how much is the usual down payment on a house or townhouse?

11/24/2005 11:21:37 PM

depends on total cost, credit, etc

11/24/2005 11:26:27 PM

Just google search mortgage calculator and save yourself from the impending flaming.

11/24/2005 11:40:56 PM

It's totally up to how much you want to put down and what the bank will let you get away with. It depends on your income, how much the house with worth, and how much you can afford to finance.

11/25/2005 1:23:51 AM

around 20%

11/25/2005 8:06:54 AM

I think it's becoming more common now to pay less than the traditional 20%. If you do
that, I would try to get around paying the private mortgage insurance.

11/25/2005 8:24:32 AM

i'd say between 10-20% depending on credit. I went with 20% so i'd have a lower monthly payment.

11/25/2005 8:48:09 AM

I went with 0% and the seller paid the closing costs. So basically I've just got a monthly payment which is fine by me.

11/25/2005 9:24:46 AM

The more you put down the lower your payment will be. If you have good credit and qualify by conventional means you should have no trouble obtaining a 100% mortgage.

If you have questions about getting a loan I strongly recommend calling the lender I got mine through. Its June at CTX mortgage, 783-7890 xt 3109. When I bought my townhouse she got the loan ready in under two weeks. This particular lender has done roughly 15 loans for my customers on houses I have sold and never missed a closing date.

Good luck!

11/25/2005 12:17:35 PM

i second CTX. i got all mine done with them. they were fast and helpful

11/25/2005 1:07:08 PM

if you arent plan on staying, no down payment is best.

if you plan on keeping it a long time, 10% +

11/25/2005 1:23:49 PM

if u plan on keeping it for several years, i'd put down 20%...that is what i did on my house, but generally when you do 20%, the mortgage company has to cover most of your house insurance

11/25/2005 1:46:32 PM

20% is not normal. Now, 5-10% is normal, with 10% being on the upper range. There are some short term advantages to putting down 20% on your home, but its not as smart a thing to do as you might think. The more money you put in a home, is less money you have to invest. Ideally, you should put as little money into the home as possible, and finance for as long as possible. This may seem counter to logic, but at todays interests rates, it is very easy to offset and overcome the additional interest if you take the money you would have put as a downpayment in a low-moderate risk investment program. For example, you will probably be paying 5.5% on the 20%. You can take that 20%, invest it, and probably yield a higher return. Whats nice, is the additional interest you pay is deductable, and your home will appreciate no matter how much money you used...

Another problem with putting a large amount down : Your nest egg goes away... Well, for a lot of people. Even as an investment, your money is liquid is something happens (you need access to cash quickly). If that 20% is in the house, it is not liquid, and your chances of getting a home equity loan if the shit hits the fan (loss of job) is low.

There are many 100 and 103% loans out there. They will work if you have 2 of the 3 important things for a loan: high income, good credit, good assets.

Do not wait to start examining financing based on what you think you will need to put down for a home. You should talk to a mortgage broker (or a few banks) to see what is available to someone in your position. You should run your own credit score, and bring this. They cant always, but should be able to give you an idea of what programs you are likely to qualify with this information without actually running the credit report themselves (which negatively affects your credit).

[Edited on November 25, 2005 at 6:14 PM. Reason : .]

11/25/2005 6:11:51 PM

Im glad my mom gets to pay cash money for my house and I don't have to worry about all this nonsense.

11/25/2005 6:16:49 PM

less than 20% equals PMI(extra interest)....go research on the net, a lot of sites with good info.

11/25/2005 6:22:34 PM

PMI is not tax deductible too.

11/25/2005 6:36:08 PM

^^^^carzin, if you say it's better to not invest in your home, what do you put your money in?

because after interest on a 30 year loan, you end up paying double on the house, but with a 15 year loan you only pay 1.5 times what you bought the house for. i don't see how not paying off the loan faster would help in the long run.

[Edited on November 25, 2005 at 6:40 PM. Reason : ^^^^]

11/25/2005 6:39:24 PM

I'm not rushing to pay off my mortgage early because I have better uses for my cash.

If you can't do better than 5.5% ROI with your money, then maybe a big down payment is better for you.

11/25/2005 6:58:02 PM

First of all, you do not always pay PMI for less than 20% down. It depends on the type of loans. There are a lot of different options that will allow you to bypass PMI. This is for traditional loans, and most people are using nontraditional loans these days.

rudeboy, the fact that you pay it off more quickly does not change anything. The more money you pay into your house, the less money you have to invest. If you do not invest the money saved by either not using a big downpayment, or invest the monthly money saved from financing over a longer period of time, you will spend more money. Here are the options:

1) Finance for 15 years yielding a payment of $1000 a month
2) Finance for 30 years yielding a payment of $600 a month and investing $400 a month.

Option 2 is much much better. The interest you are paying is tax deductable (further offsetting the real cost of interest) and your $400 a month will overcome the extra money the longer financing has cost you over the period of the loan (with a moderate return of 6-8% a year). You should be able to pull 10% a year if you really invest wisely, and 10% a year on 400 a month during a 30 year loan is considerable. Someone feel free to run the numbers.

I think the fact that loan advisers dont make this point to most people shows they dont know much about economics. The options I present are too advanced for a lot of people, but work really nicely if you have the extra cash.

[Edited on November 25, 2005 at 7:40 PM. Reason : .]

11/25/2005 7:27:19 PM

Quote :

"Im glad my mom gets to pay cash money for my house and I don't have to worry about all this nonsense."

She is allowed one nontaxable gift of 50k (I believe). What will happen to you, is after she pays for this home and hands it over to you, anything about 50k you will pay a pretty high tax on. You arent completely out of the woods, but certainly in a good position. Quite honestly, again, the best situation is to not put that money in a home. It seems novel, to own the own straight up. But having money in your home is not a great investment. You would be better off to have her give you the cash, invest it, and still make a payment on the home. Of course, your lifestyle wont be as nice to begin with, but that investment over a period of years will yield substancial dividends.

[Edited on November 25, 2005 at 7:38 PM. Reason : .]

11/25/2005 7:31:48 PM

Hey Ryan just thought I'd mention that we have all but closed on it. Just waiting for BB&T to dot the Is and cross the Ts, so they can stroke the check and we can close; but we have already told we were approved by the bank. Interest rate was something around 6.25% or 6.4% in that neighborhood and the monthly payment will be something around 480 to right under 500/month. I can't complain too much and we have already cleared out her house, painted a few rooms and this weekend plan to start moving stuff over. Main thing that has sucked is that the heat is out (the exchanger in the unit is dead and they are replacing it, but the parts on order) so its been cold as hell working around there with just a couple of electric space heaters. But I'm really excited. I'll post some pictures of it once we get moved in.

11/25/2005 7:43:37 PM

Quote :

"i'd say between 10-20% depending on credit. I went with 20% so i'd have a lower monthly payment."

You mean your extended family right?

11/25/2005 7:52:24 PM

Carzin pretty much nailed it. From my experience, here are a few tips:
- 0% down is usually a "first time homebuyers program" that will be about 1% interest higher than a regular loan.
- 5%-10% down is the standard today.
- PMI is much cheaper from credit union's than any other lender. Coastal Federal Credit Union will waive PMI for first time homebuyers in exchange for taking a one evening homebuying class.
- If you don't have 20% you can still avoid PMI by putting down 5% and doing a 80% first mortgage + a 15% second mortgage. The second mortgage will be about 1% higher interest, but the payment total will still be significantly less than getting a 95% mortgage + PMI.

11/25/2005 7:59:04 PM

these threads never cease to amaze me...

11/25/2005 8:23:01 PM

I am going to run the numbers to convince some of you...

Lets assume:
Exercise 1
$200k house at 5.5% over 30 years.
This yields a monthly payment of $1130 a month.

$200k house at 5.5% over 15 years.
This yields a monthly payment of $1630 a month

Lets assume you take the 15 year route... This costs you ~94,000 in interest.
Lets assume you take the 30 year route... This costs you ~209k in interest.

Ok, so right now, without investment, the 15 year has saved you $100k... Now, lets assume you took the 30 year route, and invested $400 a month into an investment yielding 10% a year.

After 30 years, you will have invested $144,000. Compounded annually, with a $400 increase every month, with a 10% return, this wll yield a total investment worth of $868,000.

If your investment only averaged an unimpressive 5%, you would still yield $335,000.

So, the bottom line is your money is better invested outside the house, not inside.

Exercise 2 - The MacGyver exercise
Your momma gives you two options...
1. She buys you a house worth $200k. You decide to invest $1300 a month in an investment yielding 10% per year for 30 years.

Cost of house=0
Investment return=$2,824,017.00
Net Worth=$3,024,017.00

2. She gives you 200k. You invest every penny. You add nothing with the investment gaining 10% over 30 years.

Cost of house=$408,000
Ivestment return=$3,489,880
Net Worth=$3,689,880

Need I say more?

[Edited on November 25, 2005 at 9:15 PM. Reason : .]

11/25/2005 8:52:20 PM

BTW. May be a few flaws with scenario 2. But I am too tired to figure it out

11/25/2005 9:28:08 PM

Carzin for the win.

11/26/2005 10:42:51 AM

you do not have to pay pmi at all if you know the ropes.

(wife is a mortgage consultant)

11/26/2005 11:55:29 AM

Yeah, I put 10% down, but PMI is for suckers and poor people.

11/26/2005 12:12:55 PM

carzin, i see what you are saying with exercise 1, but what if your only gonna own the house for 5-10 years. what is the best option to do?

11/26/2005 1:09:16 PM

If you can afford the payment take 95 or 100 percent financing. The interest (which is most of your payment) is deductible from your income taxes. Might as well keep the rest of your cash free for other things.

11/26/2005 1:14:43 PM

The period of time you own a specific house isnt important. The part which is important is that you stay consistant with the investment theme during your lifetime. If you sell a home in 5 or 10 years to upgrade, it will simply just change the investment sum you can give every month, but it will not change the fact that keeping your money working outside the home, while using the home for tax write-offs, is a smart thing... However, switching homes costs/wastes money. You should attempt to avoid buying a new home every few years. It costs a lot of money to sell a home.

11/26/2005 1:20:44 PM

^, ^^ you have absolutely no idea what you're talking about, stop posting

clearly most people don't even have the slightest idea how the modern real estate market functions or the loan programs out there - i assume that comes from listing to your parents, who haven't done anything like this in 20 years and who probably didn't understand it in the first place

at least nobody went with TAKE A 1 MONTH RE-CAST LIBOR, PUT THE SPLIT BETWEEN IT AND A 30 YR FIXED IN A VOLITILE STOCK, REFINANCE ON EVERY INDEX CYCLE AND YOU'LL BE RICH!

IF ONLY there were actual professionals out there that will allow you to access their services and then compare them with others - OR any financial resources on this intenet thing than tww

wouldn't that be great

11/26/2005 1:45:29 PM

Townhouses around campus generally have very weak appreciation rates so its easy to get stuck when you go to sell it. When you sell it the Realtor is probably going to charge 3-6%, the buyer will probably want you to pay some closing costs & make repairs go ahead and assume that crap will cost you a couple of thousand. It could easily cost you 5-10 thousand to sell the thing.

On average homes in Raleigh appreciate at 6% a year but in townhomes around NC state you are lucky to get 1 or 2% a year. As long as builders are slapping up new townhomes at the rate they presently are the demand will be low for resale townhomes and appreciation will be weak. It's pretty easy to get upside down on a townhouse if you look at it that way.

The tax advantages to ownership are awesome and its worth the hassle to avoid dealing with landlords and leases. Just dont expect to make a lot when you sell your townhouse. Townhouses are easy to own & live in but can be hard to sell under the current market conditions.

11/26/2005 1:51:56 PM

I love how Drtaylor tries to tell a realtor they don't know anything about financing a home...

11/26/2005 2:01:11 PM

^

He's just posting FUD (Fear, Uncertainty, and Doubt) to make himself seem like an expert.

11/26/2005 2:05:42 PM

everyone: drtaylor is practicing what is called ad hominem attack. That is, to attack the poster, rather than the argument. Notice that he has no argument to back up his statement. In fact, he impeached what little argument he makes by considering a 5% return on investment as being 'volatile' [its with an 'a' btw, not an 'i.' Its a pretty important word to being throwing around without knowing how to spell it]. Now, expecting a 10% return will require a lot of work. But as I showed above, 5% returns are still very profitable.

a 5-10% return historically on smart investments is not difficult. In fact, I know people have returned much more. My numbers dont lie. Its easily calculated. In fact, there is an economics professor at state (I never had him) which states everything I've said.

For me, personally, I purchased my home when I was 23 years old. not sure why he thinks everyone here is a kid... I'm older than you, drtaylor.

[Edited on November 26, 2005 at 2:49 PM. Reason : .]

11/26/2005 2:29:12 PM

CarZin, this is how i'm looking at your example #1:

Buy a house and pay it off in 15 years, you pay $94,000 in interest. For the next 15 years, take the money that you would be paying for the mortgage ($1,630) and invest that for the next 15 years (1630 * 12 * 15) = $293,400.

In 30 years, you would pay $209,000 in interest and the money being invested would be (400 * 12 * 30) = $144,000.

I'm trying to work this out without thinking of interest since you really do not know that you would be getting the 10% return on your investment. A 10% return is extremely good, and if you want to let me know your secret, please let me know how you make that much return. Right now, I have my money invested into a money market with SECU at 3.30%. But of course, that's a no risk investment.

11/26/2005 5:20:05 PM

20%

11/26/2005 6:27:34 PM

Boy, this is a thread I should have stayed out of Let me try to make this work...

Ok, so we'll assume you are going to invest your money in your home for the first 15, then take all that money and throw it into non home investments over the next 15 years...

Lets point out the differences...
1) If you did $400 a month, you would have to 'put up' (risk) $144,000 of your money. Over a 30 year period with a 10% ROI this would net you $868,000. So, you would make $724,000.

2) If you did $1630 a month, you would have to 'put up' (risk) $293,000 of your money. Over a 15 year period with a 10% return this would net you $ 675500.00. So, you would make $382,000. You might as well add in the extra $100k in interest saved, so you would make $482,000.

So, as you can see, investing money in a house early on while bypassing investment is still not a great move.

One way for you to make money is to pick very highly rated mutual funds... With all that money invested, however, you will want an advisor that is taking care of everything. You want to treat it like retirement, and have it diversified to minimize losses...

As I have stated, 10% is possible, but not that easy. I think 7% is probably closer to what would be considered a safe/low risk return.

[Edited on November 26, 2005 at 7:14 PM. Reason : .]

11/26/2005 6:55:43 PM

some people prefer to have the security of outright owning a house. there is a certain intangible value of possessing a tangible asset, in this case, a house.

1) its no sure thing that you'll net 10% return on your investment
2) a house is normally permanent. the economy can go to pieces and you'll still own your house, assuming the communists don't take over and forcibly possess all assets.

that being said, someone who prefers to own their house quickly should acknowledge and evaluate the opportunity cost that they are incurring by doing so. either way, both camps - the "investment" kids and the "ownership" kids are far better off than the vast majority of the US population who prefer to blow their money on depreciable cars and xbox 360s.

[Edited on November 26, 2005 at 7:19 PM. Reason : s]

11/26/2005 7:17:40 PM

Just fyi, most economic forecasting is done today by comparing against a 12% roi. That being the Standard and Poor 500 average rate of return over the last 25 years.

11/26/2005 7:30:21 PM

^ Those are good points.

However, you dont have to mke a 10% return on the investment for it to work. You can only make a 5% return on an investment, and deferring owning your home outright can benefit you.

However, with that said, owning a home outright must feel really good. I just know feeling good doesnt mean you've made the right decision Most things of value come by you taking some personal risk.

11/26/2005 7:32:18 PM

^^^i totally agree, even though i fall somewhere in the middle, and lean towards the "investment/opportunity cost" mindset.

i kinda have to force myself to think that way, though. i hate debt.

11/26/2005 7:34:08 PM

Quote :

"Most things of value come by you taking some personal risk."

Well, yes -- but you're missing out on a basic tenet of investing, which is to know what the fuck you're doing. Many people don't have the time or inclination to become good real estate (or public equities, or whatever) investors.

I think you're expressing a modern precept that has evolved from the Amway-esque Rich Dad, Poor Dad culture being propagated by today's financial pundits. Now everyone is supposedly going to work by day and flipping real estate deals by night, and that's how to really make money.

Personally I disagree with the "cash working for you" philosophy -- it takes too broad and too commoditized a view of risk. In my opinion, most people are smart to focus all their energy on what they're good at (ie their professions), and find safe havens (ie, highly diversified risk) for their earned wealth in the meantime.

[Edited on November 26, 2005 at 7:47 PM. Reason : foo]

11/26/2005 7:46:22 PM

which is exactly why i temper my ideological desire to lean totally towards the "investment/opportunity cost" way of thinking and instead fall somewhere in the middle.

and i have an easy time rationalizing it as "ok", because i really hate having debt (in addition to the "highest and greatest use of my time and efforts" reason you're getting at)

11/26/2005 7:50:45 PM

Quote :

"Well, yes -- but you're missing out on a basic tenet of investing, which is to know what the fuck you're doing. Many people don't have the time or inclination to become good real estate (or public equities, or whatever) investors. "

My strategy has nothing to do with real estate investment. In fact, its the exact opposite. it is shifting investment away from real estate (the traditional investment of the individual- his/her home) into assets which will provide a better return. However, buying a home and financing a home is very important in all of this.

Your investments will probably be diversified into mutual funds, bonds, some stocks... None in real estate. And this level of investment should be done by a professional.

11/26/2005 7:54:20 PM

yeah, what do you suggest in terms of investment after an IRA?

11/26/2005 7:55:39 PM

index funds

/thread

11/26/2005 7:55:53 PM

I was shouting index funds after the market crash, and when it appeared when we were just off the bottom. I wish I had taken my own advice At this point, I would probably rather invest in things other than index funds. I think you can still make money, but it starts to get more risky.

^ Mutual funds. They will require higher levels of investment than OTC stock, however. Thats one of the catches with funds. They make it more difficult for people to get in and out of them, which reduces the volatility of the fund.

11/26/2005 7:59:47 PM