing options than 1st timers... awlays have.

You hear about "first timer specials" but that doesn't mean they are getting delas better than seasoned owners... those "specials" mean the rookies are getting something unique & exceptional they would not otherwise be privvy to.

In most cases 5% is now a minimum down payment required for conforming (stuff for people with great credit) and conventional (non government-backed,) and 3.5% on FHA...

USDA still provides 0% down within certain guideline restrictions... you'd need 680+ credit, and the property has to be located outside urban area restrictions.

Of course, the further away from the financial norm... the more down paymetn required. Jumbo loans, bad credit loans, short employment history loans, undocumentable income loans... and more... do indeed require more "skin on the table" now.

Hope that's KISS enough ;~)

Cheers,
Dave Donhoff
Leverage Planner

    Bookmark   January 31, 2009 at 8:03PM
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ncrealestateguy

FHA will do loans with only 3.5% down. There is an upper limit on the amount though.

there are some 10% loans out there still, but your credit better be really good, and you will pay for it in terms of interest rate.

The USDA has a 100% loan, (the only one left that I know of) that is based on the geographic area that the home is in (needs to be considered rural). Limit of $70,000 income for the family.

Really the best way to find out what YOU may qualify for is to ask three separate lenders in your neck of the woods.

    Bookmark   January 31, 2009 at 8:06PM
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jenswrens

Thanks guys!

the further away from the financial norm...

Ah, this is probably the problem. So, what IS the financial "norm"? Based on the area we're looking in (NJ), I'm pretty sure our only options are going to be in the jumbo loan category (but again, I don't really even know what that means). What IS a jumbo loan - where do you find the numbers for the cutoff? Do jumbo loans require 20%? Maybe that's what DH meant when he told me weÂll never be able to buy another house now with the new rules.

We bought our last house by putting 10% down and getting a mortgage for the other 10%. Is that what an 80/20 is? Or was that a subprime thing? (IDK, I told you I donÂt understand all of the jargon & logistics.) DH is saying this is no longer allowed.

And before I start officially bothering lenders with all my details and having them do a bunch of credit checks (which I think affects your credit score somehow), I'm trying to see if DH is right. Am I just wasting my time looking for my dream house now, or is he being a pessimistic conservative wimp, which he often has a tendency to do.

We do have good credit (although lots of "revolving" debt) & stable long-term employment histories. Since we are currently paying almost $8000 a month in combined mortgages on 3 houses, I have no doubt that we can afford the monthly payment on the "dream" house - we just don't have the cash for 20% down.

    Bookmark   January 31, 2009 at 9:41PM
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scootawop

"Since we are currently paying almost $8000 a month in combined mortgages on 3 houses, I have no doubt that we can afford the monthly payment on the "dream" house - we just don't have the cash for 20% down."
Huh??
You already own THREE houses? Are you and your husband absentee landlords?
How about...selling those three houses, thus giving three other families a chance to own a house. With the resulting total money, you'll have 20% down.
Just as an asideÂI had hoped the days of serial ownership were over.

    Bookmark   January 31, 2009 at 10:52PM
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duluthinbloomz4

Isn't a jumbo loan $417k and above. Anything below is a conforming loan.

Glad I'm not in the buying or selling market today. Back when I was, my "normal" was 20% down with documentation up the wazoo for a 30 year conventional.

    Bookmark   January 31, 2009 at 10:55PM
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brickeyee

A jumbo loan exceeds the Freddie/Fannie limit for sale to them.
The level varies by location.

    Bookmark   February 1, 2009 at 11:02AM
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talley_sue_nyc

You already own THREE houses? Are you and your husband absentee landlords?

Almost ALL landlords are "absentee" in a sense--they don't generally live in the rental home w/ the tenant, you know. Perhaps people who own 2-family houses and live in one of the units aren't "absentee." And "absentee" usually refers to landlords who live so far away that they can't personally oversee their property--but there are tons of quite good landlords who don't live in the same towns as their rental properties.

How about...selling those three houses, thus giving three other families a chance to own a house.

Um, no, that would be TWO other families, because she'd need to buy one for herself, right?

And, perhaps by renting the houses out (if indeed she does), she's making it possible for families in NJ who could never purchase a home to actually live in a house instead of a rental apartment. (I have friends for which this is true; they live in someone's investment property, and they could never afford to buy, but they are great, great tenants.)

Just as an asideÂI had hoped the days of serial ownership were over.

"serial" means "one after the other."

If what you are objecting to is the OP's simultaneous ownership of 3 houses, then "serial" is not the word you want. "Simultaneous" or "multiple" or "polygamous" or something.

Also, if she wants to own three houses/homes, and have them for her family's exclusive use, she certainly is allowed--morally, ethically, and legally.

    Bookmark   February 1, 2009 at 6:39PM
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sparksals

Jen,

Can't answer your questions, but I wondered if you sold your TC's house. Sounds like you didn't. Last I remember you were interviewing realtors and trying to choose between 2 or 3.

    Bookmark   February 1, 2009 at 9:48PM
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jenswrens

"polygamous" or something LOL! Thanks talley sue for the backup! :-)

You already own THREE houses?

I should've known I couldn't post any personal info on this board without offending SOMEONE. FWIW, I only own 2 houses. The third house I am leasing (so I guess I'm really paying for someone else's mortgage as well as my own two mortgages). No, we are not landlords - that would mean I'm getting an income to cover some of that $8000, which I'm not.

How about...selling those three houses,

I'd like nothing else!! That's what this whole thread was about. I'm dying to consolidate my life right now - to end the bouncing around, living in 3 different states, paying for 3 separate households. It's a crazy scenario we've been living for the past 5 yrs b/c of jobs, etc. Finally, in July of this year, we have the opportunity to settle down in one spot. Hence, my "dream" house dream. In my mind, if I can afford to carry 3 mortgage payments and still be flush, I should be able to have just one "dream" house with one big mortgage.

As for that downpayment...
With the resulting total money, you'll have 20% down

Unfortunately, that's not the case. The one house I desperately want to sell has been on the market since last year with not a single bite, and if I do ever sell it, I'm quite sure in this market that I'll be bringing money to the table rather than recouping any cash. (yes, sparksals, this is the TC house - still out there. Obviously chose the wrong REA or maybe it's just a sucky market. We'll be listing again either FSBO/flat fee or with someone else as soon as the snow melts.)

Back to the original question, it looks like the jumbo/conforming? cutoff in NJ is around $600K - $700K. And I found lots of mortgage websites that say they still offer options for less than 20% down, even in the jumbo category, so maybe there is hope yet. (Unless someone else here can tell me otherwise.)

    Bookmark   February 1, 2009 at 11:09PM
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ncrealestateguy

You really need to "waste" a lender time to find out what you do or do not qualify for. No one on this board can do that step for you. it is always the first step in knowing where you stand.
If your one house has not sold after being in front of ready, willing and able buyers for over a year, don't expect a big change if you go FSBO.

    Bookmark   February 2, 2009 at 7:05AM
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pamghatten

A question to the person who objected to the OP owning multiple homes ... if there were not any landlord's, where would people live who could not afford to buy a house?

    Bookmark   February 2, 2009 at 12:50PM
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alison_27

Google tells me that for 2009 the limit in these counties: Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth,
Morris, Ocean, Passaic, Somerset, Sussex, Union the limit is $625,500. Elsewhere in New Jersey I presume the national limit of $417K applies.

In my recent real estate search and mortgage shopping we were able to get pre-approved by several lenders for loans above the conforming limit with 5% down. But some lenders would not even quote me for such a loan -- they said that private mortgage insurance would be difficult to impossible to acquire for that loan-to-value in the jumbo range. So I'd guess that PMI is the biggest obstacle you'll face, assuming your credit is excellent and your debt to income ratio is in the acceptable limits.

Go ahead and chat with a lender. If you don't provide your social security number, they can't ding your credit with a check, and if you work with someone good (like my current loan officer, I A thought: once you sell your extraneous houses, perhaps you can put those housing payments into savings. You should be able to build up a down payment fairly quickly that way (not to mention an emergency fund.)

    Bookmark   February 2, 2009 at 1:16PM
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gibby2015

What did you ever decide to do with your TC house? I think you posted here once that you were thinking about renting it out. Did you do that? So are you saying you own the TC house and you bought a house in NJ when you moved and now you have found a different house you want to buy? And you own a third one in there some where? Are you planning to sell any of them before you buy the new one with the jumbo mortgage?

I've kind of followed your story as I live in TC also and we are considering relocating. I don't want to end up with an extra house though so DH is currently renting an apartment in destination city and I am staying at my job and in the old house until we decide the time is right to really move. I must be more risk averse than you are.....

    Bookmark   February 3, 2009 at 12:08AM
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debbie_2008

I didn't know it was wrong to own more than one house. Scoot, can you explain? I currently own 3 houses (2 rentals and my own residence)...did own 5. I don't think I am causing 2 families to go homeless. I think I am giving 2 families a chance to have a home to live in because they do NOT have money to purchase.

    Bookmark   February 8, 2009 at 3:33AM
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dave_donhoff

Scootawop said;

Just as an asideÂI had hoped the days of serial ownership were over.

She was referencing owning stock in Kellogs!

;~D

    Bookmark   February 8, 2009 at 3:53PM
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