Related Posts
Are investment properties good for retirement?
Conversation Starter
Anonymous User
Do we have tax calculator in tcs
Google stock to buy now or after the split?
Investor’s Business Daily: worthwhile?
More Posts
Chief
Bowl Leader
Bowl Leader
Additional Posts in Real Estate Professionals
Anyone in the Real Estate Practice at EY?
New to Fishbowl?
Download the Fishbowl app to
unlock all discussions on Fishbowl.
unlock all discussions on Fishbowl.
When buying a home your lender will first look at your debt to income ratio or DTI. This will be a ratio the compares your gross monthly income vs your monthly debts. This is why they tell you not to buy a car when buying a house. It will change these numbers used for getting a preapproval. When making an offer it’s very important you have a preapproval letter from your letter. This letter tells the seller that your DTI works to cover the lending needed. The list price of a home is also referred to as the “asking price”. The list price of the house does not equal the value of the home. It equals the value that the seller thinks it’s worth based on similar homes that sold in the market. To the seller the Down payment is also a measure of financial strength which is also another way of showing the seller that you have the cash to do the deal in case issues arise. 20% or more will remove mortgage insurance and make you more competitive in a multiple offer scenario. 20% down on $385k is about $76k. That’s a lot of cash. Maybe paying mortgage insurance isn’t such a bad deal if it means you can put $38k down and put the other $38k or more into making the updates you want to make it truly a home?
Mortgage insurance is about .85-1% of the purchase price per month. So on $385k Mortgage Insurance would be about $300/month or $3600 per year to save $38k up front.
On a conventional loan after you have 20% equity in the property you can ask to have the mortgage insurance removed.
On FHA mortgages that only require 3% down you can’t remove mortgage insurance unless you refinance out of an FHA loan into a conventional.
Lastly, now is always a good time to buy. Timing the market is nearly impossible. Owning your own home is a valuable asset. You can always refinance during the life of owning the home to a better rate if necessary.
Private Mortgage Insurance should not be $300/month on a $385k house with 5-15% down. Probably closer to $125-$175 unless you’re getting shafted.
Also, Now is not really a good time to buy. Timing the market perfectly is not really possible, but you can choose to not be ignorant of the market and realize prices haven’t dropped relative to the increase in interest rates.
I am also a licensed agent, but any agent telling you it is a “great time to buy” likely doesn’t understand the economy and the current market volatility. You could go into contract on a deal and in 15 days the 10 year might jump again before you lock rate and you’re sitting on 200bps higher interest rate than initially expected.
Also you cannot “always” refinance to a lower rate if necessary. This is the most basic real estate salesperson lie spewed to help close deals. If rates don’t go below where they are at now for 5-10 years you cannot refinance to a lower rate. Also, if your value decreases from the currently high levels, you may not have the required equity in your home to refinance in an impactful or helpful way.
20% gets rid of PMI. If you can get that, do it. Otherwise, your PMI is almost the same whether you put down 5% or 19%. So for me - I could have done 10% but only put down 5% bc I was too far away from saving up the additional 10% for it to make much difference.
If you have VA benefits you don’t have to pay pmi. So you could use that money for renovations
I don’t have
Not financial advice but I would def second comment above and go conventional 20% down to wipe PMI. Also, I would budget 5-10k in reserves because something ALWAYS breaks when you buy a home 😂. Anyways y’all have a good income that home will be yours sooner or later! Best of luck.
Budget based on your monthly payment and reserving a cushion for repairs/improvements and things that may come up. The best first step is connecting with a local lender. They will be able to get you preapproved and discuss the various options. For example, you may want to know what it would look like for you to put down 3.5% with FHA, 3-10% conventional, and traditional 20% down. Less than 1/3 of people put 20% down. Often, it’s more beneficial to pay a little PMI and maintain liquidity than put down 20%. A good lender will be able to walk you through all the options so you can find what is best for your family and particular house you’re buying.
-from a real estate attorney that has closed thousands of transactions.
20% down or more