House Buying Questions

I hear all kinds of things about how much money you should have for a down payment, how much you need for closing costs, how much $ you should have saved up on top of that and it confuses the shit out of me...So how much for each?

Let's use a price of 300k for a house.

0% to 3% for a down payment and 2% to 5% for closing costs. Remember closing costs include real estate taxes to the state and local government, prepaid property taxes, filing fees, transfer taxes, attorney, water and sewer, homeowner's insurance, application fees, points if any (not a bad thing), etc.

$20-40K.

Is this a house for yourself or as an investment?

If it's for an investment try not to use any of your own money...

it'd be a house for me, not an investment.

You skimming on that IFL banner ad? I see how it is now... it all makes sense...

We should send them a bill for that....they suck.

300k will probably run you around 6k in closing costs but that can of course vary. How much you put down depends on your financial situation. You can go 0 down and get an 80/20 loan to avoid paying PMI. But your interest rate will be higher. You can go 80/15 and 5% down if you've got cash. You'll have to calculate PMI and your expected interest rate and make a best guess which will be the better deal. Or you could throw that 60k down, but if its your first house it isn't likely you'll have it. I didn't have 20% either.... ;)

I'm a big proponent of keeping money in your pocket and going zero down. There are literally hundreds of products out there to help you achieve home buying goals.

I'd ask for seller's contribution (especially in this buyer's market it shouldn't be difficult at all) to pay for closing costs that way you come out of pocket in a very minimal way.

I'm a bit worried about going zero down...my friend just did that on a house for 300k and she's getting raped on her interest rate. I assume the more $ you put down, the better the rate?

Negative. You can "buy down" the rate by paying points (usually 1% of the purchase price = one point). If you are worried about rate.

Here's my theory (and I'm sure others will agree or disagree) but I like no money down interest only loans. The difference I would use in the payment between the interest only and the 30 year fixed, I would then take and invest in something that gets me a safe ROR say around 8%.

My theory...Equity in a home is truly nothing more than a number on paper. If you take that $60K you'd put down on a $300K house and have that liquid, as opposed to using it in the down payment, you can access it anytime.

However, if that $60K is sitting in equity in your home and say something bad happens like you lose your job, you aren't going to be able to touch that money. The bank wouldn't loan to a person who is unemployed. So I'd rather have the money working for me in an accessible account because IF you did lose your job, you'd have the $60K to cover your bills for several months or years (depending on what your actual outlay is of course).

Make sense? Hopefully I explained it correctly. I think others will disagree but I believe in leveraging my money.

I understand....the problem is that I'm 25, and unless I win some type of lottery, I'll never have 60k to put down...not on my first house anyway.

Property values are dropping, and 300k buys a ton of house out here, so I'm gonna start small I think...

I'm confused about the whole thing right now, and I'm basically looking for a number to shoot for...so if I know I need an additional 15k on top of what I have already saved, and I wanna buy this time next year, I know I need to save $1250/month for a year to get the 15k...

Well, like I said, you're in good shape. I would put less down and buy now.

"I'm a bit worried about going zero down...my friend just did that on a house for 300k and she's getting raped on her interest rate. I assume the more $ you put down, the better the rate?"

It's not entirely true. You can still get a decent rate even with zero down. VA loans if you are in the military do not rape anyone.

Your rate is going to depend on mostly 2 things:

  • Your debt income ratio
  • Your credit score

If your friend is getting raped on her rate, several causes:

  • Her debt income ratio might be too high.
  • Her credit score might be low.
  • Maybe she had a bankruptcy in the last 7 years.
  • Cannot justify her income ie. stated income.
  • She didn't shop around and didn't get an honest loan officer which charged her higher than he should have.

It's going to be hard to find exactly what number you are going to shoot without knowing the exact location of the house, your credit score, your income for the last 2 years etc...

You can get a very good deal if you shop around, do your research and homework. A first home buyer does not need to be raped to purchase his first house.

Good luck!

KickU2.