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Getting to 20%... or should we?
So a few weeks ago, I was "actively looking" for a home with my DH. We even put an offer in on a house, but I was quite literally insulted by the builder's counter-offer. Do they think I'm an idiot?!
Anyway, we more recently decided to stay in our apartment for now (month-to-month lease, phew!), and save for a while, because I wasn't comfortable draining our entire savings on the DP, closing, etc., and I want to have at least 3 months of expenses still in our savings after closing. We're very fortunate that our buyer's agent is a close family friend and will be handing his 3% right back to us, so that will bump us back up to 6 months of savings, plus a little extra to put into the house we buy.
My question: I'd really, really, REALLY like to put more than 5% down. 20% would be amazing, but honestly, who the hell has that kind of money unless they save for several years (and in the meantime, waste more money on renting and paying into something that we have nothing to show for)? Does anyone have any recommendation as to how we can save more, faster? I don't know the banking industry well at all, so any help would be appreciated!
Re: Getting to 20%... or should we?
You lost me here.
Why are you paying your agent? The agent's commission comes out the proceeds from the house that you buy (when a house sells, liens are paid off, realtors fees are paid and any other fees are paid before the sellers make a profit).
You shouldn't be paying your agent anything. Again, the sellers of the house you buy will pay the agent's fees once you close... not before. They're never paid before the work is done.
http://pandce.proboards.com/index.cgi#general
1. renting is not a "waste" of money as you state above. you are paying for a roof over your head. you are also paying for convenience and flexibility. your month-to-month lease allows you to pick up and move relatively easily and inexpensively if you needed to for a job or whatever life throws at you (no costs to sell a place). you also pay for the convenience of having your landlord take care of all repairs--home maintenance and repairs add up. also, there are real estate cycles in which it makes a lot more sense to rent rather than own from a strictly financial standpoint.
2. builders rarely negotiate much on price. the place to negotiate with builders is in upgrades. so yes, he thought you were stupid (or at least hadn't done your research) and was probably right (about the well-researched part). also, it's business. don't take it personally. if you start taking things personally in the home-buying process, you're in for a very difficult ride.
3. we have rented and been saving several years as have many people we know. we've purposely rented something that's comfortable for our budget. so we still have room to save. many people do it. i know in my HCOL market, lots of families and parents will also help out with a loan or gift to help with a down payment. yes, it's taking a long time, but it should. buying real estate is a big investment, and all that time saving has given us a lot of time to learn, think, and realize what's best for us long-term.
4. if you do not put 20% down, you will be paying PMI. in the long run, this can be very costly. it will also increase your monthly costs (although some you an pay up front if you've got the cash).
5. saving more, faster:
take a hard look at your budget and cut back. especially monthly, recurring costs. sock that money saved away.
rent a cheaper place.
increase your income by finding a new job (the best, only long-term solution).
supplement your income with a 2nd job.
honestly, it doesn't sound like you're ready to buy. check out the first few chapters in home buying for dummies, and it will help you a lot. that and mortgages for dummies are both great references.
My Blog:Through My Eyes
Wait, save and put down 20%. Trust me I've been researching home buying for awhile now and builders are not very flexible. It sounds to me that you need to do a little more research, and this bored is a great start.
Yes, leasing can have its ups and downs, but renting is NOT throwing away money. Like you, we also have the luxury of a month to month lease and we have a really crapy landlord. But to us saving for the down payment out ways the little extra work we have to put into our rented place.
We've rented for more than five years total. We've lived here two and half years and it's going to be another year before we have a down payment, closing costs, and money to buy all that extra stuff. (Furniture, Lawn Mower, etc.) Plus, we have an eight month emergency fund. Granted we live in a somewhat HCOL area so it will take us a little longer.
IMHO putting only 3.5 - 5% down on such a huge purchase is a huge mistake. Like PP said, it sounds like you're not ready to buy yet. I've seen several friends and family buy way too soon because they all listened to the "now is the time to buy jargon", and now they are in a financial mess. The time to buy is when you are ready to buy.
1. As others have said, stop looking at renting as "wasting money", it's paying for something really important: a place to live.
2. How do you save more, faster? Two choices: spend less or earn more. There's no magic investment option that will earn a huge return in a quick amount of time. Look at your budget and see what isn't necessary that you can cut. If you're not already doing it, track your spending so you know exactly where your money is going and where you're overspending or spending on extras that you don't really need. Or get a part-time job to supplement your income.
Also ... as a correction to the PP who said you'll pay PMI with a down payment of less than 20% ... that's not always true. There are loan programs out there with no PMI. We didn't put 20% down, and we aren't paying PMI because we have VA financing. We have friends who just bought with an 80-10-10 loan, so they put 10% down and aren't paying PMI. Granted, in many cases, you'll pay PMI with less than 20% equity, but not always. Look around for special loan programs.
Mr. Sammy Dog