Financing in New York>Question Details

BrooklyntoIs…, Home Buyer in New York

Do people really put down 20% anymore?

Asked by BrooklyntoIslandFirstTimers, New York Mon Jan 28, 2013

My husband and I are interested in buying our first home. He works for a bank and inquired with one of the loan officers there who told him he'd have to put down 2-% otherwise, it makes no sense. Now, this loan officer is used to working with millionaires. We're not that. We don't have $65K to put down. It would take us, on average tops 6 yrs to save that, which means we would miss the good rates now.
What are our options?
My credit is decent 741-705-730 I only know one of his scores, a 635. Our combined income is around $90K
Most debt is student loans.

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Answers

13
Janet Nation, CBR’s answer
Hello Kim,

I service Nassau County. I'm offering my full services. If you like please give me a call. I'm a seasoned agent specializing in buyer representation. You can review my profile, website and recommendations.

Janet Nation, CBR
Sailing Home Realty
Direct: 646-321-9649
Office: 516-377-4760
Licensed Real Estate Salesperson
http://www.jnationproperties.com
1 vote Thank Flag Link Mon Jan 28, 2013
I would advise you to speak with mortgage bankers in New York City. I know you can get away with putting 3,5% down with an FHA loan, but not many buildings in New York City are FHA approved. And even so, these are condos which are already higher prized than coops.
In generally most coops will want you to put 20% down, even though there are exceptions. You can focus on sponsor sales which allow you often 10% down and the bonus is there are no coop applications and board interviews.
1 vote Thank Flag Link Mon Jan 28, 2013
We are looking in Nassau or Suffolk COunties
Flag Mon Jan 28, 2013
If you're buying in Manhattan, yes. Keep in mind you need money left over too. If buying a coop you need 1-2 years worth of maintainence and mortgage payments in the vank. If you put 10% down you'll have to pay PMI (Principle Mortgage Insurance).
1 vote Thank Flag Link Mon Jan 28, 2013
Hi, Yes peopel absolutely do put down 20% and more. Does every buyer have to do this, no. I don't know about a 2% down payment but and FHA loan allows for a minimum of 3.5% and a SONYMA allows for 3%. You can also finance your closing costs with these two loans as well. Just keep in mind, the less you put down now means you owe a lot more on the home, your monthly payments will be larger, and you'll need PMI (private mortgage insurance). It's al;so smart to check with a mortgage broker as well. When you go straight to a bank you only get what that bank has to offer. The mortgage broker will shop for the best rate and if they are a mortgage bank, will fund the loan.

Christopher Pagli
Accredited Buyer Representative
914.406.9023
0 votes Thank Flag Link Tue Jan 29, 2013
Thank you. Another loan officer friend of my husbands suggested SONYMA, We want to put 5% down and keep the rest of the cash for emergencies....
Best answer
Flag Tue Jan 29, 2013
FYI We are NOT looking to live in NYC or for a co-op. we want a single family home in Nassau or Suffolk counties
0 votes Thank Flag Link Mon Jan 28, 2013
Kim,

Please contact a local loan officer. Either a local mortgage broker at a firm like Guarateed Rate formerly Manhattan Mortgage or mortgage bankers at NYC banks such as Citibank and Chase or ones with a local presence and mortgage division that do coop loans such as Wells and B of A.

70% of housing ownership in Manhattan are coops. Adina is correct. Coops are not eligible for FHA financing. Only a few condos in Manhattan have applied for FHA loans. NYC coops and condos have "restrictive covenants" such as "board approval" in a coop and "right of first refusal" in condos. FHA does not give loans in buildings with restrictive covenants.

There are some coops that allow 90% financing and all condo do. However only a loan officer can determine if your credit score and income can qualify for 90% financing. $65,000 is 20% of an $325,000 apartment. I currently have 2 and 3 bedroom HDFC coops in that price range that allow 90% financing. However, 20% down is always preferred if possible.

Best,

Mitchell Hall, Associate Broker
The Corcoran Group
mhall@corcoran.com
347-921-4255
http://corcoran.com/mhall
0 votes Thank Flag Link Mon Jan 28, 2013
Thank you but we aren't in the market for a co-op; we want a single-family home outsde of nyc. Nassau or Suffolk counties
Flag Mon Jan 28, 2013
Mitchell Hall, Real Estate Pro in New York, NY
MVP'08
Contact
Kim,
The first thing I will tell you is to please disregard answers below from agents from other parts of the country. The NYC real estate market is like no other with all its quirks and nuances.
In NYC, you would be purchasing a co-op or condo. Yes, it is necessary to put down 20% these days. All co-ops require at least 20% down, many require even more. While condos only require 10%, banks are generally only lending 80%, therefore you still need to put 20% down. And, as Nick points out, co-ops require considerable liquid assets after closing. Regarding the misinformation below about FHA, in NYC FHA would only be applicable to the few new development condo buildings where the developer has gone through the effort and expense to get the building certified for FHA. Those are few and far between.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 381-4268
http://jenetlevy.halstead.com
0 votes Thank Flag Link Mon Jan 28, 2013
Thanks for your reply. We are in NYC; however, we are not looking to purchase in NYC. We want to purchase a single family home in Nassau or Suffolk County. The co-op info isn't useful to us
Flag Tue Jan 29, 2013
Hey Kim,

Most buyers in NYC are putting down at least 20% when buying right now. Most Coops require at least 20% as a part of the board approval process, and Condo minimums vary by building (but are generally lower).

Talking to a qualified Mortgage Broker familiar with the NYC market would be a good move for you. Victoria Homan of Manhattan Mortgage (now called Guaranteed Rate) is fantastic, and will be happy to explore options with you. Her email is Victoria.Homan@guaranteedrate.com, and her phone number is 631-704-6142. Best of luck in your search!
0 votes Thank Flag Link Mon Jan 28, 2013
Kim, thanks for the additional information you supplied. Since you get all 3 scores from your bank, then I'd recommend you check out the other 2 scores for your husband. For "good" FHA rates a 640 qualifying score is recommended, but 620 or above can still qualify with most lenders.

Yes, FHA's mortgage insurance (just called "MI" on FHA loans) is quite expensive compared to PMI with conventional financing, but only if the credit scores are good-to-excellent (680 or above). With scores below 680, FHA offers much better interest rates than conventional financing and the mortgage insurance is comparable. PMI on conventional loans is based on the FICO score & loan-to-value (LTV) - for example an 85% LTV with a 740 score will have dramatically lower PMI premiums than 95% LTV with a 640 score.

Another thing to keep in mind is that in NY, PMI is based on the appraised value rather than the purchase price - so if you can find a good deal on a foreclosure which appraises quite a bit higher than the purchase price, you could have a lower rate of PMI. FHA does not follow that rule though. On FHA mortgages, you need to pay the monthly MI for 5 years and also until the balance reaches 78% of the value of the home when you initially obtained the mortgage, even if the home increases in value later. With just making minimum payments and a 3.5% down payment, you usually end up paying FHA's MI for 10+ years.
0 votes Thank Flag Link Mon Jan 28, 2013
Consider shopping around for other loan officers; FHA loans require 3.5%
0 votes Thank Flag Link Mon Jan 28, 2013
Hi Kim,

Please contact my friend at Chase who has helped so many of my first time buyers. He is the first number I give when I meet a new client. His contact info is below and please tell him Yul referred you.

Good luck

--
Jason Han
Chase Mortgage Banking
Email: Jason.han@chase.com
Cell: 516-459-7826
Fax: 866-454-9590
Web: http://homeloan.chase.com/jason.han

--
Yul Park
Vice President
Cell: 917-647-2717
Fax: 646-537-2626

RES Sales and Marketing Corp.
320 West 37th Street, Suite 301
New York, NY 10018
http://www.RESnewyork.com
0 votes Thank Flag Link Mon Jan 28, 2013
My husband works for chase, and it was a chase loan officer that told him that.
Flag Mon Jan 28, 2013
FHA financing is possible with just a 3.5% down payment.

If his qualifying score is 635, and if financing no more than a $417k loan amount, then just 5% down is possible. If you can qualify for the amount of mortgage you need on just your income alone, then with your scores just 3% down is possible.

However if this loan officer is used to financing $1,000,000 loan amounts, and not use to working with FHA financing, then that is probably why you were told that 20% down would be needed - they just aren't used to working with smaller loan amounts.

With mortgage financing it is the middle of 3 credit scores that qualify, or if only 2 scores are available then it's the lower of 2 scores. Why do you only know 1 of your husband's credit scores? You could both apply for a mortgage with his bank, and get your credit scores that way, or you could go online to http://www.myfico.com and get the credit scores there (only 2 of them are available from tat website, Equifax & TransUnion, because Experian no longer allows consumers to get their FICO score unless you apply for credit, i.e. can't get it through a website).

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes Thank Flag Link Mon Jan 28, 2013
He didn't want to pay for the the other scores, which is why he only got one. I get all three scores through my bank. The homes we are looking into are no more than $350K
Flag Mon Jan 28, 2013
Kim,
There are advantages to putting 20% down, the primary being you don't have to purchase Mortgage Insurance. Mortgage Insurance protects the lender, not you so you still would need home owners insurance too.
To answer your question, the most popular mortgage right now with first time buyers is FHA. This loan only requires 3.5% down, but does require mortgage insurance. If you can put more than 3.5% down, you may be able to reduce the mortgage insurance and will of course increase your equity.
Should you wait several years and save up 20% or buy now with less? I could argue either side of this, the future is unknown so either argument could be right. Rates could (and most likely) will go up over that period of time and the rent you are paying now, will be lost. On the other hand if we were to go through another financial meltdown, renting may be a preferred option.
I encourage you to take some time and learn all you can. Talk with people you trust who have no financial interest in what you decide and make your decision.
One last note, your scores are excellent, but the one from your husband is fair. I would encourage you to research the reason his isn't better and take some steps to improve it. The result of a better score will be more options and better rates when you are ready.
0 votes Thank Flag Link Mon Jan 28, 2013
Thank you
At minimum we can do 3.5% max I think 5% I don't want to put all of our savings into the down payment, and not have funds for emergencies.
His scores are low because he was late on credit payments in the past. He's paid off his cards and is working on improving his scores.

The loan officer stated the FHA loan is a waste of money due to the PMI. After doing some research, due to the high cost of living in NYC (renting), after a few years if the home we buy appraised at 20% we won't have to pay PMI anymore.
Also, are 80-15-5 loans or 80-20 loans still given?
Flag Mon Jan 28, 2013
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