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Are houses commonly being bought today with less than 20% down?

By BayArea follow BayArea   2019 Sep 5, 12:02am 826 views   21 comments   watch   nsfw   quote   share    


If so, who is giving these types of loans?

3.75%, 5%, 10% for instance

According to Forbes, the median down payment for a mortgage is only 5%

https://www.forbes.com/sites/samanthasharf/2019/07/08/how-much-do-you-really-need-for-a-down-payment/

Is that possible??
1   Misc   ignore (0)   2019 Sep 5, 5:06am     ↓ dislike (0)   quote   flag      

From what I understand Fannie and Freddie only require 3% down now, but you gotta pay PMI if less than 20%. FHA only requires 3.5%, but their rates are higher, but FICO requirements are minimal. There are limits on the size of the mortgage you can get from these government guaranteed ones. Most Jumbo mortgages require the 20%.
2   Tenpoundbass   ignore (15)   2019 Sep 5, 6:03am     ↓ dislike (0)   quote   flag      

I think credit score and all of the other financial requirements are more important than how much you put down.

I've been leasing cars for the last 10 years. Every time I turn one in, it's beat to shit. I expect they are going to ding me hard in fees when I turn them in. But they never do.
The Salesman(sold me all 7 of my Mazdas) told me, that the used cars sell better than the new ones. I asked him, well if they are so cheap and easy to lease for a few years, then turning them in and getting a new car is so easy. Why don't everyone just lease them?
He said it takes good credit to get the incentive lease and zero down down offers and deals. He said only about 20% of the would be leasers qualify. They end up buying an off lease car. That's where car companies make their money, and make up any wear and tear that the previous leaser put on it.
They do hit you hard on going over the miles that they wont forgive you. I turned in a wrecked front end, and was not charged. But they got me for $700 on the overage.

But with Mortgages I think the banks consider the credit worthiness first, then how much down payment second.
3   BayArea   ignore (1)   2019 Sep 5, 1:19pm     ↓ dislike (0)   quote   flag      

According to Forbes:

- The majority of mortgage loans today are with less than 20% down.

- The average mortgage loan DP is 6%

😳
4   Shaman   ignore (2)   2019 Sep 5, 2:08pm     ↓ dislike (0)   quote   flag      

That jives with what I’ve seen from friends and coworkers. One bought with 3% last year. Poor bastard has to pay $800/month in PMI with no end in sight. Just not much of a saver. I bought my first house with 15% down and PMI was $80/month which dropped off after the first year I think. Second one I bought with 20%.
5   BayArea   ignore (1)   2019 Sep 5, 5:40pm     ↓ dislike (0)   quote   flag      

Only a sucker buys with 20%
6   Hircus   ignore (0)   2019 Sep 5, 5:41pm     ↓ dislike (0)   quote   flag      

I forget which website, but the other day I looked into the cost of PMI and it was surprisingly cheap - about 3.1% APR.

For someone looking to leverage up their investments, that's a good rate IMO.

e.g., for each 100k of the home, instead of making a 20% of down payment, just make $3k (3%, the minimum down payment, I think) and the other 17% via PMI
17k * 3.1% = $527 a yr in interest.

Then, take the 17k you still have and invest it elsewhere.
7   ForcedTQ   ignore (0)   2019 Sep 6, 5:08pm     ↓ dislike (1)   quote   flag      

Real life example: Wanted to do 20%, instead did 5%. 277500 financed, 4.125 apr 30 yrs, 2.5 yrs ago, pmi of $94.86 a month. It was very minimal and I used a portion of the other funds for interior rehab. Seemed real cheap to me, and now I’m in a position of at least 24% equity without a recent appraisal to take stock of the interior upgrades. Time to refi to a 15yr @ <3% and drop the pmi while dropping my payment. Been paying the 30 at the rate of a 15.
8   BayArea   ignore (1)   2019 Dec 29, 4:59am     ↓ dislike (0)   quote   flag      

I just spoke to a long time 20+yr veteran real estate agent. She told me that the vast majority of her home buyers are buying with less than 20% down in 2019.

Interesting
9   APOCALYPSEFUCKisShostakovitch   ignore (52)   2019 Dec 29, 10:34am     ↓ dislike (0)   quote   flag      

With money this cheap and underwriting non-existent and MAE/MAC ready to buy the crap, you'd have to be an ASSHOLE! to finance your flip with your own money.

TAXPAYER! CUNTS! take risks!

REAL! AMERICA!ns rake in the returns!
10   Fortwaynemobile   ignore (3)   2019 Dec 29, 10:42am     ↓ dislike (0)   quote   flag      

2 of our neighbors bought with 10% down. Apparently common. People have hard time saving 20%.
11   just_dregalicious   ignore (2)   2019 Dec 29, 11:24am     ↓ dislike (0)   quote   flag      

Investors typically need 25% down.
12   Fortwaynemobile   ignore (3)   2019 Dec 29, 11:25am     ↓ dislike (0)   quote   flag      

Investors here do 100% cash by grouping up to buy. Mostly multi unit properties.

just_dregalicious says
Investors typically need 25% down.
13   Blue   ignore (0)   2019 Dec 29, 8:43pm     ↓ dislike (0)   quote   flag      

Misc says
Fannie and Freddie

I thought they would be closed by now. When it comes to housing the government running loans is not any different from any other communist country programs.
14   just_dregalicious   ignore (2)   2019 Dec 29, 8:46pm     ↓ dislike (0)   quote   flag      

Fortwaynemobile says
Investors here do 100% cash by grouping up to buy. Mostly multi unit properties.


I've thought about that but I don't buy in CA. In Texas over the past decade I was able to buy 3 essentially brand new houses (179K, 190K, 225K) for with 25% down which cash flow well.

I have free property management so it works. That won't last forever though and sometime after it does I may sell them all and buy a multi-unit.

Plus I don't like dealing with other peoples shit. Unless it's a condo on the beach in Maui haha... That's worth it.
15   vain   ignore (0)   2019 Dec 29, 10:51pm     ↓ dislike (0)   quote   flag      

Don't forget about Stated Income Loans - Built for ones that cannot prove their income. You state your income. I believe it. I finance!
16   SunnyvaleCA   ignore (1)   2019 Dec 30, 1:26am     ↓ dislike (0)   quote   flag      

Hircus says
I forget which website, but the other day I looked into the cost of PMI and it was surprisingly cheap - about 3.1% APR.

For someone looking to leverage up their investments, that's a good rate IMO.

e.g., for each 100k of the home, instead of making a 20% of down payment, just make $3k (3%, the minimum down payment, I think) and the other 17% via PMI
17k * 3.1% = $527 a yr in interest.

Then, take the 17k you still have and invest it elsewhere.

Are you saying that 3.1% PMI is the total cost of borrowing that 17% extra? Or is 3.1% PMI on top of the 4% for the 30 year mortgage?
Another win with only 3% down is the extremely low cost if you decide to walk away.
17   Shaman   ignore (2)   2019 Dec 30, 5:54am     ↓ dislike (0)   quote   flag      

https://www.investopedia.com/mortgage/insurance/avoid-pmi/

This website says that PMI is typically between 0.5%-1% of the total loan annually.
So a loan of 700,000 (typical for California) would cost you $7,000/year or $583/month.
That’s a luxury car payment or a payment on a nice truck.
Not tax deductible.
Just sheer outlay.
I chose to avoid such expenses where I can.
18   Hircus   ignore (0)   2019 Dec 30, 10:08am     ↓ dislike (0)   quote   flag      

SunnyvaleCA says

Are you saying that 3.1% PMI is the total cost of borrowing that 17% extra? Or is 3.1% PMI on top of the 4% for the 30 year mortgage?


Ah, good catch. I'm not certain, but I think the 3.1 must be on top of the ~4% mortgage rate. It wouldn't make sense for to be able to pay a lower rate for the riskiest portion of the loan, so it must be in addition to the mortgage rate.

So, it's not as good as I thought. I was thinking the opportunity cost was 3.1% for that 17k per 100k of loan, but indeed it must be 3.1 + 4 = 7.1%, which isn't very good. It's not a bad rate though, and could still be useful as you mentioned - to give you the option to walk away early in the loan relatively cheaply.
19   Hircus   ignore (0)   2019 Dec 30, 10:12am     ↓ dislike (0)   quote   flag      

just_dregalicious says
Plus I don't like dealing with other peoples shit. Unless it's a condo on the beach in Maui haha... That's worth it.


haha you're still killin it w/ that VRBO rental huh? That's awesome, I remember you talking it about years back.

Will you buy a multi unit in TX, or elsewhere?
20   just_dregalicious   ignore (2)   2019 Dec 31, 1:17pm     ↓ dislike (0)   quote   flag      

Yeah, it's working for me but I wouldn't say killin it. I clear about 25K (5%) each year after taxes/expenses. But I've been putting 10-15K each year into it to finish a remodel, it was mostly remodeled when I bought it. I'm basically done with that by mid-February. So I think I can get to 35K (7%) now. Where 9% is a decent return on Real Estate. However, on paper it's appreciated 20% the past 2 years.

We just got a pretty decent sized sinkhole we patched. Should last a few years while we beg the state to allow us to fix it properly. That will likely cost me about 20K out of pocket and shut us down for 3 months so I'll lose revenue too. I have insurance for lost revenue in the event of say, something like a tidal wave hits it (I'm ground floor) but I'm not sure this fits the bill.

The cinder block building and grounds are in fantastic shape and I'm about 15 steps to a private beach in the nicest part of Maui though -> Lahaina area. My reviews a top notch and I'm blowing away the competition. This has let me raise rates each year although I'm probably peaked out on that at this point.

I got a hell of a deal for the place that just can't be found anymore. Old people with health problems that I haggled with for 3 months needed to sell. I learned they had to sell from my neighbors after the fact obviously. So if there is a pull back in the market I think I'll at worst break even until prices go back up. However, condo properties don't sell quickly in Maui. It takes 3-6 months typically. I don't plan to sell for a decade or two or ever.

People who go to Hawaii: The newly wed and nearly dead

My owner peers are >90% nearly dead so this decade is going to be interesting.

Most of my neighbors in the building are part of "The rental pool", where a 3rd party does all of the work and changes 28%. So my neighbors don't make any money and the funny part is that leasing company just uses VRBO and they are shitty at it. They don't change prices seasonally, might respond to a reservation request after 24hrs, have crappy reviews etc., and I get a lot of pressure from my neighbors to do the same stupid shit they do. Hell no.

If I buy a multi-family it won't be in TX or CA but wherever I move to after I retire from biotech here in San Diego.
21   SunnyvaleCA   ignore (1)   2019 Dec 31, 1:49pm     ↓ dislike (0)   quote   flag      

just_dregalicious says
My owner peers are >90% nearly dead so this decade is going to be interesting.
The going joke around me is that whenever you see an ambulance going down the street there will another house up for sale! My neighborhood was developed in 1961, so original owners who were young when they bought these starter homes are just about done. Sad to think back to times now far gone... someone graduates from college (debt free), gets their first full-time job, gets married, and can immediately buy a house that now wouldn't be affordable even at 1/3 the price.

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