When buying your 1st home, do you need/recommend a down payment?

Question

My fiance and I are having a discussion about buying our first home. I told him we should think about having at least a five percent down payment. He said he doesn't think it's necessary. He said he hears commercials on the radio everyday that talk about buying your first home and how you don't need a down payment. I think he's talking about those commercials that are those guys that are trying to rip you off and make a lot of money off the interest since you aren't having a down payment. Anyone have any suggestions or know where I could learn more about buying our first home and if it's recommended to have a down payment. (I think it'd be a very bad idea not to have one. How can I convince him, too?)

Answer 1

I am not a one of those that think you should place a lot of money if any down on a home. All interest is tax deductable over the course of the loan no matter how large or how small, the interest is.

Your credit score will determine if you are qualified to purchase a home with little or no money down. The higher your credit score the less you have to put down and if you are at the level of having to put no money down all and good.

The only way that you can find out if you are qualified for a loan is to find a mortgage "Broker" take one month of each of your pay stubs, 6 months bank statements from each bank account. W-2 form for 2 year and fed income tax for 2 years for each of you,as well as 6 months statements from any 401k program the both of you might have from your employers. Take your drivers lic and social cards or at least a copy of each.

Now you will have lots of paper work to complete, but he will assist you. Not to worry you will get through it in fine fashion.

This mortgage "Broker" will get a credit report for the both of you , after which he will be able to tell you what type mortgage you are gualified for. He will be able to tell you if you are qualified for a 100% loan or not. He will also be able to tell you how much home you can afford based on the amount of money you guys earn each month and the amount you guys pay out eacch month.

The important thing for you to concern yourself if to get into a home with little or no money. The interest rate is important, but don't let it be a deterrent from you purchasing a home. Because your brother or friend got one rate does not mean you are going to get the same rate. Each person's credit is different and each person's credit score is different so don't expect the same loan.
Just remember all the interest you pay on your loan is tax deductable.

Once you have been pre-approved by your "Broker" he will fined a real estate person he has worked with and has a professional realtionship with to assist you in finding you a home.

Once you have found a home, the real estate person will then get you a purchase contract, an appraisal for the property, have your mortgage "Broker" open an escrow or closing agent for you. He will give all the paper work to your mortgage broker who will take another 10-14 business days to complete your mortgage.

When you go to your closing be prepared to sign lots of documents and other items that are required by the federal, state and local governments.

Now that I have told you how to go about getting a home for the both of you, do you plan to get married before you purchase the home or after.

My advice is to purchase the house after the marriage. I have seen so many purchase a house before marriage. After they purchase the house something happen and a breakup occurs. There are lots of legal things in the air, especially the house and who gets it. One say they paid the most on the mortgage and want to give the other a few $1000,00 for them to move.

I know that you didn't ask but I wanted to pass on some experience and knowledge I have gained over the years.

I suggest you check with your tax advisor on your tax situation and other tax questions you might have.

I hope this has been of some use to you, good luck.


"FIGHT ON"

Answer 2

You really don't need a down payment. There are plenty of 100% financing programs out there and you can still get 100% without paying PMI. An 80/20 mortgage will get you out of having to pay MI granted the second mortgage is going to be at a slightly higher rate but the payments may be less than the MI. Each situation is different and and the 80/20 option may not be a viable choice for you. Also, you have to think about how long you are going to live in the home.
You should discuss your situation with a loan officer to get a better idea if a down payment or not is best for you.
http://www.lendermark.com

Answer 3

You can own property without a down payment. There is 100% financing. Look into 80/20 loans which is a loan for 80 percent of value and another loan for 20 percent of value.

I personally like to pay as little as possible to get into a piece of property and ride the appreciation and tax write offs while letting the bank deal with inflation. Everyone is different in the risks that they are willing to take. Some like the comfort of a fixed loan while others like the flexibility of an option ARM loan.

Find an online mortgage calculator and find out how much your payments would be if you put 0, 3, 5 or 10 percent down.

Good luck and I wish the both of you well.

Regards

Answer 4

I would recommend not putting down a down payment. 5% is not going to exempt you from taking out a second, or paying PMI. As a first time home buyer ask yourself these questions, Do have a lawnmower? Do I have a humidifier/dehumidifier? Do I have a sprinkler, garden hoses, rakes, shovels? Do I have enough furniture to fill a house? I have seen many people pay all kinds of money down only to realize they have no money to repaint, buy the lawnmower, put up the playhouse etc. There are many programs with 100% fianancing, reduced PMI and other incentives. If you want more info email me. On a $200,000 house the difference in payments is $60 a month provided the whole loan is at the the rate of 6.5%.

Answer 5

It would really depend on how long you are planning on staying in the house. If it's really short term (5 years or less), then I wouldn't have a down payment. And I'd go with an interest only loan. If it's any more than that, I'd put as much down as possible. And I'd get a conventional mortgage so that I could build equity. The more you put down, the lower your payments will be. A lot of companies won't even look at you for a conventional mortgage with less than 10%, and most really want you to have 20%. Hope this helps.

Answer 6

A down payment is not needed, however, it will help in the long run by making you house payments more affordable. The more money you put down, the less money you have to borrow with interest, and therefore, the less your house payments will be. If you want to borrow the price of you home great, but the monthly payments will be higher than if you put some money down. 5-10% is a good amount to start with. More is better, but try to put something down.

Answer 7

I see four basic ways to get a home . One is to pay little down and have very high payments ; two is to put a lot of money down and have small payments; three is to buy a fixer upper and work on it forever or four, the one I picked in my life. It is to buy a piece of land and build a house from good plans using your labor mostly. Well I got the house and ownership and always owned a house after that. But I lost my first marriage and my second and such is life.

Answer 8

when you get a mortgage the company lending you the money will use the house as security - if for some reason you can't pay then they will take the house and sell it to get their money back

when you buy a house it will be valued but what if the value of the house when the mortgage company tries to sell it is less than what you owe ?

this is the problem the company faces

they solve it in 2 ways

1 way is to only lend say 90% of the value of the house so they are more likely to be able to get their money back if you default

the other is to give you a 100% mortgage and also insure against you not being able to pay - and they will charge you that insurance

so, yes you can get 100% mortgages but they will cost a few thousand more because of this insurance

alernatively, save up about 10% of the value as a deposit and avoid having to pay the mortage company's insurance for protecting themselves

Answer 9

Having a down payment, reduces the amount borrowed over a 20-30 yr period, that is alot of money to pay back in that amount of time. Also some require money down to lock in an interest rate, so it is not adjustable with inflation, most likely to rise than fall. You will also build up equity sooner with a down payment.

Answer 10

FHA and VA only require around 3%. Conventional requires 20%. What you put down is entirely dependant upon your comfort level emotionally and your cash flow expectations for the future. The more you put down, the less mortgage you will have....but, the less you will have in the bank for furniture, blinds, carpet, remodeling, etc.

Books? I would check the library. Also, talk to mortgage brokers...but, remember, they have their own agenda...which may be different than yours!!