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Percent down on a house...

Old 05-14-2013, 06:43 AM
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Default Percent down on a house...

Well we finally sold the admirals house about 6 weeks ago and are currently looking. Not much in the area on the market, and when a nicer home comes on they're getting multiple bids sometimes over asking price.

Anyhow we have been swayed towards possibly buying and building our own custom ranch house...but finding the property in the right spot of town for a reasonable price may be tough as well.

After talking with a mortgage friend of ours I brought up the 20% down deal, as I feel no one is doing this anymore especially first time home buyers like myself. But how I was raised was pay cash for everything no credit cards etc, and I don't want to be mortgage poor either so more money down lower monthly payment. Mortgage guy had said alot of finance guys are telling clients to put say 5% down and the rest they are putting in the market and making a better return rather than the few dollars a month you would save on your mortgage payment.

What are your thoughts?

If I can find a lot for 100k do you think it's possible to build a nice ranch house for 180k?
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Old 05-14-2013, 07:01 AM
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The reason people aren't putting as much down right now is because the interest rates are so low. Borrowing money at 3% is rediculously cheap. People are betting they can make more return than that on the money they would have put down as a downpayment.

I don't know anything about your area and building. In my area you could build a pretty nice ranch house for 180K. Something around 1800 to 2000 SF. We're not talking hardwood floors, granite and stainless steel apliances, but nice.
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Old 05-14-2013, 07:02 AM
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My thoughts....you will get a fairly equal amount of telling you to do both on this thread.

The real answer depends upon, at minimum, your personal financial knowledge, risk assessment acumen, earnings potential and personal discipline.
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Old 05-14-2013, 07:03 AM
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I just recently purchased my first home and was told that many first time, low down payment, programs do not allow for buying land and building, as this was the direction that I was originally going. I was in construction for about 8 yeas out of high school, now in NG utilities, but as an electrician, I made many contacts and knew someone that could do every aspect of building a home. From what I was told, the only way to get financing for buying a lot and building was to put the minimum 20% down for a conventional loan.

As far as building prices, in my area (Southeast Mssachusetts) the cost to build a home is roughly $120-150/sq-ft. At those numbers and your $180,000 budget, you're at 1,200-1,500 square foot.
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Old 05-14-2013, 07:05 AM
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I'm not so sure there are many, if any, mortgage companies lending with only 5% down anymore.
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Old 05-14-2013, 07:07 AM
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Originally Posted by Jus Teasin View Post
I'm not so sure there are many, if any, mortgage companies lending with only 5% down anymore.

I was only "required" to put 3.5% in December, 2011.
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Old 05-14-2013, 07:23 AM
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Originally Posted by Jus Teasin View Post
I'm not so sure there are many, if any, mortgage companies lending with only 5% down anymore.
FHA- 3.5% down
Conventional- 5% down
VA- 0% down
USDA(rural areas)- 0% down
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Old 05-14-2013, 07:24 AM
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Originally Posted by burtonboards32 View Post
I was only "required" to put 3.5% in December, 2011.
That's great! FHA?
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Old 05-14-2013, 07:27 AM
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stick with the old fashioned way. the way grandma did it.
I like things paid for ASAP if not cash..............I know money is cheap right now, but I am not so sure the market is "real" money
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Old 05-14-2013, 07:28 AM
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Originally Posted by Jus Teasin View Post
That's great! FHA?
Yes. I put more down, but that was the "best" way at the time for us.
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Old 05-14-2013, 07:30 AM
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Originally Posted by wdkerek View Post
stick with the old fashioned way. the way grandma did it.
I like things paid for ASAP if not cash..............I know money is cheap right now, but I am not so sure the market is "real" money
Even if the market isn't "real", and falls apart, the flip side is inflation, which seemingly points to putting down less than 20%, as you'll effectively pay your larger loan with less valuable dollars in the future.

To the OP, also consider PMI, which you'll be required to pay (unless something has changed). I believe 2013 is the only year (unless Congress extends) left of being able to deduct that on your taxes.
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Old 05-14-2013, 07:36 AM
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Read up on the new FHA Insurance guidelines...harder to cancel I think.....

OP there is no right answer. I dont know your situation, but i personally like a large chuck of liquid cash money in the back... Sort of a Puck It fund. I know it's dumb to keep in the bank but I don't care. You're comfort level, payment, other assets will determine what you put down and what you're comfortable with
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Old 05-14-2013, 07:48 AM
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Historical investment returns (including recent history) suggest putting the minimum down with borrowing costs as low as they are today.
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Old 05-14-2013, 08:04 AM
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Originally Posted by Sprockets View Post
Historical investment returns (including recent history) suggest putting the minimum down with borrowing costs as low as they are today.
absolutely !!! get it if you can!!!

(for Sprockets, not the op - OP go for it)! - but I gotta tell you with 5% and less down loans all over the place - are we setting up for another boom bust cycle - seems like right after the last crash they all wanted 20% to get a decent rate.....
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Old 05-14-2013, 08:06 AM
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If that's your budget you will end up spending that extra money while buying or building the home. If you put it down you don't have that option anymore. Put more down and lower your payments and pay more monthly directly to the principle.
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Old 05-14-2013, 08:14 AM
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As little as possible. This way, if there is a big life-changing event (illness, bankruptcy, ugly divorce, death, etc...) you can leave the keys on the counter and tell the bank to pound sand without having as much skin in the game.

It's not how I was raised but that's the kind of behavior which the government and banks reward. Playing by the rules is only for suckers and little people, it seems.
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Old 05-14-2013, 08:49 AM
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Originally Posted by blueflyer View Post
As little as possible. This way, if there is a big life-changing event (illness, bankruptcy, ugly divorce, death, etc...) you can leave the keys on the counter and tell the bank to pound sand without having as much skin in the game.

It's not how I was raised but that's the kind of behavior which the government and banks reward. Playing by the rules is only for suckers and little people, it seems.
I CANNOT believe you are seriously suggesting this. Answers like this are the reason this country is in the condition it is in. Oh well, I can't/don't wanna hold up my end of the deal, fawk it, I'm out. Really great suggestion here.....


To the OP, put 20% down. You won't have to pay PMI and you won't worry about some jackass playing with your money in the marketplace.
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Old 05-14-2013, 08:50 AM
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Originally Posted by slickcav View Post
Well we finally sold the admirals house about 6 weeks ago and are currently looking. Not much in the area on the market, and when a nicer home comes on they're getting multiple bids sometimes over asking price.

Anyhow we have been swayed towards possibly buying and building our own custom ranch house...but finding the property in the right spot of town for a reasonable price may be tough as well.

After talking with a mortgage friend of ours I brought up the 20% down deal, as I feel no one is doing this anymore especially first time home buyers like myself. But how I was raised was pay cash for everything no credit cards etc, and I don't want to be mortgage poor either so more money down lower monthly payment. Mortgage guy had said alot of finance guys are telling clients to put say 5% down and the rest they are putting in the market and making a better return rather than the few dollars a month you would save on your mortgage payment.

What are your thoughts?

If I can find a lot for 100k do you think it's possible to build a nice ranch house for 180k?
From what I understand if you have less than 20% equity you are going to pay PMI.

Find a good mortgage broker, don't deal directly with the banks. You will get a better rate and pay less in closing costs. I went into a fixed 15 yr at 2.75% just before the new year, zero closing costs.
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Old 05-14-2013, 09:21 AM
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Originally Posted by CLang View Post
I CANNOT believe you are seriously suggesting this. Answers like this are the reason this country is in the condition it is in. Oh well, I can't/don't wanna hold up my end of the deal, fawk it, I'm out. Really great suggestion here.....


To the OP, put 20% down. You won't have to pay PMI and you won't worry about some jackass playing with your money in the marketplace.
While I agree with you that I would never encourage someone to just "walk away", he has good points regarding unforeseen events in life.

If you put ALL available cash into a house, you have no way of getting it out if you lose your job or go through a rough patch of unexpected expenses. IF you also have liquid reserves of at least 3-6 months living expenses, and can still put 20% down, it makes sense. But at 3-4% over thirty years money is so cheap that it is reasonable to expect a better ROI in a different investment that is much more liquid.
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Old 05-14-2013, 09:26 AM
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Originally Posted by CLang View Post
I CANNOT believe you are seriously suggesting this. Answers like this are the reason this country is in the condition it is in. Oh well, I can't/don't wanna hold up my end of the deal, fawk it, I'm out. Really great suggestion here.....
.
It's a business decision, emotions have nothing to do with it. Businesses write losses off all-the-time. JP Morgan stiffed some Japanese bank for something like $100 million a few years ago and just walked away from some sky scraper in Vancouver because it just wasn't worth it anymore.

I can cite you a hundred more examples like this.

Besides, the bank will just stick the tax payers with the bill.
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