Forum Thread

house financing advice

52 14 November 8, 2017 at 07:01 PM
Deal
Score
+1
1,360 Views

Thread Details

+1 Deal Score
1,360 Views
hey guys n gals, I'm currently in the process of getting approved for a home loan for around 400k. they want me to put 3.5% down for loan, close to 14k. I can scrape all my savings together and barely do it, but the first house I bought I went through a program that added the down payment to the loan total, it was a 100k house so it was allot less. if I add the down payment to the house loan I have to pay all the closing cost and it adds to my interest rate. any advice on this? if it a smart choice to wipe out my savings for this, I'm worried something will pop up on the house I can't afford to fix. what are your thoughts?

13 Comments

1

Sign up for a Slickdeals account to remove this ad.

This comment has been rated as unhelpful by Slickdeals users
Joined Dec 2012
L4: Apprentice
453 Posts
394 Reputation
Our community has rated this post as helpful. If you agree, why not rep pokerfreak07?
#2
I'm thinking if you are worried about the smallest down payment its too much house.
Reply Helpful Comment? 7 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2009
Old Hippy & Mortgage Pro
612 Posts
#3
Most would say that if you barely have enough assets and will be wiped out after closing then you are not ready to purchase a home. The following information is for your reference.

3.50% down resembles the minimum required down payment for a FHA loan.
Depending on your qualified credit score you may be eligible for a 3% down Conventional loan product, or even a 1% down conventional loan product where the lender will kick in 2% for 97% financing (however restrictions do apply).

Another method to reduce out of pocket is to structure your purchase contract with a seller's concession towards your closing costs and prepaid expenses (i.e. tax/insurance escrows). Your Realtor can evaluate that possibility.

Finally, you can also opt for a higher interest rate that would provide you a lender credit towards your closing costs and prepaid expenses.

If the house is not new construction you must be prepared with reserves as the majority of time there will be additional expenses that will come up unexpectedly.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Jun 2013
L2: Beginner
36 Posts
10 Reputation
#4
Sorry but I'm thinking it's too much house for you. I'm not familiar with any of the special housing programs, always had to put 20% down.

14k is barely enough reserve to cover an emergency repair in a new home. Usually they throw in one year home warranty and that'll cover the small stuff like plumbing clogs and leaky toilets or showers. Anything with significant cost expect the warranty to find a way to not cover e.g. A/C unit or heater or electricity or pipe burst. In the scenario of a pipe burst (not sure if it's a new home or older home), the repipe would be on you and water damage would be covered by insurance.

Not to mention in 6 months you'll owe a partial property tax bill since there will be a delta between old bill and the new valuation along with a full property tax bill. So you'll need to save those funds up fairly quickly, if it's not packaged in your monthly payment.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Sep 2006
L5: Journeyman
764 Posts
134 Reputation
#5
Moving from a $100k house to a $400k house is a large jump. Maybe look for something in between?
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Dec 2015
L3: Novice
141 Posts
56 Reputation
#6
How quickly can you rebuild your savings account if you decide to put that money down, a couple months or a couple of years?
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Jan 2008
L2: Beginner
33 Posts
18 Reputation
#7
400k house and you dont have 14k. I had to put 20% down for 418k house
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2016
New User
52 Posts
14 Reputation
Original Poster
#8
Quote from Rob_799
:
How quickly can you rebuild your savings account if you decide to put that money down, a couple months or a couple of years?
I a an at a place now, with the mortgage payment I can put aside 800 per month and still live comfortably. 1200 if I stick to top ramen and absolute basics
Reply Helpful Comment? 0 0

Sign up for a Slickdeals account to remove this ad.

This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2016
New User
52 Posts
14 Reputation
Original Poster
#9
Thank you it all for your advice
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Jul 2006
L0: Not Dead
20,578 Posts
944 Reputation
Moderator
#10
Seriously, think about what would happen if in the next month you got sick or laid off.
Reply Helpful Comment? 0 0
If it weren't for electricity, we'd all be watching TV by candlelight.
This comment has been rated as unhelpful by Slickdeals users
Joined Sep 2006
L7: Teacher
2,072 Posts
930 Reputation
#11
" they want me to put 3.5% down for loan, close to 14k. I can scrape "
" I'm worried something will pop up on the house I can't afford to fix. what are your thoughts? "


You have a perfect recipe for becoming house poor. Here I am thinking about buying two rental houses 100% with cash while having a year worth of emergency cash to spare, and a lot more in my retirement account investment. I've been on ramen and alike for 5 years now though. Our mentality and risks cannot be further apart. I would have enough security/equity if I decide to borrow money at any time (likely won't), you are only one job loss away from getting your financial status ruined.

I think it's better to act according to what you have, not what you want other people to think of you. If you worry about interest rate, then you should not buy a house when it requires PMI because you don't have enough down payment.

Everything looks fine when the economy is doing well (and is overvalued). When it tanks, those who took the risks are on the list of foreclosures and bankruptcy. If you can't even produce enough cash for the purchase while everything is going well, what do you think would happen when the market decides to go for a dive after this tax reform honeymoon period is over?
Reply Helpful Comment? 1 0
Last edited by teetee1 November 11, 2017 at 07:18 AM.
This comment has been rated as unhelpful by Slickdeals users
Joined Mar 2011
L4: Apprentice
359 Posts
190 Reputation
#12
OP, You're nuts.

Enjoy your new home.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Nov 2014
New User
5 Posts
10 Reputation
#13
OP, There is some good advice in this thread...however some of us do not follow the conventional wisdom of the group.

FWIW, our first home was 417k, we had little to no savings and a metric farkload of debt (all student loans in the same ballpark). We literally had 4k in savings and were scraping together paycheck to paycheck to make the earnest payment of 1500, home inspection of $500 and other misc things. Anyways, our mortgage was processed and approved in 2 weeks and we are happily living in our new(ish) home. The main breadwinner in the family(not me I stay at home and raise the kiddos) is in a solid industry with great income potential and solid employment opportunities.

I add this comment to communicate that it is possible to do what you are planning on, but know that it will be a difficult path up to and after the home buying process.
Reply Helpful Comment? 0 0
This comment has been rated as unhelpful by Slickdeals users
Joined Apr 2005
L3: Novice
155 Posts
126 Reputation
#14
People are right to question the financial situation here where you're looking for such a high value home with such a low down payment, but we don't have all the details so I'll skip the criticism.

It depends on what you'll do with that 14k if you don't put it down right away. Will you invest it in a mutual fund? Conventional wisdom is that responsible mutual fund investments should grow at 4-7%, higher than your home loan. So that wouldn't be so bad.

But, taking that approach, you're subjecting yourself to more market risk. Now you've got a 400k home *and* a stock market investment that both will lose money if the market dips.

If you're planning on keeping that 14k in cash, or a 1% savings account, you're paying 3.5% interest on that money.

Do you have a Roth IRA? This can be a good emergency fund in a pinch because you can withdraw the principal penalty-free if something comes up with your house. A nice fallback.

You can also get a home warranty, which doesn't cover everything, but can reduce the risk you take on by covering things like your furnace, fridge, etc for the first year.
Reply Helpful Comment? 0 0
Page 1 of 1
1
Join the Conversation
Add a Comment
 
Copyright 1999 - 2018. Slickdeals, LLC. All Rights Reserved. Copyright / Infringement Policy  •  Privacy Policy  •  Terms of Service  •  Acceptable Use Policy (Rules)  •  Interest-Based Ads
Link Copied to Clipboard