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home owners questions
H and I are in the process of buying a home. Not a specific home, but we have a couple in mind that we are going to look at soon.
My question is about down payments. We are going to be getting a FHA loan that will require a 3.5% down payment. We have more money in savings than the 3.5%. When H talked with the bank that gave us the pre-approval about putting more money down he suggested not doing that so that we could keep some money in savings for expenses that came up, furnishing the home, repairs etc. When H talked to his mom she thought this was not a good idea and that we should put as much down as possible.
So when you purchased your home, did you go with a lower DP to keep some money for expenses or put down as much as you could? And were you happy with your choice?
Re: home owners questions
We put down as little as possible because we needed to do some renovations when we moved in. I'm not sure what your savings/financial situation is like, but something to consider if it's not already in place: have 3 months of living costs saved up and set aside. This will be a huge relief if either or both of you ever loose your jobs, gets sick, or something else comes up where you need the money to live on. This is your emergency fund and should never be touched.
In any case, I think I would still put down the minimum and save the extra money. I would hate not having it and needing it. If you are wanting to put more down to lower your principle, just pay extra per month or split your mortgage into two payments per month (somehow this lowers interest paid).
Dont forget you will have closing costs, which is around 6%. If you can get the sellers to put money down it won't be as much. I put down the minimum because it was a short sale and the house needed some work. It doesn't hurt to keep some cushion for once you get in the house in case anything comes up. The reason what you pay more down when you do payments biweekly it does pay down your principal faster because essentially you will end up paying an extra month each year, or one month worth payment that goes directly to the principal. It depends on how the mortgage company processes the extra payments.
Sorry if this posts wrong.. this is my first time over here on the nest.. and it's acting strange.
I'm actually going to counter somewhat, what the other ladies are saying... I would definitely agree to have 3 months worth of savings in the bank for repairs and other misc things that came up. Our water heater died within the first few months. However, we put down 20% so we didn't have to waste a penny on that mortgage insurance. We're also paying a little extra each time to try and get it paid down faster. So I'd say put as much down as you can while still having money for closing costs and the emergency stuff, because money put down now will will save you on interest later.
We did the FHA with 3.5% down. We knew H was getting out of the Army and transitioning into the civilian world, so we wanted a cushion. And we needed it! If you don't have the 20%, then keep the rest as a emergancy fund and after a few year you can streamline refi the mortgage to get rid of the PMI.
I see your H is Military, curious why you didn't use the VA loan. They finance 100% so you don't have a PMI even without a down payment.
I agree with the previous women. We put 3.5% down and had some money in savings. Our house needs work, but we didnt plan on doing that right away. With that said, there are A LOT of things that you don't think about that can get pricey in the first month. Example being window treatments. Our house was a foreclosure, so the last owners took a lot of things with them and I had to buy window treatments for every room our first week here. There also might be some things that the inspection doesn't find, but you find in the house once living in it that you would like fixed or upgraded.
My advice: put minimum money down now, and you can always make higher payments or a lump-sum payment at sometime during the year on your principle. Better safe than sorry if something major goes wrong.
we had to have at least 5% for a down payment i think we ended up putting down 20%. my in laws gave us a lot towards it we used our own savings for lawyers fees and anything else that came up. we wanted to put as much down as possible for us so we can carry a lower mortgage.
my advice is to put down a good chunk but also saveo some for anything that comes up...but also do a home inspection first! we knew we wouldn't have to replace anything in our house because it was all in working order and fairly new. however, we had about $8000 in savings in case anything did come up.
oh, and we are first time buyers so we didn't have any closing costs.
We have a similar loan for our house. We put down as little as possible, because we wanted to have money left for: closing, repairs, insurance, inspections, furniture etc. The traditional 20% many of our parents were taught is no longer a possiblity, or necessity. Also, the 20% down rule makes a lot of sense in the past b/c rate were MUCH MUCH higher in the past. With 11% interest rate, yes put down as much as possible. HOWEVER today with rates of 3-5%, the 20% down rule is outdated. If you DO have money left over after inspections, closing, repairs, etc. you can always pay extra payments to your prinicple AFTER you purchase the home. It does almost the same thing as a large down payment (you pay less time and less interest) but you haven't gotten yourself into trouble by spending all your spare cash that you ended up needing for some other unexpected expense. I hope this helps
EDIT: we didn't have to get PMI because of the type of loan we had. If you do need PMI (Private Mortgage Insurance) put down a little more to lower that cost... once you have paid down your loan, you can request to have PMI lowered or removed.