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  #1  
Old 06-16-2010, 02:36 PM
pbbth pbbth is offline
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How long did it take you to save up a down payment for a house?

We are starting to consider buying a home/condo and are saving up for a down payment. Right now we have about $5,500 set aside for a down payment and out of curiosity we started looking at what is available on the market. After doing some research we've discovered that the cheapest place we could live that wouldn't require major renovations would be about $280,000-$300,000.* There are some places on the market at about half that price but they aren't really habitable at this point. To be able to bring the monthly payments to an affordable amount we would need a full 20% down payment of $56,000-$60,000. We would need to save at least $800 a month for more than 6 years to have a decent down payment for a house. If we really scrimped and got part time jobs on the weekends to get to $1,000 a month savings we would still be 5 years away from a decent down payment.

How the hell do people save this much money? Are we doomed to line up to sell plasma, sperm, eggs, kidneys, and anything else we have more than one of to be able to own a home? We have no desire to have an ARM loan with a 3% down payment. We have spent the last 2 years saving for a wedding and we will not go into debt to pay for that. We don't have any student loan debt between us. We have maybe $400-$500 on credit cards that will be paid off in the next month. We are really financially responsible people and this is just throwing us for a loop. Do most people live well beyond their means or do most people wait until they are in their mid-30's before they own a home and we have just been misled by TV to believe we should be better off than we actually are?

*We live in NYC and are looking in the city and surrounding areas. I know we could move to Kansas and buy a house for $85,000 or something but then we would each take a huge hit in our income so it wouldn't be to our benefit anyway. Plus then we would have to live in Kansas and neither of us want that.
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  #2  
Old 06-16-2010, 02:50 PM
Glory Glory is offline
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We got an FHA loan and put down 10%. It does suck because now we're stuck with PMI for awhile, but 20% was just prohibitive.
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  #3  
Old 06-16-2010, 02:55 PM
Cluricaun Cluricaun is offline
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86 years. Which is how old my fiancee's grandmother was when she died and left us the money we needed to put down on a house.

Realistically we never could have done it otherwise. We did buy before the market collapsed and the banks coffers slammed shut, but as we both work in the industry we weren't dumb enough to finance everything, so we put down.....$40k on a $180k townhouse I think it was. All that managed to save us is that we're not upside down now three years later.

As for people looking to be first time buyers on single family homes I would have no idea where they could ever actually get the scratch together to make what banks want as a down payment these days. There are lots of properties selling for what they're actually worth these days which is nice, but still 20% of a quarter of a million dollars is a lot of liquidity to expect from someone in their 20s or 30s.
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Old 06-16-2010, 03:03 PM
fluiddruid fluiddruid is offline
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I don't think most people actually save up that much money. Some might, but most people would probably not be able to afford that (barring something like an inheritance). I would imagine that, unless people have really high-earning jobs, they just continue to rent or they buy a house and fix it up.

Do most people pay down 20% on their first home? I sure didn't. I even had conventional financing, not FHA, and I put down, I think, around 7%. It isn't an ARM, either. This was just a year ago, too, after the crash. Yes, I pay PMI (though because of extra principal payments, I'm aiming to finish that off in a year or two). But I didn't worry as much about making the payments, because I bought a much less expensive house.

That's the thing with NYC. Things are far, far more expensive - if you're not earning far, far more, then you won't end up with the same things that people do when they live in cheaper locations. A liveable starter house here in an affluent suburb of Des Moines is in the 110k-140k range. Do you think you make 2.5 times as much as you would here? I doubt it. I've seen the pay scales my company uses in different areas of the country; they're different, but not that different. Now whether or not you'd like it, well, that's a different story.

Last edited by fluiddruid; 06-16-2010 at 03:06 PM..
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  #5  
Old 06-16-2010, 03:09 PM
Snickers Snickers is offline
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I hear you. When SpouseO and I were looking, we felt the same thing - "How on earth will we ever be able to save up that much?" It was just unthinkable, really. And this was 8 years ago, during the boom when even dogs could get loans.

Because we both had really good credit, our mortgage guy was able to do this weird scheme where he sort of "fronted" us the 20% for the down payment, then got us a mortgage for the remaining 80% (just as if we had the 20% already). Then, since we had 20% equity, he got us a second mortgage/home improvement loan for that exact amount, with which we "paid him back" the down payment. It seemed rather shady at the time, but I've heard since that it's a rather common arrangement. So we really have two mortgages. It worked for us - we were careful to not buy outside of what we could afford.

One thing our realtor told us when we asked about whether we should wait for a couple of years to save up. At that boom time, he said, "Buy now. The market will outpace what you can afford next year." His thinking was that the $150K house we were looking at now would be $175-$180K next year, and we wouldn't be able to save fast enough. His advice would probably be different now.
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  #6  
Old 06-16-2010, 03:09 PM
Renee Renee is offline
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You don't have to have 20% down to buy a house. We just bought one a few months ago, and the interest rate is so low that we decided to only put down the minimum, which was 5%.

The first house we bought, back in '01, we also put down about 5%.
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Old 06-16-2010, 03:10 PM
Snickers Snickers is offline
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Oh! Forgot to mention - one of the advantages of the 2 loan dealie that I have is that I have no PMI to pay, so that's nice. Saves me some cash.
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  #8  
Old 06-16-2010, 03:12 PM
Snickers Snickers is offline
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Another thing to mention - you can take a loan from your 401k for a house purchase. That said, I don't think it's something I would do if I could avoid it in any way.
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  #9  
Old 06-16-2010, 03:15 PM
Dogzilla Dogzilla is offline
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1 year.

I know, hate me.

When I moved to this fair city, I was approximately 20K in debt. I made a plan, paid off a student loan, my car loan, and several thousand in credit card debt. That took about three years, maybe more like 4-5, confirmation bias being what it is.

For the next year, I wouldn't allow myself to buy clothes, music, or travel. I would not go see concerts, which is a huge money drain for me. Kept my credit card paid off. Did not incur any other debt. Socked away $500-750 a month, sometimes a little more, until I had about $10K saved up.

I bought a house in a gentrifying neighborhood in the middle of Florida's capital city. (I am literally living slam in the middle of town; it's even called "Midtown.") This was in 2003 and pricing was still relatively low, especially for an in-town neighborhood. I got a 3/2, built in 1942, with an addition + upgrade done in 1989, for a few cents less than $100K.

I put maybe 5% down from my own cash and Wells Fargo gave me a variable interest HELOC with a fat balloon payment in 15 years. It was one of those scammy interest-only loans, but only for the other 15% I needed for the downpayment. I have since flipped that loan into a nice secure, low-interest second mortgage. I avoided paying PMI and was able, instead, to deduct the interest off the second loan from my taxes. I hate giving up money (like paying PMI) and not getting anything in return for it. At least by financing my downpayment, I was able to jack up my tax deduction and the PMI premiums weren't just flushed down the toilet.

I still had about $2K leftover after closing costs, so I bought some new furniture. I am now house-rich and cash-poor, and even with the real estate crash in Florida, I still retain equity because I bought the house for so damn cheap (and did nothing to it in the way of improvements or repairs, aside from paint and landscaping) and its value increased so much in the 7 years since I bought it. At one point, the resale value had increased by about 50%, but I think I'm down now to a profit of only about 30%.
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  #10  
Old 06-16-2010, 03:16 PM
Tom Scud Tom Scud is offline
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When we bought, we also got the people we were buying from to front us some of the down payment (technically, the closing costs); basically we added x thousand to the loan (and thus the money they got) and they paid x thousand of the costs.
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  #11  
Old 06-16-2010, 03:18 PM
Hari Seldon Hari Seldon is offline
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I bought a house two years after I got married. I guess I had saved enough (the house, in 1966, cost $13.5K and I sold it two years later for the same price) to take over an existing mortgage. I then moved and rented for four years, at which time we were able to save enough for a normal down payment (about $4K), but by borrowing $5K from a friend I was able to take over an existing mortgage whose balance was about 2/3 the cost of the house. So we put over 30% down. I paid off the friend (he charged me only the interest his bank was paying) in under five years and the rest of the mortgage in 19. The house cost $31.8K and is now assessed at $560K. No one who is currently where I was in 1972 could possibly save enough to buy it.
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Old 06-16-2010, 03:19 PM
Eva Luna Eva Luna is offline
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You're living in one of the craziest places in the country, housing-wise, which is a large part of the problem. Even here, we just bought our first condo, and a) we never would have been able to swing it this soon without some VERY generous wedding gifts; and b) we put 10% down, not 20% (conventional loan, though, not ARM). We're hoping to sock away some extra mortgage payments and get rid of the stupid PMI ASAP, though.
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  #13  
Old 06-16-2010, 03:19 PM
pbbth pbbth is offline
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Originally Posted by fluiddruid View Post
That's the thing with NYC. Things are far, far more expensive - if you're not earning far, far more, then you won't end up with the same things that people do when they live in cheaper locations. A liveable starter house here in an affluent suburb of Des Moines is in the 110k-140k range. Do you think you make 2.5 times as much as you would here? I doubt it. I've seen the pay scales my company uses in different areas of the country; they're different, but not that different. Now whether or not you'd like it, well, that's a different story.
When I moved to NY from TX and got a job in the exact same industry for the same size company I got about $14,000 more just for changing locations. Along with the dramatic reduction in my transportation costs (I spend $89 a month for a train pass and 50% of that is subsidized by my job) it more than made up for the increase in rent. If I move to Des Moines and find a job paying me $10,000 less per year I might be making plenty to buy a house but then I have to get a car, car insurance, gas, etc. to get from place to place.
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Old 06-16-2010, 03:19 PM
Surly Chick Surly Chick is offline
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It took me two years. But I had to go to Afghanistan to do it. We get some big financial incentives and plus there's no place to spend it...
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  #15  
Old 06-16-2010, 03:22 PM
Dogzilla Dogzilla is offline
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By the way, I did that as a single person, no kids, no parental involvement whatsoever. Bought the house at age 33.
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Old 06-16-2010, 03:22 PM
Manda JO Manda JO is offline
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We received a life-insurance payout when my husband lost his mother: two of his three siblings also used their share of the money for the same purpose, and it's exactly what his mom wanted for her kids, so we all felt pretty good about it.

That said, right now we are saving for IVF ,which is comparable, and we've managed to save almost as much as our down payment was in the last six months. But we've really moved our lifestyle from "middle middle class" to "lower middle class" in order to do so.
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Old 06-16-2010, 03:27 PM
Dinsdale Dinsdale is offline
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6 months. When my wife and I got out of school we both had jobs. Moved into a really cheap apt and saved everything we could. Before we knew it we had 20% to put down on an inexpensive house, and our landlord kindly let us out of our lease.
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Old 06-16-2010, 03:33 PM
Pleonast Pleonast is offline
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It took us about 7 years to save up the 20% for a house in the size and neighborhood we wanted. It would have taken us longer, but the housing crash brought prices down to our savings level. We could have bought sooner, but we didn't want a non-traditional loan or a bubble price (despite the willful ignorance of some, it was obvious that prices were unsustainably high). Nor did we want a small "starter" home.

It may seem like a long time, but in the big picture, it's not. And remember that having the patience for a long time horizon is a necessary component of being financially responsible.
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  #19  
Old 06-16-2010, 03:34 PM
malkavia malkavia is offline
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I don't know if things are just different in AZ, but I bought my home on a fixed rate interest (5.5%) FHA loan where I was required to put 3.5% down and we bundled the closing costs into the offer so the seller actually handled them. (i.e. we offered 118,500 vs. the 114k asking price to ensure they would pick up 4500 in closing costs)

I borrowed the 4200 down payment from my parents which I then repayed as soon as I received the first time buyer incentive (8k) when tax time rolled around. Otherwise I could've seen it taking me a couple of years to build up to 4200.

20% down is horrifying. Especially in NYC.
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  #20  
Old 06-16-2010, 03:42 PM
Finagle Finagle is online now
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Originally Posted by pbbth View Post
How the hell do people save this much money?
Well, they don't pay NYC rents, for one. I'm not sure how two putatively financially responsible adults working at presumably decent-paying jobs can have just $5500.00 in the kitty unless they're splurging it all on a pretty significant monthly rent. (And, I guess, weddings.)

But to answer your questions:

a. Before the crash, at least, you could get away with much lower down-payments. I paid 10% with a higher second mortgage thingy that allowed me to avoid PMI. Then refinanced later to get rid of the second mortgage.

b. Many people do live beyond their means. Thus the whole mortgage crisis that's been going on for the past few years.



BTW, the assumption that you won't be doing remodeling or renovating is optimistic at best. You should have at least $2-5K in reserve after the closing in case the furnace craps out the first winter or the roof starts leaking, the old Indian graveyard in the basement needs to be dug up and relocated or you realize that you just can't live one more minute with the 1970 avocado appliances that the old owner left behind.
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  #21  
Old 06-16-2010, 04:11 PM
Q.N. Jones Q.N. Jones is offline
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Almost everyone I know who bought a house prior to age 35 got the downpayment from their parents. Even the ones with really good jobs. Try asking your older relatives who like you and have money to burn. Some might give you the money rather than waiting to pass it on after death. Begging is embarrassing, but sometimes it doesn't pay to have any pride.
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  #22  
Old 06-16-2010, 04:17 PM
Duckster Duckster is online now
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We bought our current home ($250,000) with an 80/10/10 loan arrangement, with closing costs included in the price (at the moment of sale there was a cash flow crisis). An 80/10/10 loan means 80 percent primary 30-year mortgage, 10 percent secondary 10-year mortgage and 10 percent cash. The purpose of an 80/10/10 mortgage meant I didn't have to pay mortgage insurance, which only benefits the bank.

Within 18 months I had entirely paid off the secondary mortgage and converted the primary to biweekly auto-payments. That means an extra monthly payment a year and thus reduces the 30 year payoff to 25 years. At the same time I began monthly principal payments. I will pay off the 30 year primary in less than 15 years total. I will save more than half the interest had I not planned to pay off both mortgages at an accelerated rate.

The down payment comes from an attitude to always, always, always consider savings as an expense taken out of every paycheck since I started earning money delivering newspapers as a kid. Without fail. No exception. It also comes from discipline to not waste money on crap. Don't get me wrong. I made plenty of lousy buying decisions on life's toys and things I thought necessary at the time. I buy quality and things that will last a lifetime. Initial cost might be more but over the life of the item it's dirt cheap. I also only buy things (other than a house or vehicle) only when I have cash in hand or will have cash in hand within 30 days. That way if I buy a new computer or two, I must save up the cash and have it in hand before I make that credit card purchase. The cash pays the billing during the next credit card billing cycle. Without fail. (Yeah, I upgraded to two new laptops in May. With cash. Top of the line and I did not pay full price. Lenovo has an outlet site when you can buy new -- never left the factory -- for as much as 60 percent off. Yes, I always shop for bargains.)

We don't have a meager lifestyle. It just takes discipline and if you didn't learn it or develop it as a kid you won't have it as an adult. It also pays not to be a drug or ego addict (alcohol, tobacco, coffee, restaurants, etc.).

Last edited by Duckster; 06-16-2010 at 04:20 PM..
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  #23  
Old 06-16-2010, 04:19 PM
pbbth pbbth is offline
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Originally Posted by Finagle View Post
Well, they don't pay NYC rents, for one. I'm not sure how two putatively financially responsible adults working at presumably decent-paying jobs can have just $5500.00 in the kitty unless they're splurging it all on a pretty significant monthly rent. (And, I guess, weddings.)


We have $5,500 towards a house that we have been saving for about 7 months since we got engaged and decided we want to purchase a home. We have $8,000 in emergency savings and another $5,000 in a wedding fund. We also have retirement Roth IRA accounts in addition to our 401k's through the offices. So we don't just have $5,500 in the kitty, we have almost $20,000 but it is spread out for different purposes.

We don't have a problem saving money but the amount we would need for a down payment is a little overwhelming so I thought I would see how other people did it and so far the most common answer seems to be that they didn't, quite frankly. Most of the people here have said they got a mortgage with a 5% down payment or a relative kicked off and left the money to them. This makes me feel a lot better to know that most people can't afford to come up with that kind of money either and it isn't just us.

And I didn't say no remodeling or redecorating, I said habitable, by which I mean working plumbing and electricity, no black mold, etc. We know we need to plan to have extra for the minor things that need to be done when you buy a place. The places we've found for $140,000 are huge but literally falling apart and not worth it when we would have to take out a $60,000 loan to repair the damage on a 110 year old building.
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  #24  
Old 06-16-2010, 04:26 PM
corkboard corkboard is offline
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Yes, people generally live beyond their means. Just look at how the credit card industry is thriving.

We were really lucky. We married at 31 and bought a house six months later. My wife had worked in the midwest for about 10 years out of college, always had a roommate and isn't much of a spender. She was promoted a number of times but never really changed her lifestyle, so by the time she moved to the East coast and we got married, she had about $75k earning a paltry 2% in a savings account. (I had been in grad school most of that time, so had only been receiving an income for about a year by that point) We bought our first house for $190k in 1999 in northern New Jersey and just took the down payment from her savings.

Also, like Snickers, we didn't put down 20%. We put down 10% and took a home equity loan for the other 10% at a slightly higher interest rate, but paid extra to that every month then refinanced two years later and rolled the payoff into the re-fi.

So while we were fortunate that my wife had amassed a substantial savings account, she wasn't necessarily doing it for the purpose of a down payment. And yes, it took about ten years.
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Old 06-16-2010, 04:37 PM
raspberry hunter raspberry hunter is offline
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My husband saved for 10 years, and I saved for 5. We were married for 4 of those years, during which we socked away pretty much my entire paycheck and some of my husband's too. Before we were married my husband lived even more frugally and managed to save most of his paycheck during that time.

We bought last fall, after prices had gone down about 30% in our area from the peak, but are still pretty much outrageously high (let's just say, our house is significantly more expensive than the ones the OP is looking at). However, saving for so long allowed us to put 30% down, so that our monthly payment is doable if only one of us is working -- although we are both working right now, we both felt pretty strongly that what with the economy and such, we wanted to be able to get by on one income if necessary.

However, if it weren't for our new kid and not wanting to move with a baby, we would've kept renting and kept saving. Prices are still going down, and our mortgage payment plus utilities and such is about twice what our rent was (though to be fair we have twice as much space now).
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Old 06-16-2010, 04:50 PM
Pleonast Pleonast is offline
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Originally Posted by raspberry hunter View Post
However, saving for so long allowed us to put 30% down, so that our monthly payment is doable if only one of us is working -- although we are both working right now, we both felt pretty strongly that what with the economy and such, we wanted to be able to get by on one income if necessary.
This is an important point that bears repeating. Saving for a large-percentage down-payment means you are less likely to be in a two-income trap. We wanted our monthly payment to be low enough that if one of us became unemployed, we would still be able to make the mortgage payments.
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Old 06-16-2010, 05:08 PM
gravitycrash gravitycrash is offline
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I bought my house in 04 when they were selling houses to anybody with a pulse and sometimes without one.

I was able to qualify for 100% financing only because of my high credit score and my profit sharing fund. I even had to borrow the cash for closing cost!
It sounds like you have good credit but make sure. Clear up anything that is outdated that could be bringing down your score even a little.

They will also take into account any 401k's, IRA's and other retirement funds.
Again, the credit score means everything to them!

I just reached 20% equity in my house so I finally got out from under the PMI after refinancing. Mortgage insurance sucks for sure but renting sucks more IMHO.

You probably won't have to come up with 20% down, if you have great credit the banks will work with you, especially with the excess number of homes for sale right now.
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Old 06-16-2010, 05:17 PM
kathmandu kathmandu is offline
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I bought my first home in 1997 with 5% down. I bought a townhouse that cost $104,000, so I put down just over $5,000. I've moved twice since then, first to another townhouse and then into a single family home. I had enough equity in my home due to the rising real estate market and paying down the mortgage to significantly bump the down payments on the subsequent homes.

I guess I'm a bit curious about your financial situation - if you're in New York, I'm guessing your rent is pretty expensive. By my calculations, a 6% mortgage for $250,000 would result in a payment of approximately $1600.00 per month, while a 6% mortgage on $180,000 would result in a payment of $1,150.00. Unless I'm missing something, I can't see how it would make more sense for you to try to save $1000.00 per month for the next six years rather than paying an extra $350.00 per month on your mortgage to buy a home now. Is there any reason you're convinced that it wouldn't be wise for you to make a down payment smaller than 20%?
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Old 06-16-2010, 05:20 PM
Ludovic Ludovic is offline
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I decided I'd get a condo before the market got any higher, and thankfully at the time I almost had 20% in the bank. Had to dip into my IRA a bit, but it was worth it since it is still cheaper than rent. Now, getting rid of it will be a pain, but hey
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Old 06-16-2010, 05:30 PM
Queen Tonya Queen Tonya is offline
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Took me about three years. My initial downpayment savings fund came from claiming zero on my taxes and socking the refund straight into an untouchable savings account. (Being a single parent meant I had at least one good deduction.) As I got raises, I kept my expenses as low as possible and put the extra in savings, too. By twenty-seven, I had twenty percent and found my place.

Granted, I bought what I could afford, then saved up and added onto it a few years later. Mortgages at the level you're talking about blow my mind, there's no way I could have saved up that much and paid rent and childcare.

Anecdotally, no one in my circle got inheritances or trust funds or anything like that. Most of us just scrimped and saved or bought tiny starter homes in questionable neighborhoods and worked on improving the properties to trade up into something better as the market allowed. It's not that you've been misled, per se, but that you live in an outrageous market.
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Old 06-16-2010, 05:31 PM
Telemark Telemark is offline
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I bought my first house 2 years out of college, saving 20% down. I worked in the high tech world and had no trouble saving the money quickly for the Nashua NH market back in the 80s.
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  #32  
Old 06-16-2010, 05:34 PM
Malthus Malthus is offline
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We rented for a full decade before buying - but that was because we had such a sweet rental deal. By the time we bought, we had 50% down.
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  #33  
Old 06-16-2010, 05:41 PM
Hello Again Hello Again is online now
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To give non NYCers an idea -- there are subsidized rental programs in NYC for which household incomes over $100,000 qualify.

pbbth you might qualify for affordable home programs for middle-income residents available through City programs. Listing change often - check back if you don't see anything.

Visit here to see properties currently available by lottery:
http://www.nyc.gov/html/hpd/html/buyers/lotteries.shtml

Example: new construction in Bed-Stuy:
http://www.nyc.gov/html/hpd/download...coop-units.pdf

Look at the sidebar menu options for additional info on the Downpayment Assistance program (for households making under $61, 000/yr) and Mitchell-Lama co-op program.
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  #34  
Old 06-16-2010, 06:00 PM
pbbth pbbth is offline
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Originally Posted by kathmandu View Post
I bought my first home in 1997 with 5% down. I bought a townhouse that cost $104,000, so I put down just over $5,000. I've moved twice since then, first to another townhouse and then into a single family home. I had enough equity in my home due to the rising real estate market and paying down the mortgage to significantly bump the down payments on the subsequent homes.

I guess I'm a bit curious about your financial situation - if you're in New York, I'm guessing your rent is pretty expensive. By my calculations, a 6% mortgage for $250,000 would result in a payment of approximately $1600.00 per month, while a 6% mortgage on $180,000 would result in a payment of $1,150.00. Unless I'm missing something, I can't see how it would make more sense for you to try to save $1000.00 per month for the next six years rather than paying an extra $350.00 per month on your mortgage to buy a home now. Is there any reason you're convinced that it wouldn't be wise for you to make a down payment smaller than 20%?

The reason we can't buy a $180,000 home and just trade up later is because in this area $180,000 homes are not livable. I contacted 3 real estate agents today to ask about homes in that price range and they advised that they wouldn't even show me homes in that range if I did not understand up front that most of them require at least $50,000 or more in necessary repairs. Not like needs a new paint job and replacement windows kind of repairs but no plumbing and 80 year old electric wiring repairs. That means that our cheap starter house will end up costing $250,000 anyway because of the money we have to put into it to be able to live there every day. Beyond that we really don't want to be in a situation where we can't afford our mortgage. It only takes one job loss or surprise baby to take us from, "Well, this is tough but we can manage it" to "Jesus I hope our insurance company can't tell we burned it down for the money" and we would rather rent for a while longer and come up with at least 15% down on a place than be in a position where we are flirting with disaster. 20% would be better so we can avoid having 2 or 3 mortgages or PMI.

Hello Again I will be sure check out the lottery!
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Old 06-16-2010, 06:32 PM
kathmandu kathmandu is offline
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I think you misunderstood my question (or maybe I didn't express it clearly).

If you put 20% down on a $250,000 house ($50,000), you'll have a mortgage of $200,000.00. That's a payment of about $1,300.00 per month. If you put 5% down ($12,500), you'll have a mortgage of $$237,500 for a payment of just over $1,500 per month. It seems like paying an additional $200.00 per month on your mortgage would be a lot easier than saving up an additional $40,000.00 for your down payment.
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Old 06-16-2010, 06:55 PM
pbbth pbbth is offline
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Originally Posted by kathmandu View Post
I think you misunderstood my question (or maybe I didn't express it clearly).

If you put 20% down on a $250,000 house ($50,000), you'll have a mortgage of $200,000.00. That's a payment of about $1,300.00 per month. If you put 5% down ($12,500), you'll have a mortgage of $$237,500 for a payment of just over $1,500 per month. It seems like paying an additional $200.00 per month on your mortgage would be a lot easier than saving up an additional $40,000.00 for your down payment.
Ah, I see. The thing is after all the payments, taxes, PMI and everything those numbers are much higher than they first appear. According to a couple of mortgage calculations I've made we would be looking at a $2200 monthly payment with 5% down and $1800 with 20% down, both of which are significantly more than we pay in rent. $2200 would be doable, just barely, if we were really focused. Then we would constantly be a job loss, medical bill, or surprise kid away from drowning in our bills without any principle to borrow against if we needed it.
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Old 06-16-2010, 07:05 PM
aruvqan aruvqan is offline
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I had the tail end of a trust fund that matured when I hit 21 that I hadn't touched, and mrAru and I had been saving $250 a month for 3 years, and he had a re-enlistment bonus that we bundled up and used as the down payment. We were preauthorized for a $150 000 loan and the property we decided upon cost us $91 000. I vaguely remember that because the guy that owned the property was desperate to sell it, we got a serious break on points and whatever other crap was associated with it - since mrAru handled everything while I was in Virginia [a goddaughter was about to pop out of the mother and I was helping with the rest of the kids] I really don't know much of the details otehr than we actually didn't end up paying out the whole thing on the house, we had a bit left over to get some new furniture for the place.
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Old 06-16-2010, 07:05 PM
Cunctator Cunctator is offline
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My first down payment was a while ago - back in the early 1980s. I had a scholarship while I was at uni, and I managed to save the down payment over the three years of my degree.
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  #39  
Old 06-16-2010, 09:40 PM
ZipperJJ ZipperJJ is online now
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It took me either 1 year, 2 years or 5 years depending on how you look at it.

It took me 1 year to pay off all my debt, and another year to save up $5k.

Then I borrowed $10k from my grandpa, and paid him off in 3 years. So if you count the time it took me to pay off all my debt from credit cards to paying off my grandpa, it was 5 years. Of course, I was living in my house 3 years by then

Of course, my house was only $150k and I only had to put 10% down (super awesome credit, and just before the bust). Looking for a house in 2010 in the NYC area is a whole different ball of wax.
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Old 06-16-2010, 10:07 PM
Rand Rover Rand Rover is offline
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For my first house, I got a 0% down loan with no PMI. Go go go housing bubble!
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Old 06-17-2010, 09:00 AM
Dinsdale Dinsdale is offline
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I thought I would see how other people did it and so far the most common answer seems to be that they didn't, quite frankly. Most of the people here have said they got a mortgage with a 5% down payment or a relative kicked off and left the money to them. This makes me feel a lot better to know that most people can't afford to come up with that kind of money either and it isn't just us.
Curious how different people can read the same thing so differently. I saw 3 sorta equal categories of responses. One (the smallest I think) benefitted from gifts, inheritances, etc. Sure would be nice, but not available to all of us. The second benefitted from lending policies none of us are likely to see again anytime in the near future. An the 3d - which you seem to ignore or discount - involves economizing and saving - either for a number of months or a number of years.

I have no idea what you make or your lifestyle. But in my experience, many couples can easily get away with one - or even no - cars, especially if living and working in a big city. I sure hope you aren't making 2 car payments or carrying other consumer debt. What is your rent? I know NYC is crazy expensive, but how much could you save if you moved to a smaller place, perhaps with a longer commute. Eat out much? Travel?

In the abstract, $5k may not seem extravagant for a wedding. But you know you could choose a small civil ceremony, and immediately nearly double your house savings... Have a nice vacation on your 5th or 10th anniversary, when you can better afford it. This fall my wife and I are taking our nicest trip ever - for our 25th. Just depends on your priorities. Very few of us can afford to have it all.

Don't mean to pick on you, but it seems as every year goes by, people get further and further away from the concept of going without today in order to be able to afford something tomorrow.
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Old 06-17-2010, 09:20 AM
Manda JO Manda JO is offline
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Honestly, it's not clear to me that buying makes any sense at all, if prices are running that far ahead of rents. If you can rent for significantly less than what your payments would be, it might well make more sense to plan to rent indefinitely and sock the difference into some other sort of investment. Investing in a condo/house is one form of retirement savings, but it doesn't make the most sense in all markets. I wouldn't assume it's the best plan just because it's what people do.
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Old 06-17-2010, 09:22 AM
Malthus Malthus is offline
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In Canada, I believe, if you don't have a 20% down payment you are forced to buy mortgage insurance (which protects the bank, not you) - an extra and added expense to you. This is an added incentive to save first.

Fact is, I sorta agree with Dinsdale - folks these days are not very savings-minded, and sorta expect to have the lifestyle they want without scrimping.

It doesn't help that there are now a plethora of expensive consumer gadgets that most people feel are more or less indespensible, that simply did not exist a few decades ago - these tend to eat up income that ought to go to savings.

I'm a relatively high earner (I'm a lawyer at a major Toronto lawfirm) and I have trouble saving as much as I need, to fund retirement, to pay for mortgage, childcare expenses, etc. I do without a lot of stuff to save money. How some people live high off the hog and can afford everything they want is beyond my understanding (not saying anyone here is doing that, but I've seen it in my friends - I know they are not earning more, yet they have new luxury cars, much larger homes than us, etc. I assume the answer is that they are racking up debt and not saving for retirement). We have one (used) car, don't buy much in the way of electronic goodies, etc.

Way I save money is simple: every month I automatically deduct a certain amount from my pay, right off the top, by having it transfered into a different bank account used only for savings. Thus, I get used to living on a reduced income.
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Old 06-17-2010, 09:24 AM
Nava Nava is offline
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Excuse me, what's PMI? Google-fu is failing, it tries to take me to a Spanish milk company...
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Old 06-17-2010, 09:45 AM
Desert Nomad Desert Nomad is offline
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We put about 35% down on our first home... about $80,000 which we had saved. Of course our car was 25 years old and we spent less than $3,000 on our wedding. We also had no kids, no cell phones, no cable. It is easy to save if you are willing to give things up.

Last edited by Desert Nomad; 06-17-2010 at 09:45 AM..
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Old 06-17-2010, 09:49 AM
Rysto Rysto is offline
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Seems that it stands for "Private Mortgage Insurance". The borrower makes the payments on the insurance, but it actually protects the bank from default.
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  #47  
Old 06-17-2010, 09:49 AM
EmAnJ EmAnJ is offline
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I used an inheritance of $10K to buy our first home at 22. We put 5% down. The boom hit and three years later we were $70K richer. We paid off our debt and put 10% down on a new house. Lived there for a year, sold again and had $100K in the bank. Paid off our vehicles and put 12% down on our current house. We got very lucky though.

I know very few people my age who pay more then about 5% - 10% down unless they are on their second or third home and have gained equity.

Last edited by EmAnJ; 06-17-2010 at 09:50 AM..
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Old 06-17-2010, 10:19 AM
Machine Elf Machine Elf is offline
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Originally Posted by Manda JO View Post
Honestly, it's not clear to me that buying makes any sense at all, if prices are running that far ahead of rents.
True. My brother lives in Palo Alto, and intends to rent for the foreseeable future, since purchase prices there are still insane (even after the crash). IMHO buying is desirable at least for the freedom to mangle/improve the property at will, but if the costs are out of sight, then you do without.

Quote:
Investing in a condo/house is one form of retirement savings...
I hear this said a lot, but I don't get it. My parents retired 10+ years ago and continued to live in the same house they had owned for 20 years prior to that time. They recently moved, and their new house cost about the same as their old house sold for. I suppose they could have bought a much cheaper place instead, but even if they had, the proceeds would not have funded much more of their retirement.
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Old 06-17-2010, 10:20 AM
Eva Luna Eva Luna is offline
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.

Fact is, I sorta agree with Dinsdale - folks these days are not very savings-minded, and sorta expect to have the lifestyle they want without scrimping.
True, but keep in mind that a big difference between now and then is that higher education expenses, even at state schools, have increased in a manner that is totally out of whack with inflation and salaries, and this has a significant impact on recent grads' (or even not-so-recent grads') ability to save money for other things. If you're $30k in educational debt, that's hundreds of dollars a month that aren't available for a down payment, or anything else. And not everyone is fortunate enough to have parents who are willing and/or able to pay for their postsecondary education.

We've got one 13-year-old car between us, a 10+ year old 20" TV, bought much of our furniture used, etc., but let me tell you, the $350+ a month I pay on student loans would come in mighty handy for other things.
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  #50  
Old 06-17-2010, 10:21 AM
Malthus Malthus is offline
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Originally Posted by Rysto View Post
Seems that it stands for "Private Mortgage Insurance". The borrower makes the payments on the insurance, but it actually protects the bank from default.
In Canada, mortgage insurance if you don't have 20% or more downpayment is mandatory.
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