Financing in 95134>Question Details

kdude, Home Buyer in 95134

Down Required

Asked by kdude, 95134 Wed Mar 11, 2009

Looking into purchasing a place. First home. How much down is required in todays market? Lets say the house valued around 500K-600K. Credit scores are excellent.

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kdude: In general, 3.5% down for FHA, 10% down w/PMI for non-FHA, 20% down to avoid PMI for non-FHA.

Also, there are two Tax credits to consider: the Federal $8K, and $10K CA tax credits for first time buyers. The later applies to new, never-occupied houses and condos bought between March 1, 2009, and March 1, 2010:
http://www.sacbee.com/business/story/1641601.html
http://www.sacbee.com/business/story/1641603.html
http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml

This chart provides an "old vs. new" FTHB Federal tax credit summary:
http://docs.Steven-Anthony.com/HR1-FTHB-TaxCredit.pdf

I would highly advise you go through the Pre-Approval process (which I can do for you):
http://www.steven-anthony.com/default.aspx?pp=39377

Personally, in this market, I like the FHA program due to the benefits:
1) 3.5% minimum Downpayment.
2) Up to a 6% Seller Credit allowed for buyer's closing costs and Seller concessions (non-FHA max is 3%).
3) FHA requires that identified safety/health issues be corrected.
4) FHA allows up to $8,000 in financed energy efficient upgrades without negatively affecting borrower's debt-to-income ratio.
5) Cash reserves not required.
6) Upfront Mortgage Insurance may be financed.
7) Non-occupying co-borrowers are allowed.
8) High and flexible qualifying ratios.
9) FHA loans are assumable.
10) No pre-payment penalties.
11) Will consider "compensating factors" in determining whether a loan should be granted.

When using an FHA loan you will have to pay Mortgage Insurance for a MINIMUM of 5 years, or until you have paid your original LOAN AMOUNT down to 78% (not that the loan amount is 80% of current market value, which is typical for non-FHA MI removal). http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…

Given the current downward trend in home prices, and the fact your will have to pay the MI, why not keep your cash in an interest bearing savings account working for you? Only set aside this money in savings if it will actually be saved for this purpose!

If housing trends continue (downward, and I believe they will through 2009), the market will eliminate any additional equity you pay in over the 3.5% down. When the market improves and you do get more market-based equity, you could possibly pay down the FHA loan balance - or, refinance out of the FHA loan into another product that recognizes market equity in calculating whether MI is required, thus saving you this cost. Food for thought...

Best, Steve

MBA, GRI, ABR, e-PRO, CMPS, RE Masters
REALTOR® / Mortgage Banker-Broker / Certified Mortgage Planning Specialist
0 votes Thank Flag Link Thu Mar 12, 2009
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