Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Too embarrased to ask IRL
We moved recently from a fairly low (aka reasonable) COL area to a VERY high COL area. I see people younger than me, who have less income than we do, buying homes and I just don't understand it. I'm used to the standard 20% down payment model, but unless their parents are spotting them the cash, there's no way these people are coming up with 80-100k. Is there something I'm missing? In a very high COL area are you not expected to come up with the 20%? If not, how does that work??
Re: Too embarrased to ask IRL
That sums it up pretty well.
20% down is not a requirement and not everyone's financial profile requires them to put down close to that nor do they have any consequence for not putting down that much.
We came from a very high cost of living area (NYC/NJ market) and with homes 1m+ - I think it becomes rarer for people to put down that much.
Our financial profile doesn't require us to put down more than 10% and we probably could have pushed the bank for 5% - with no penalties for doing so. But that is because of our financial profile and history - though I would not call us 'young' and nor are we new to home ownership. I also know that there are a variety of loan programs that offer low % down as well with strings.
Also - how do you know how much the people you 'see' that are younger than you make? Are you stereotyping/generalizing that people 'younger than you' are not able to make a salary higher than you or manage their finances in a way that is advantageous to them?
I think this is a bit of a generalization ... I read an article recently that provided the medium price of homes that were foreclosed on and it was a modest home (150-300K) ... IMO not the jones'es.
All of this!
Assuming you live in Boston (as per your name) I can only imagine how they are doing it-Boston is super high COL!!! Like, I got into the phd program @ Harvard, but couldn't afford to live anywhere near the college so didn't accept their offer.
We bought a house in a high COL area (400k+ for most of the homes), but we don't make nearly enough for those houses. We found a repo'd Fannie Mae for under 100k and it isn't even run down. Two broken windows is the worst of it (we are restoring it to the original design from 1930 so there's other things that are a pain-but not problems). Try not to be so judgemental. We used the savings my husband had from his high school graduation as a down payment and we put 7.5% down. 20% has been the standard and it should probably stay that way. We got lucky-buying our home actually saves us about 200$ a month. But for most people it doesn't.
With FHA, you can put 3.5% down and some banks offer mortages with 5 or 10% down. Many people don't need to put 20% down and the higher the COL, the less likely it probably is that people are putting that much down.
You never know what people's circumstances are. We live in a very HCOL area and put more than 20% down (caveat: I recognize that my personal situation was different b/c it had to do with having cash from an investment). However, even if we hadn't had that, we still would have put 20% down just out of our savings.
We bought when we were in our mid-30s and both had been working and saving (both as single people and then as a married couple) for a long time. I wonder if that's a factor? No way would I have had that saved at say 25, instead of 35.
I think it's natural to look at "the others" and wonder how they have what they do. You're wondering how people save 20% and I see most people my age in my town living in houses at least twice what mine cost and scratch my head.
A lot of people don't put 20% down.
We ended up doing about 15%, and we had to pay all closing costs after the house under appraised (before the sellers dropped the price they had agreed to pay half of closing costs). We're young. I'm 23, my fiance is 28. I'm only 2 full years out of college, but I make more than my parents combined and my fiance makes more than I do. The young people that you are seeing buying houses could be making more money than you. Or not.
Our goal was to have 20% down plus be able to pay closing costs if needed, but we fell in love with our home and didn't want to wait and lose it.
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