A buddy of mine who lives in California claims that you can’t get a mortgage there with a down payment of any less than 20%.
I just about crapped my pants. Here, it’s 5%. I think technically you could even borrow that.
Is this true? TWENTY PERCENT? Is the credit crunch that bad?
Have things really gotten this ridiculous over the past few years? 20% is standard. Anything less than 20%, anywhere in the US, requires mortgage insurance and sometimes exotic deals with multiple lenders.
The notion of viewing a 20% downpayment for real-estate as onerous or unusual completely boggles my mind.
Are you quite sure you can get a mortgage in Ontario with 5% down? I know there are special deals for first time home owners, up to a certain value house, but I don’t think that’s necessarily a common situation.
I know years ago when we bought a condo, my ex- and I had to top up our down payment because we came in a little shy of 20%.
Are you talking first-time buyers, or otherwise? I think it is unreasonable to expect a first-time homebuyer in an expensive market to have a 20% down payment.
Really?
The average dump in Herndon, VA (northern VA) is around $400K. 20% of that is $80K. I don’t know many people who have $80K lying around.
20%-25% is about the minimum right now, which also happens to price anyone making less than a mid-six-figure income right out of the market for anything fancier than a Maytag box. Mortgage lenders are suffering the backlash from NINJA (No Income No Job Applicant) loans that are defaulting right and left as people realize they can neither flip the property for profit or pay mortgage and taxes, and even if they can find capital somewhere are reluctant to dump money into a property that the lendee doesn’t have a significant financial interest in from the start. It’s a lot smarter than taking a token down payment on million-dollar-plus houses, but given the lack of affordable housing and the glut of overbuilt and defaulted new construction makes it nigh impossible for first timers to buy and very difficult for others to buy up. It’s a bummer (and has put the kibosh on my plans) but a correction in housing prices in California and all along the Pacific Northwest is long overdue.
Stranger
My son bought a condo in LA in Sept of last year.
He was offered 100% financing. He wound up paying about 10% down to bring the payments down. No mortgage insurance either. It was actually two loans from the same lender, a first for 80% of the loan amount, and a 2nd for the other 20%
So unless things have changed a lot in the last 6 months, my son’s experience would say that no, you don’t need 20% down.
He is a first time buyer, BTW.
Does it really matter from state to state, anyway?
I just went through the mortgage process in Northern VA. I was offered 95% financing (80/15 30-year fixed). The first 80% was financed in one loan, while the other 15% was financed in a balloon loan (financed as a 30-year mortgage, but the balance is due in 15 years) at a higher interest rate.
The only “gotcha,” which is a national one, is the “declining market” designation, which says that you have to have at least 10% down if the area in which you’re buying is labeled as declining and you’re going for a single loan (at 90%) with private mortgage insurance.
I think it’s entirely up to the lender as to what you’ll need for a down payment.
Things have changed a lot in the last six months. Several national mortgage lenders are on the rocks, and after AHMIC went belly up and Countrywide divulged its perilous financial status and dubious accounting, mortgage requirements skyrocketed. I did some looking at the end of the year hoping to see signs of a massive drop in house prices but found that while housing costs only reduced moderately the requirements for mortgage loans were nothing short of onerous. (And yes, 20% for first time buyers is absurd in many developed areas of the country.)
Stranger
0 down can be done, with excellent credit.
It helps if you are a 1st time homebuyer who is below median for your County and thus qualify for County?city homebuyer programs.
The thing about CA (and NY, and Ha…) is that almost all Home Loans are “Jumbo” because of home much RE costs out here. 
Unfair, really.
A couple things:
0% is not really possible these days, even if the borrower has a credit rating of 800. The banks won’t take the immediate loss on the property if you can’t make the first payment. They have enough inventory that they’re trying to dump.
I believe the FHA limit has been raised from $417,000 to $729,750 in many areas, so those wanting to borrow over the previous limit of $417,000 won’t be affected by jumbo interest rates.
If we expected everyone to have that 20%, it wouldn’t be so expensive a market. Do we really want a real estate market as leveraged as it’s been in the last few years? Is that working out well?
I don’t think that 20% is at all unreasonable, considering many of those expensive markets are down about that much just in the past year. The purpose of a down payment is to make sure that the buyer has a financial stake in staying with the house, and that reasonably minor fluctuations in the price don’t result in foreclosure by choice.
My co-op board won’t even approve an offer if the financing is more than 80%, and that policy has been in place for longer than I’ve been alive. Stupid financing is partly to blame for the absurdities of the real-estate bubble the past few years. I can’t get too worked up about it, though. The lenders and mortgage buyers got what they deserved.
We just bought in November with 100% financing. (Not counting closing costs of about $11k) Part of that was with first home buyer money, but our first mortgage is for more than 80%. The drawback is we’re stuck paying PMI until our first drops below that 80% line.
80% of the appraised value is common for the first mortgage, but you can (or you used to be able to) get a second mortgage for the last 20% at a higher rate. I did this 4 years ago. My house was 400k. I had a 320k loan and a second of 80k for a few % higher.(no PMI) This was my first home. After 2 years, my house was appraised for 515k so I refinanced and got one loan for 400k at a lower rate. I’m sure things are a little different now, but I’m not sure how much.
It is precisely because of the fact that lenders decided to give up the requirement of 20% down mortgages that the cost of real estate skyrocketed (or, at least, that had a good bit to do with it). If the first-time homebuyer was forced like I was in 1987 to make a financially prudent decision, the demand for homes would be substantially less, and, thus, the prices would be substantially lower.
Perhaps the correction will remind banks and borrowers alike why it’s stupid to assume that free lunches exist…
It’s 5%. Has been for as long as I can remember, actually.
Mortgages, as I have learned since I posted the OP, are actually very different in the USA as opposed to Canada. I mean, WTF are “points”?
I’m not sure that I buy the notion that low down payments are the cause of all this. If we allow 5% down payments in Canada and we’re not having a mortgage crisis, then why would you assume 5% down payments are the reason? It seems to be the issue is lending money to people whose incomes can’t hack the payments. We bought on a 5% down, but we got a mortgage we could easily afford; it seems to me the sane measure, for a bank, is whether or not you can afford the mortgage with some room to spare.
A friend’s son just bought a house in Minerva, OH with $0 down. I actually was surprised to hear this, and wondered if it was accurate. The son is an engineer and makes pretty good money–but I still find it surprising he bought a home at 0 down considering the current climate I would not have imagined it possible.
Banks in Australia will quite happily lend you 100% of the money needed to buy a house. I was doing the rounds of the banks last week on my day off to sound them out vis a vis obtaining a mortgage, and That Bank said they would be more than happy to lend me an obscene sum of money with which to buy a house, with $0 input from myself except Mortgage Lender’s Insurance, which is $2,000 (and means they get their money back if I default on the loan). The interest rate was exactly the same as if my wife and I put in 20% as a deposit, and in fact, That Bank seemed awfully keen for me to come and make an appointment with one of their Lending Officers so we could discuss the whole thing in further detail.
We’re waiting for the housing market to crash here so the prices come down, then we plan to make our movie, FWIW. Right now we’re much better off renting from a dollars perspective, and when stuff breaks, it’s the landlord’s problem, not ours…
Oh good, I loves me some fillums from Down Under. Another like Gallipoli, please!