What % downpayment should one pay in buying a house?

[ckramer]

How many points would be reasonable in getting a mortgage?

[Misunderestimator]

1. Usually 20% avoids you having to pay PMI

(private mortgage insurance)... as for points... it depends on how much lower the rate will go with each point. If it's a 15 or 30-year mortgage, over the life of the loan, it's a good idea to pay the points for a lower interest rate, and the points are tax-deductible in the year you finance.

[ckramer]

11. It's nice to know that points are tax-deductible!

[Dr.Phool]

2. Shop around

There are plenty of "no point" mortgages out there.

20% or more is the best downpayment. Otherwise, on a conventional mortgage, you'll have to buy mortgage insurance, which is a waste.

[MadHound]

3. Well, I believe the minimum amount is five percent.

However, if you can pay more, do it, always. It will save you money in the long run. Also, if you're getting a thirty year loan, first, make sure that you get a fixed interest rate, and second, make sure that on every monthly payment you make, you add in ten percent extra to go towards the paying down the principle. Again, it will save you money in the long run, and it will cut your thirty year mortage down to a twenty year one.

[ckramer]

10. Thanks for the tips!

On the 10% extra paying to the principle thing, will every lendor let you do that?

Does one need to do it (paying 10% extra) regularly? What if on a particular month one couldn't come up with that extra 10%?

[MadHound]

17. You're welcome

You would want to check with your lender first, they might charge a penalty if you pay extra on the principle. I don't know who you're going through for the loan, but most banks will let you make extra payments on the principle with no penalty. Other loan institutions I think it depends on who you're going with. Ask first.

And if you don't make that extra payment one month, you can always make up for it later. My first house that I bought, I was a bit strapped for cash the first few months after I bought the house, so I was just making the minimal payments. However, with a monthly payment of $280, I was able to easily make the money later on, and before I moved into my new house, I was paying way over the ten percent figure for a couple of years(was paying four hundred dollars, thus making up for my earlier lack of extra payments).

You will also find that as you pay off the extra principle, your minimum monthly payments will go down, since you're paying off principle(in the first fifteen-twenty years of a thirty year note, your payment that you make almost all goes to the interest debt, banks always want their profit first). Also, by paying off principle, you're building equity in your house, and thus it will be easier to take out a second mortage if you need to, and one that will be larger than if you hadn't been paying off extra.

Good luck friend, buying a house is one of the better investments you can make. Don't get thrown when signing day comes, everybody feels like they're signing their life away the first time, as reams and reams of paper will await your signature. If you wish to go through all of this paper before you sign(always a good idea) request the paperwork from the mortage company, or your lender the day before you close. That way you can go through it all without being rushed.

[XNASA]

4. Ideally, lenders would be paying you to buy.

But that's not gonna happen.

Seriously, no points and no down the best arrangement. The lower the better. But remember, unless you put down 20%, you'll have to pay mortgage insurance.

As soon as your paid principle added to your equity amounts to 20%, you can cancel your mortgage insurance (PMI).

So it's not unusual for a first time buyer to go 10% down, and maybe 2 points, which can be rolled into the mortgage.

[bobbobbins]

5. I'm looking to buy a house too...i wanted to get one in the 300-400k range

but i only have 10k for a down payment. I'm guessing i need more.

[cabbage08]

6. PMI

PMI rates go in steps if you can not make 20% then only put down 15%, or 10% etc. Check with your bank to see what the $$ difference is

[unblock]

7. if you can't come up with 20%, try getting a home equity loan as well

if you only can come up with, say, 5% down, you should look into getting a mortgage for only 80% of the house (thereby avoiding the dreaded pmi) and make up the rest with a home equity loan or line of credit for the remaining 15%.

you'll pay a higher interest rate on the home equity portion, but (a) it's still deductible and (b) it's almost surely cheaper than pmi.

of course, the extra paperwork and logistics are a hassle, but the mortgage broker or bank should help with that. after all, they want to close the deal as much as you do.

(disclaimer: i have no formal tax credentials)

[bobbobbins]

8. How much is this PMI i keep hearing about?

[gottaB]

15. depends on the insurer

Usually about .5% of your loan balance per year, broken down into monthyly payments.

[On the Road]

9. If You Want to Avoid Mortgage Insurance,

it's possible to avoid PMI by using a second deed of trust.

The lender writes a mortgage with a 20% downpayment. 5% of that is your cash and 15% is provided by a second deed of trust, which is like a home equity loan. The second deed of trust is at a higher interest rate, but it's much better than paying PMI.

20% downpayments are good if you can afford them. (It's even worth thinking about borrowing from a retirement plan.) But if it takes years to get the savings, going ahead with a 5% downpayment may be better.

One advantage of a lower downpayment is that it leaves you with more reserves to deal with unexpected expenses. This is especially good if being laid off might cause you to default on the house.

My concern about buying nowdays is the possibility of a housing bubble bursting. If prices go down, you may not be able to sell your house, and if you do, you may take a major financial hit. Real estate has defied expectations the last few years, so the temptation is to jump in ASAP. It varies by market and area, but the safer neighborhoods are those which have increased the least in the last few years.

[AllegroRondo]

12. Another PMI strategy

Your mortgage company will probably require PMI if you dont have 20% down. Make sure that your mortgage also says that you no longer need PMI as soon as your equity is 20% or more, and that the 20% is based on the current assessed value of the home, not the original amount of the mortgage.
For example: lets say you buy a house for $100K, with 0$ down. You would need PMI until you owe $80K on the mortgage.
Now lets say next year home values go up and your home is assessed at $120K. You've already paid off $5K on your mortgage, still owing $95K. 80% of the $120K your home is worth is $96K, so you now have more than 20% equity and should NOT require PMI any more.

[ckramer]

13. Would you recommand a reputable mortgage company in your

own experience?

Are all mortgage companies inside rates.com trustworthy?

Why there are big difference in the offering (or advertisement) of mortgage rate among these mortgage companies?

[GOPisEvil]

14. Are you a first time buyer?

If so, check into the Genesis Program. I got my mortgage through Bank of America. They have a first-time buyer's program that will allow the seller to rebate some of the purchase price and use that toward the downpayment. (Basically you finance your downpayment in the mortgage.) If you go to their little class on financial management (which is a couple of hours and REALLY basic), they get you a lower rate and no PMI.

[Wcross]

16. 20% to avoid PMI, as little as 3% for an FHA loan.

On my first home I put down 60% and had the owner hold the rest. It was only 54k for the 15 acres and small house. I love living in flyover country! I will have it paid off next year after two long years of payments. Nothing beats having a paid off home for peace of mind!