Kenyetta Shaw, Renter in Washington, DC

General question about loans.

Asked by Kenyetta Shaw, Washington, DC Sun Aug 25, 2013

Do you think that 9200 is too much of a down payment for a first time homebuyer. I have an FHA loan which only requires a 3.5 % downpayment however by debt to credit ratio is a little high due to cars and other payments, credit cards, loans etc..
I do have help with bills and such but I'm unable to add my fiance's name to the loan. I will also be doubling my payments from my rental to the mortgage. I had the 3.5 % but now the underwriter is asking for 5%. Need help

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7
Elliott R. O…, Agent, McLean, VA
Mon Aug 26, 2013
Not sure why the underwriter would arbitrarily increase your down payment from 3.5% to 5%. Sounds like you are not getting the whole story from your loan officer. Kenyetta, aside from being a real estate agent I also spent 15 years as a loan officer so if you feel like answer some basic questions I can offer you some guidance and help clear things up a bit.

What are your credit scores?
What lender are you using?

Also, if you are buying in DC there is a great program called the DC Open Doors program that provides you with down payment assistance whether you are using an FHA or Conventional loan.

If you would like more information on that program feel free to call me or email and I will get you in contact with a great lender that can help you.

Elliott R. Oliva
Realtor |“Servicio en Espanol”
703.344.8153 direct | 703.636.7300 office
Keller Williams – McLean 6820 Elm St. #100 McLean, VA 22101
National Association of Hispanic Real Estate Professional (NAHREP)
NAHREP DC Metro-Board of Directors
1 vote
HI Kenyetta,
I work with Elliott and I highly recommend him. He can help you out with your loan!
Flag Mon Aug 26, 2013
Kelly Putz, Agent, Fairfax, VA
Sun Aug 25, 2013
Hi Kenyetta,

There is really no such thing as too much of a down payment, even for a first-time home buyer. Prior to, oh about 10-15 years ago, most home buyers were required to put down 20% before they could get a mortgage.

I have a wonderful lender I work with I'd be happy to share with you. He is very responsive and also has a partner who works with home buyers to work on getting their credit score up so they can qualify for less expensive mortgages.
1 vote
John Settles…, , Washington, DC
Mon Aug 26, 2013
Hi Kenyetta,

It sounds like the underwriter(uw) may be asking you to put down 5% for one of the following reasons; your credit score, to lower your debt ratios, or to get the automated undwerwriting system to respond with an "Accept." Many lenders now require a minimum credit score, 640 is typical. If your middle score is below this amount most lenders require you to put down a higher down payment to offset the perceived higher risk. Do you know what your middle score is? Your back ratio(all of your debt payments + new anticipated mortgage payment /your gross monthly income), may be above the lenders allowable scores. For most lenders that max is between 50-52%. The uw may be asking for the higher down payment to either lower your debt ratios to an acceptable level, or use the higher down payment to justify approving the loan with the higher ratios. The last reason could be FHA's Automated Underwriting system may come back with an "accept", which means FHA is ok with the profile. If the system gives a "referred" instead of an accept the underwriter has to justify why they are overruling the system. if the loan goes into default it impacts the underwriter's delegated underwriting authority. It sounds like the 5% is required for you to get the loan. If you have the additional money then you should go ahead an pay it. Putting more money down only gets you closer to paying off the home. If you have any additional questions, you can email me at john.settles@wellsfargo.com.

John
0 votes
Miekeba Jones, Agent, Silver Spring, MD
Sun Aug 25, 2013
Hi Kenyetta! there is not a max on downpayments. The more you put down the less you have to finance. If your debt to income ratio is too hi then your new lender may be trying to off set it with a larger down payment. Maybe you need a more flexible lender. I know a couple. Contact me to speak with a lender experienced with your type situation.
0 votes
Kenyetta Shaw, Renter, Washington, DC
Sun Aug 25, 2013
I don't have an issue paying the mortgage. My problem is the amount keeps changing for the down payment on the same house. This is my second lender and I had two different prices for the down payment on both with the same FHA Loan, the same price. I was able to get some help through programs with the first one but he wasn't making himself available when the agent needed some information. New lender wonderful but is asking for more money.
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Sun Aug 25, 2013
It's not that there's an amount that's too much for a first time home buyer, personally I have always felt that all home buyers should be required to \put a minimum of 10% down. When I purchased my first property over 30 years ago I put down 20% and interest rates were considerably higher then than they are now. I wasn't born wealthy and received no help from my family, I imply worked (a lot) and saved for a few years. Regardless there are programs designed to permit home buyers to but down less and taking advantage of them is perfectly fine.

The real question is not how little you can or should be putting down, the question is can you comfortably afford the payments because if you can't then ultimately yo're going to become very stressed out, and could potentially lose your property , the money you've invested and at the same time damage your credit for years to come if you're foreclosed upon.

I'm not your financial adviser but you may want to talk things over either with your lender or with people who you trust to give you good solid advice. Perhaps you need to back off for now, save up some more money and work down your credit cards, loans etc. My advice to my first time buyer clients is to live well within their means. Don't become house rich and cash poor. IF a lender tells you that you qualify for up to "X-amount" my advice is to find a property that's at least 10% if not 15% less than this. Some listen, some don't but rest assured those that listen tend to ultimately be much happier that they did as their not stretching to make their payments; and can handle the occasional unexpected financial bump in the road.

I wish you all the best and hope you find this advice worthwhile.
0 votes
Don Tepper, Agent, Burke, VA
Sun Aug 25, 2013
There are really two questions:

The first is whether you can comfortably afford the payments. You note that you'll be doubling your payments from the rental to the mortgage. Regardless of whether you can get approved for the loan, will you comfortably be able to make the payments? If not, don't do it...even if you loan could be approved.

The second is whether 5% down is reasonable for a first-time homebuyer. Of course it is. That used to be standard. True story: The first home I bought after I got out of school was in Washington, D.C. It was a condo--an efficiency--priced at $28,500. (Yes, a long time ago--back in 1974.) I put 20% down. Second property I bought was in the Logan Circle area for $60,000. The third property was also in the Logan Circle area. It wasn't until I bought a house in Falls Church in 1985 that I put less than 20% down.

Oh, and back then interest rates were around 8%--about double what they are now.

What with low interest rates and 5% down (or 3.5% for FHA if you can qualify), home buying has gotten much easier.

One thing you might consider is paying off some of those other debts. That'll lower your debt-to-income ratio. Check with the lander on that possibility.

Hope that helps.
0 votes
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