Several of my friends bought houses or condos in the past year with what looked like, at least to me, absolutely no planning. One was a single guy that doesn’t make much money and only had a period of about two months between when he even started thinking about it and moving in to a house. Two other couples were “just looking around” with no intention to buy and ended up putting in winning bids and buying a house and a condo with very little planning or preparation. There are a few other stories like this from my circle. All were first-time buyers that aren’t particularly rich and had very little ($1K or $2K tops) savings toward a down payment.
All of these stories surprised me because I’ve always thought that you had to put down a significant amount of money - somewhere between 10% and 20% - in cash when buying a place in order to qualify for the mortgage and move in. Whenever I read about people buying places, I hear stories about people having to come up with an extra $10K at the last minute and weird stuff like that.
Lately I’ve been thinking about buying, but have absolutely no money saved up toward a downpayment. As a first-time buyer, what % should I/would I be expected to come up with up front in order to qualify for a mortgage? How are these people I know buying places in a post-meltdown without (apparently) putting up much money up front?
I’m waiting with baited breath to hear about this, as I’m in a similiar situation. Lots of local assistance options available to purchase a home (first time home buyer and all that), but I would still need a good chunk of cash to put down (which I don’t have).
If you have decent credit and some income, you will probably be able to find a lender who will give you a mortgage with very little money down. That doesn’t mean you should do it. Buying a house when you have no savings is a bad idea. If you’re serious about buying, start saving. Houses are unlikely to go up much in the next couple of years, and they may even go down more. Don’t buy until you have a real down payment (at least 10%) and an emergency fund (6 - 8 months of expenses). Starting home ownership will zero net worth or negative net worth is not a good financial plan. Houses are fairly good assets over the long term, but in the short term they are money pits.
Yep. When you buy a house, you should pretty much count on * something * breaking down during the first few months. The furnace, the fridge, the plumbing.
So if you go in with no savings and end up over your head immediately, you don’t have much of an exit strategy.
I would expect houses to be better maintained than that (I’ve lived in my current one for 20 years and had no bills over £100 ($150).)
However **I do agree that you need savings to cover unexpected problems **(work, health, family as well as housing).
The owner of a “troubled” property might be willing to take a chance on a buyer who doesn’t look perfectly sound, when the alternative is to hold a property that looks to be tough to sell to anyone.
I can think of three explanations for your experience. Either you’ve been very lucky or you have not been maintaining your house very well or you bought a house with all new systems (heating, cooling, roof, siding, etc.) and the large bills will be coming soon as those systems reach the end of their lifespans.