I heard the general rule of thumb for a down payment of a house is 10%. Is that generally true? I'm sure it depends on a person's credit, amount of years the loan is for, etc. I wanted to know if this is true because my friend said that used to be the case, but not anymore. Houses are so expensive now, most people wouldn't be able to afford one because their down payment would be too high. I live in West Maui, a studio is $300,000. A 3 bedroom house is $600,000.
2007-12-17 06:37:13 · 11 answers · asked by Nani Girl 3 in Business & Finance ➔ Renting & Real Estate
10% is the norm for conventional home loans. There use to be gimmicky loans, like subprime, and such, however since the skyrocketing foreclosure rates, you can't find them anymore. The lenders tighened up from all the loses, and reverted back to conventional loan practices, which is typically 10% down.
You can probably find someone who will work with you if you are a little off, but there is not alot of wiggle room.
And yes, the majority of people cannot afford that, which is why the housing market and the median home prices continue to drop. The general census is that the housing market will not stabilize until 2009/2010.
I pasted below a link to a recent news article from msnbc on the subject. Hope it helps
http://www.msnbc.msn.com/id/19417232/
2007-12-17 06:53:41 · answer #1 · answered by Anonymous · 0⤊ 0⤋
NO NO NO NO
You can purchase a house with a 100% Loan.
It really isn't how much you put down, but how much you pay each month.
To those that believe that the subprime/mortgage problem is because people dont' put down a down payment, YOU ARE WRONG>
These people have a cash flow problem. They can't afford the monthly payment. Even if they had put money down, their monthly payment is too high.
DO NOT USE MORE THEN 25% of your gross income for your total housing payment. Your lender can get you a loan using up to 40% of your gross income, but this is where you will get in trouble.
Spend less then you earn and you will not have a problem.
FHA now requires 1.5% down. Loan limit will be 417,000. Get the seller to pay the closing costs.
Buy a home that you plan to live in for the next 10 years. Buy a smaller home in a GREAT area vs a larger home in a "bad" area. This is very important.
2007-12-17 07:42:44 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Your friend is right. It used to be 10-20% before you would even think of buying a home. Now it's different. Money is cheap. The most important thing is that you're able to afford the payments. Don't get in over your head with teaser rates unless you know you'll only live there for a set amount of years. Even then I wouldnt' recommend it, because time flies and before you know it, your interest adjusts and you can't afford your payment anymore. When lending rates are in the 6's your better off investing your money wisely and putting the minimum amount down while not effecting your rate or monlthy payment too much. If you're getting an 8-10% ROI with your down payment money, that off-set's the 6.x that you're paying in interest and you're 2-4% ahead of the game. Not only that, it's almost better to have you're money set aside for a rainy day. If you run into tough times, you can use the money to make bills otherwise you'll be in trouble. Hope this helps!!
2007-12-17 06:47:07 · answer #3 · answered by chicagobrokerguru 2 · 0⤊ 0⤋
No, not even close to correct. In any case, you'd pay income tax on the amount withdrawn from a deductible traditional IRA or other tax-deferred retirement account. If it's taken out of an IRA, the 10% penalty for early withdrawal if you're under age 59-1/2 can be waived. Whether you can withdraw from a 401K at all while still employed there depends on your employer's plan, but if you can and do, you'll pay the income taxes, plus the 10% penalty if you're under 59-1/2.
2016-04-10 04:30:50 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Do you have to have 10% down? No.
SHOULD you have 10% down? YES.
The whole subprime mortgage debacle is because money was loaned to people who couldn't afford to buy a home. These individuals are now looking at foreclosure, ruined debt and being worse off than they were before they tried to buy.
If you don't have the 10% down, you shouldn't be looking.
2007-12-17 06:41:25 · answer #5 · answered by Anonymous · 0⤊ 0⤋
you need 10% not really for a down payment you can get an fha loan at 3% down but you may need to show reserves which is at least 3 months of payments including taxes & insurance
2007-12-17 06:56:50 · answer #6 · answered by Anonymous · 0⤊ 0⤋
You don't have to have a 10% downpayment, but it sure is recommended. The more equity you have in your home upon purchase the better. Otherwise you can get a 5% downpayment and in some cases a 0% downpayment plan.
2007-12-17 07:14:10 · answer #7 · answered by myacumen.com 3 · 0⤊ 0⤋
It is not mandatory to put down 10%. However, when I bought my house, I avoided having to pay for mortgage insurance (which is added to the mortgage payment) by putting down 20%.
2007-12-17 06:42:00 · answer #8 · answered by lisa b 3 · 0⤊ 0⤋
Lenders offer two mortgages designed to gid rid of requiring large down payments.
You can do 100% financing (though I don't recommend this), or you could do an 80/15 - where the first mortgage is 80%....the second is 15%.....and you only put down the remaining 5%.
2007-12-17 06:42:27 · answer #9 · answered by Matt K 4 · 0⤊ 1⤋
wow you can actually afford a house in Maui ? that is way too high . I though houses were high where my sister live in virgina . there are houses there that run for 600,000.00 but they have land with them . good luck and god bless . No 10% is no longer acceptable . you need at least 20 -25% down now . good luck and god bless.
2007-12-17 06:42:36 · answer #10 · answered by Kate T. 7 · 0⤊ 1⤋