Getting a mortgage without 20% down--is it possible anymore?

[6packofun]

We'd like to start looking forward to maybe buying a home someday, but I'm pretty sure that unless I went to work (which is impossible right now) and put away every penny of that job for at least a year, we won't have much of a down payment.  We've been working on our credit and it's better, but we haven't even begun the process of looking into buying...part of me just doesn't want to experience the dashing of hopes and the frustration yet again.

 

How do people come up with $40k for a $200k home??  Do that many people still have mom and dad or other relatives help them buy homes?  Or are the requirements relaxing a bit at all?

 

What are some first steps you think we should take now that we are JUST thinking about buying a home?

[madteaparty]

How much of a mortgage and is it a first time homebuyer? Look into FHA loans

[Guest]

They still do plenty of mortgages with alternatives to 20% down. You have FHA, VA, you can do 80/10/10, 80/15/5.....I suggest calling a mortgage broker and exploring your options. :)

 

ETA: And a first step is to make sure your credit is as good as possible. If you have anything outstanding or any delinquencies work on cleaning those up first and paying off any small debts you might have. 

Edited July 19, 2016 by texasmom33

[Happy]

An FHA loan is about a 3.5% down. Sometimes as low as 3%.

 

A conventional loan is 5% or so. You'll pay PMI until your equity reaches 20%, but that's a small cost to pay for getting into your own house.

 

Then you'll need about 3% of the sales price for closing costs and such.

 

Call a lender--NOT Quicken loans or a big bank, but a credit union or a local lender or bank. Ask questions. Knowledge is power.

[LisaKinVA]

Yes, there are still low and no-down payment loans.  The interest rates are often higher, there is usually extra mortgage insurance included -- but they aren't completely gone.

[PeachyDoodle]

Part of it depends on where you're buying. 100% financing does still exist. It's possible to get through USDA if you're buying in a more rural area.

 

We have been looking at several options ourselves. One is a traditional loan, but the down payment is only 3%, not 20%.

[Spryte]

An FHA loan is about a 3.5% down. Sometimes as low as 3%.

 

A conventional loan is 5% or so. You'll pay PMI until your equity reaches 20%, but that's a small cost to pay for getting into your own house.

 

Then you'll need about 3% of the sales price for closing costs and such.

 

Call a lender--NOT Quicken loans or a big bank, but a credit union or a local lender or bank. Ask questions. Knowledge is power.

This. Find a good lender or two, and get info. You'll be surprised.

[BarbecueMom]

We used a USDA guaranteed rural development loan in 2009. We technically live in a suburban area (DH commutes to downtown in a large city), but our zip code area is spread out enough to qualify.

 

0% down, no PMI, just 2% (I think?) fees rolled into the mortgage (or paid up front). Went through a small bank for the mortgage, which was then sold to one of the large banks, but we've never had a problem.

[mellifera33]

We were able to get an 80-20 loan, no down, no PMI, but it was before the last real estate crash. I have heard that lenders tightened up the qualifications for getting loans, but with a new bubble appearing on the horizon, I don't know if they will be able to resist...

[vonfirmath]

They still do plenty of mortgages with alternatives to 20% down. You have FHA, VA, you can do 80/10/10, 80/15/5.....I suggest calling a mortgage broker and exploring your options. :)

 

ETA: And a first step is to make sure your credit is as good as possible. If you have anything outstanding or any delinquencies work on cleaning those up first and paying off any small debts you might have. 

 

We did a 80/10/10 and refinanced after 4 years when our value went up.  Our downpayment was mostly money we had saved for 8-ish years since selling the condo I bought when single  -- and luckily making some money off of it. We put it in savings and then managed to not touch it.

[Pawz4me]

We just sold our previous home last month. The couple who bought it got an FHA loan and put down and teeny, tiny amount. DH and I were surprised that was possible, but apparently it is.

[teachermom2834]

For us, our recent home was bought with 20% down but we only had that because of the previous home we sold. I know home ownership has been bad for some but for us getting in that first house and building equity was critical to getting on our feet financially. There are still low down payment options though they will cost more in monthly payment and private mortgage insurance. However, if it is the only way to get into a home it can be worth it. And you can work toward refinancing for better terms at some point.

 

Definitely check out FHA,VA, and USDA if you qualify.

[Arcadia]

Our local credit union doesn't have good rates compared to the bank a few doors away from the credit union.

When asking banks, they are more concern about monthly payment then the downpayment. 5% down is still common but the HELOC+mortgage(+PMI)(+prop tax) has to be below the percentage of family income the bank is comfortable with.

 

Housing prices has gone sky high here and banks are wary. The first thing they ask us is who hubby's employer is. My current condo possible sale price based on neighbors with same floor plan has gone up 1.5 times from when we bought in 2006 and more than 2 times from property crash in 2009/10.

 

ETA:

Our relocation benefits include taxable money for buying or renting a place. We are in Silicon Valley and that apparently is a common relocation benefit since rents are crazy here as well.

Edited July 19, 2016 by Arcadia

[redsquirrel]

I was wondering exactly the same thing about 12 years ago.

 

 

We got a loan and a home through a federal program. There is a local agency that walked us through the steps.  We found them because they offered a 6 week class on how to buy a house. DH took the class. For the end of the class they ran a credit report and then helped you make a plan. Well, dh was told he was ok to buy a house right then. We NEVER thought that would be the case. 

 

So, we applied for what might be an FHA loan. We had a lot of assistance because we were first time homebuyers. We also qualified for some low income assistance? I don't exactly remember.  But we only had to put down 2,000 and no closing fee.  The lawyers donate their fees. 

 

There are two agencies in town. One helps with buying a home outside the city limits and one helps with buying a home inside the city limits.  We went with living in the city because while the house was more expensive, living in town is much cheaper. We only need one car, and only buy gas every three weeks or so.

 

The same agency buys home that are falling apart or have been foreclosed on and are mostly in what they call 'up and coming neighborhoods' (meaning poor, lol),  Some of their houses are fixed up and sold to anyone and some are only sold with low income requirements.  It's nice. My house used to have squatters and was falling apart. There had been a terrible fire in the kitchen and it was never cleaned up.  They came in, gutted it, put in super efficient plumbing and heating, new windows, new roof etc.  It went from a scary eyesore to a family home. And since we moved in the neighborhood has improved more than you could imagine. 

 

So ask around to see what is available in your area. There must be someone who knows

[NicksMama-Zack's Mama Too]

Absolutely. I've purchased two houses and never put down anywhere near 20%. Good credit is key. Interest rates are super low. Our first mortgage had a rate of 8.75% and we thought THAT was great!

[gardenmom5]

first step: talk to mortgage companies and banks and see for what you can qualify.

 

1dd didn't have 20%,  but her income and credit rating qualified her for her mortgage.   2dd and dsil are in process of buying a house - don't have 20% down, but are only buying what *his* income can get them.  they won't use hers at all.

 

 

Edited July 19, 2016 by gardenmom5

[SparklyUnicorn]

We did with an FHA loan. 

 

 

[SparklyUnicorn]

Yeah we didn't have low income, but we didn't have 20%.  In the end we put about $2000 down.  Closing costs were paid in part by the seller.  We do have to pay a small amount per month for loan insurance.  This is typical in lieu of putting 20% down.  Once our payments hit the 20% mark the insurance drops off. 

 

 

I was wondering exactly the same thing about 12 years ago.

 

 

We got a loan and a home through a federal program. There is a local agency that walked us through the steps.  We found them because they offered a 6 week class on how to buy a house. DH took the class. For the end of the class they ran a credit report and then helped you make a plan. Well, dh was told he was ok to buy a house right then. We NEVER thought that would be the case. 

 

So, we applied for what might be an FHA loan. We had a lot of assistance because we were first time homebuyers. We also qualified for some low income assistance? I don't exactly remember.  But we only had to put down 2,000 and no closing fee.  The lawyers donate their fees. 

 

There are two agencies in town. One helps with buying a home outside the city limits and one helps with buying a home inside the city limits.  We went with living in the city because while the house was more expensive, living in town is much cheaper. We only need one car, and only buy gas every three weeks or so.

 

The same agency buys home that are falling apart or have been foreclosed on and are mostly in what they call 'up and coming neighborhoods' (meaning poor, lol),  Some of their houses are fixed up and sold to anyone and some are only sold with low income requirements.  It's nice. My house used to have squatters and was falling apart. There had been a terrible fire in the kitchen and it was never cleaned up.  They came in, gutted it, put in super efficient plumbing and heating, new windows, new roof etc.  It went from a scary eyesore to a family home. And since we moved in the neighborhood has improved more than you could imagine. 

 

So ask around to see what is available in your area. There must be someone who knows

 

[Guest]

We did save and put down more than 20% for a mortgage, and it's what I recommend for stability and a hedge in this economy. But here is an interesting mathematical perspective to consider on whether to rent or own:

http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

 

There are lots of reasons to buy a house, but if finances are tight renting may be a better overall use of your dollar. It has been kind of a new concept to me as I was always taught that renting was a waste of money!

Edited July 19, 2016 by Arctic Mama

[EmseB]

We did zero down with a VA loan, and we sold pre-2008 crash (just barely). After that we vowed never to do a zero down loan again and resolved to just rent until we had enough saved to make a sizeable down payment. We should be ready to buy in another three-is years depending on where we settle. I know the loans are still out there, but I think another sub prime bubble is coming because no one learned the first time around so I don't think they are wise for us.

Edited July 19, 2016 by JodiSue

[Mosaicmind]

Yep!!! If you are military or a veteran there's many programs. We got a loan with zero down for our home we live in now. It was 4 years ago but it was easy; it was some kind of federal loan.

 

Lisa

Edited: we didn't have to have loan insurance tacked on either with this particular program, which meant that our monthly payment dropped by $50 so that was nice. There were lots of hoops to jump thru but it paid off in the long run. We also have a fixed interest of 3%

Edited July 19, 2016 by Mosaicmind

[Ravin]

We are in this process, and are expecting to qualify for a VA loan, and are hoping to qualify for a first-time homebuyer grant which can go towards the closing costs, down payment, and other up-front expenses of home purchase. The grant we found out about only applies for select communities in our state--fortunately a couple of them were on our list of places to look already!

[Sneezyone]

Even without VA, look into state housing agency first time homebuyer programs. I don't know many states who don't have them. There's also NACA (https://www.naca.com). They work with homebuyers who are of modest means and are rebuilding credit or are first time buyers. Note: First time also applies to people who haven't owned or bought in 3-5 years. 

[Crimson Wife]

As long as you're not looking at a jumbo loan, there are plenty of options. We just put a significant chunk of savings into our home so that we could qualify for a conventional 15 year fixed re-fi with the same monthly payments as the old 30 year one. Mortgage rates have dipped because of the whole Brexit thing. We're getting way below 3%, which is just crazy cheap.

[6packofun]

Oh, I'm starting to have hope!  lol  Yes, we are first-time buyers.  I know there are programs out there, I'm just nervous about being SMART in who I talk to, who I trust for info, you know?  We need to talk to a good lender, but what does that mean??  lol  I will start doing some research!  Thank you, ladies!  I will continue to share info in this thread with dh to light a fire...hehe :)

[redsquirrel]

Oh, I'm starting to have hope!  lol  Yes, we are first-time buyers.  I know there are programs out there, I'm just nervous about being SMART in who I talk to, who I trust for info, you know?  We need to talk to a good lender, but what does that mean??  lol  I will start doing some research!  Thank you, ladies!  I will continue to share info in this thread with dh to light a fire...hehe :)

 

Ask around for a name for a successful real estate agent. You want someone who knows people in the business, and someone who is approachable and has sold a LOT of homes.  Tell them you got their name from your good friend Jane Doe who told you that this is the person to talk to about the home buying market in the area.  Tell them you are hoping to be first time home buyers and you know that there are lenders who work specifically with people like you and who know how to guide you  through the process.  Can they please advise you on where to start?

 

"I know that it's not really your job, because I'm not actually buying a house right now...but I heard that you know how all of this works and might know where to send me for answers I'm just trying to figure out where to start."

 

Real estate agents know all about this stuff and know who does what. If they tell you just to go to a bank and find out how much you would be approved for, move along. This is not the help you are looking for.  But, if they say, Hey, go to Barbara at a particular bank...or go to Susan and a particular real estate agency... or better yet...call Mary at City Neighborhood Housing Services because they do all that first time home buyer stuff.... then you are on to something.

 

Good luck!

[Sneezyone]

Oh, I'm starting to have hope!  lol  Yes, we are first-time buyers.  I know there are programs out there, I'm just nervous about being SMART in who I talk to, who I trust for info, you know?  We need to talk to a good lender, but what does that mean??  lol  I will start doing some research!  Thank you, ladies!  I will continue to share info in this thread with dh to light a fire...hehe :)

 

I would recommend attending one of the free first-time homebuyer seminars that state agencies and non-profits run BEFORE talking to a lender or a real estate professional. The staff that lead these sessions usually know which local lenders do a good job and many have special arrangements to deal only with large, preferred lenders...no fly by night brokers...and in exchange offer class graduates discount interest rates or other incentives. They will tell you, very clearly, what to watch out for and the types of loans that are best for your situation. They will also tell you how much home you can comfortably afford which is typically less than you will be approved to borrow. They cover emergency repair funds, etc. etc. I know, it sounds like a scam but it's not. The classes are free, gov't sponsored/run and are there to educate potential buyers. More folks should take advantage of them. Here's an example from WA...http://www.wshfc.org/buyers/  We attended this before buying our first home with VA.

Edited July 19, 2016 by Sneezyone

[SparklyUnicorn]

Oh, I'm starting to have hope!  lol  Yes, we are first-time buyers.  I know there are programs out there, I'm just nervous about being SMART in who I talk to, who I trust for info, you know?  We need to talk to a good lender, but what does that mean??  lol  I will start doing some research!  Thank you, ladies!  I will continue to share info in this thread with dh to light a fire...hehe :)

 

Ideally talk to more than one lender.  They vary mostly in what they charge for their fees. 

 

The thing you need to know is this is probably one of the most convoluted processes you will ever go through.  It will seem confusing every step of the way.  You will have many moments where you are certain it is impossible to buy a house.  Hang in there.  Ask a lot of questions.  Stay organized. 

 

The one "surprise" when we bought was the concept of earnest money.  The Realtor and the bank never mentioned this.  When you agree to buy the house you basically seal the deal with some money up front.  I told the Realtor what we had from the beginning and that was IT.  Again, she never mentioned it.  Same with the banks.  It's like they know you'll do anything at that point to make it happen so they get you.  She recommended $1000.  I said $500 is what I'm offering.  We had the upper hand so the seller was totally fine with that.  But I had to borrow the money from my dad.  They basically don't allow that so they made him write a letter that it was a gift (we did pay him right back). 

 

That's just some little thing that I wish someone had told us. 

[SparklyUnicorn]

I would recommend attending one of the free first-time homebuyer seminars that state agencies and non-profits run BEFORE talking to a lender or a real estate professional. The staff that lead these sessions usually know which local lenders do a good job and many have special arrangements to deal only with large, preferred lenders...no fly by night brokers...and in exchange offer class graduates discount interest rates or other incentives. They will tell you, very clearly, what to watch out for and the types of loans that are best for your situation. They will also tell you how much home you can comfortably afford which is typically less than you will be approved to borrow. They cover emergency repair funds, etc. etc. I know, it sounds like a scam but it's not. The classes are free, gov't sponsored/run and are there to educate potential buyers. More folks should take advantage of them. Here's an example from WA...http://www.wshfc.org/buyers/  We attended this before buying our first home with VA.

 

This is a great idea.  The whole thing fell into our lap and we had zero time to do this, but I would have done it had we had the time.

[Sneezyone]

Ideally talk to more than one lender.  They vary mostly in what they charge for their fees. 

 

The thing you need to know is this is probably one of the most convoluted processes you will ever go through.  It will seem confusing every step of the way.  You will have many moments where you are certain it is impossible to buy a house.  Hang in there.  Ask a lot of questions.  Stay organized. 

 

The one "surprise" when we bought was the concept of earnest money.  The Realtor and the bank never mentioned this.  When you agree to buy the house you basically seal the deal with some money up front.  I told the Realtor what we had from the beginning and that was IT.  Again, she never mentioned it.  Same with the banks.  It's like they know you'll do anything at that point to make it happen so they get you.  She recommended $1000.  I said $500 is what I'm offering.  We had the upper hand so the seller was totally fine with that.  But I had to borrow the money from my dad.  They basically don't allow that so they made him write a letter that it was a gift (we did pay him right back). 

 

That's just some little thing that I wish someone had told us. 

 

This is the whole point of state and non-profit homebuyer education seminars. They cover all of this. Really. And they're FREE. I really can't say enough good things about them. Any questions that you have, they will answer. You don't have to use the first-time homebuyer assistance programs they offer to attend the seminars either.

Edited July 19, 2016 by Sneezyone

[SparklyUnicorn]

Another tip I have is do not use a lawyer (if required) or an inspector (do it even if not required) suggested by your Realtor or the Realtor of the seller.  Just...don't.  They recommend their "friends". 

 

We did that.  Duh.  It was ok, but not ideal and I would never do it again.

 

 

[Kim in Appalachia]

Yes, we are doing it with 10% down.  There will be PMI, but that's how it is.  Less than 10% gets tricky, but I know there are companies that do it.  Keep looking around in order to find the best lender for you. 

 

and  :grouphug: , it's such a frustrating and mind numbing process. 

[SparklyUnicorn]

FHA does 3.5%.

 

There may be other options out there, but I don't know how other options work.  FHA loans are not more tricky than other types of loans.  Except, they do require certain conditions to be met with regards to the home.  For example, there can't be any pealing pain in an older home.  This does not mean you can't buy the home, but that has to be fixed. 

 

 

 

 

[goldberry]

We were just shy of 20% on our last home.  We could have come up with it, but would not have had a mattress or washer and dryer... or a moving van... or money for paint.   :glare:

 

We have PMI but it is set up so that we can remove it once we reach 20% in equity.  That's a good feature to ask for.

[Happy]

Ideally talk to more than one lender.  They vary mostly in what they charge for their fees. 

 

The thing you need to know is this is probably one of the most convoluted processes you will ever go through.  It will seem confusing every step of the way.  You will have many moments where you are certain it is impossible to buy a house.  Hang in there.  Ask a lot of questions.  Stay organized. 

 

The one "surprise" when we bought was the concept of earnest money.  The Realtor and the bank never mentioned this.  When you agree to buy the house you basically seal the deal with some money up front.  I told the Realtor what we had from the beginning and that was IT.  Again, she never mentioned it.  Same with the banks.  It's like they know you'll do anything at that point to make it happen so they get you.  She recommended $1000.  I said $500 is what I'm offering.  We had the upper hand so the seller was totally fine with that.  But I had to borrow the money from my dad.  They basically don't allow that so they made him write a letter that it was a gift (we did pay him right back). 

 

That's just some little thing that I wish someone had told us. 

Curious--Were you doing a no down payment loan (like a VA)?

 

Otherwise the earnest money just comes from your pile o' cash that is your down payment.

 

Surprises are no fun....I really try to inform my buyers when and where someone will tap them for cash.

[SparklyUnicorn]

Curious--Were you doing a no down payment loan (like a VA)?

 

Otherwise the earnest money just comes from your pile o' cash that is your down payment.

 

Surprises are no fun....I really try to inform my buyers when and where someone will tap them for cash.

 

We didn't put much down as a down payment.  The earnest money, we were told, was needed prior.  We had the money, but we were waiting on borrowed money (from our 401K). 

 

There was a lot of miscalculating on their part.  In the end, we actually had a lot of money left over that wasn't in the bottom line "now give us the check".  They crazy overestimated everything.  No clue why.  It was ok because the house needed a lot of fixing so we just used a lot of it towards that. 

 

 

[SparklyUnicorn]

Oh and the Realtor was lousy.  Very....

[Happy]

We didn't put much down as a down payment.  The earnest money, we were told, was needed prior.  We had the money, but we were waiting on borrowed money (from our 401K). 

 

There was a lot of miscalculating on their part.  In the end, we actually had a lot of money left over that wasn't in the bottom line "now give us the check".  They crazy overestimated everything.  No clue why.  It was ok because the house needed a lot of fixing so we just used a lot of it towards that. 

 

 

Ahhh...I get it. I recently had a buyer client have to sell stock for his earnest money. He's buying a $$$$$ dollar home and has tons of dollars, but none in the checking account.

 

I hate lousy agents. I have to deal with them from time to time, too. Ugh. My goal is to treat my people with care, respect, and as much education as they need and want. Being a former homeschool mom makes that a compulsion! What I sometimes forget is how LITTLE people know about the process--and I do this every day, so I forget to mention something or warn them and they get surprised.

[TianXiaXueXiao]

We bought with a 0 down USDA loan for rural communities last year. Our home was $237,000 in a HCOL area. Our monthly mortgage is roughly $1500.

[redsquirrel]

I would recommend attending one of the free first-time homebuyer seminars that state agencies and non-profits run BEFORE talking to a lender or a real estate professional. The staff that lead these sessions usually know which local lenders do a good job and many have special arrangements to deal only with large, preferred lenders...no fly by night brokers...and in exchange offer class graduates discount interest rates or other incentives. They will tell you, very clearly, what to watch out for and the types of loans that are best for your situation. They will also tell you how much home you can comfortably afford which is typically less than you will be approved to borrow. They cover emergency repair funds, etc. etc. I know, it sounds like a scam but it's not. The classes are free, gov't sponsored/run and are there to educate potential buyers. More folks should take advantage of them. Here's an example from WA...http://www.wshfc.org/buyers/  We attended this before buying our first home with VA.

 

That is what we did.  DH attended the classes, they ran for 6 weeks. They were super nice and so supportive. They really want people who don't think they can own a home to be able to do so. In our small city there is really just one bank that works with the type of loans we had, but everyone was very familiar with how it worked and there were no surprises.  It was all very smooth and quick. We were in a house in about 3 months after DH finished the classes!  Amazing!

[6packofun]

This is the whole point of state and non-profit homebuyer education seminars. They cover all of this. Really. And they're FREE. I really can't say enough good things about them. Any questions that you have, they will answer. You don't have to use the first-time homebuyer assistance programs they offer to attend the seminars either.

 

Is there any "catch" to using the assistance programs?

[SparklyUnicorn]

Is there any "catch" to using the assistance programs?

 

Some of them have added rules, but I don't think most of them are too unreasonable.  For example, we have some local programs that offer assistance on down payments for certain income levels.  The main catch is you have to agree to live in the city for a minimum period of time.  I want to say a year or two.  They basically don't want people using these programs to buy homes that they then rent out.  They also want to attract people who want to live in the city.

 

I'm sure this varies from place to place and program to program. 

[SparklyUnicorn]

Ahhh...I get it. I recently had a buyer client have to sell stock for his earnest money. He's buying a $$$$$ dollar home and has tons of dollars, but none in the checking account.

 

I hate lousy agents. I have to deal with them from time to time, too. Ugh. My goal is to treat my people with care, respect, and as much education as they need and want. Being a former homeschool mom makes that a compulsion! What I sometimes forget is how LITTLE people know about the process--and I do this every day, so I forget to mention something or warn them and they get surprised.

 

Live and learn.  She was our agent and the seller's agent.  Not a good idea.  She wasn't a total unethical jerk, but we weren't her only "interest" IYKWIM.

[redsquirrel]

Is there any "catch" to using the assistance programs?

 

The owners or owner has to live in the house. I can't move out and rent it out.  Well, I can, but I have to sort of sell my house back to them an rebuy it with a different mortgage. 

 

And for the first couple years we had to sign a form stating that there hadn't been any major change in our income, mostly that I hadn't gone back to work.  But, when we had our second baby, that was no longer an issue. Even if I was earning a salary, given what I was likely to earn, having 2 kids put us back in their income zone.

 

Every couple of years we have to sign a document stating we still live here. But for some reason we no longer have to verify our income as being below a certain level.  I think that was after 5 years?.  The whole point of the program was that by owning our own home we would move out of barely holding onto middle class status by our fingernails and become upwardly mobile. They don't want to keep people from becoming more prosperous.

 

It's all about that huge down payment. It keeps so many young families (and not so young, lol) from that first house. So, just when they should be building equity they are shut out. It's for all those families and people who could afford a mortgage and home upkeep, but just don't have the resources to save a huge downpayment. If you aren't in a position to be able to afford a mortgage then they can help you make a plan to make that happen. But they are looking for families who are almost there and just need a little boost.

[calihil]

We put 3.5% down with an FHA loan just this past September. It was very easy. Including closing costs we paid about $11k on our $235k house.