We'd like to be home owners, and could afford the mortgage payments, but may never have the 20% down payment. Are we doomed to rentals?

Asked by Sarah, Canandaigua, NY Fri Jan 21, 2011

My fiance has a fixed income and I work in the Human Services field (is not and will never be a high paying career). Should we just accept that we don't make enough to afford a home and continue paying for over-priced, relatively small apartments? We've checked out renting a house but the prices are over double estimated mortgage payments (based on houses under $90k). Any advice?

Thank you!
Cramped Apartment Dwellers, Canandaigua, NY

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Annette Lawrence’s answer
Annette Law…, Agent, Palm Harbor, FL
Mon Mar 18, 2013
Your timing could not be more perfect. Well, actually, last year would have been better.
With the information you have shared, it is reasonably clear you need alternatives to building wealth.
Looking towards a real estate investment is the most practical and obvious solution at this time.
You would be well served to consult a financial planner to establish a long term plan that includes a real estate element.

Let me be honest with you, if your finances are so tight you can not save the money for a down payment, you may be setting yourself up or future disappointment.

Be aware, wealth building through real estate may require buying what you can afford, before you can buy what you have always dreamed.

Get real guidance from real people, you know, those you can call and meet.
Set up a strategy, and implement the plan.
You ARE on the right thought.

Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL

Scotsdsale Bluffs Tour:
0 votes
Simon Campbe…, Agent, Miami Beach, FL
Mon Mar 18, 2013
If you are looking for a loan with a low down payment, then a FHA loan may be the ticket (3.5% minimum down) but there are changes that are coming in April 2013 that could make you pay thousands in extra fees.

New FHA borrows will need to have a credit score of at least 580 to qualify for the low down payment loan. If your FICO score is less than 580, you are not disqualified for a loan, but you will be required to put a minimum of 10% down.

Because you would be putting less than 20% down, you will be required to pay mortgage insurance. FHA has an upfront fee of 1.75% which is wrapped into your loan and a monthly fee of 1.30 % if the original loan amount to value is less than 95% and 1.35% if you put less than 5% down.

Typically, once you reach a 20% equity position, the PMI is removed. Not so with the new FHA loan changes. The insurance stays on your loan for the life of the loan.

For example, if you are paying $112.50 (borrowing $100,000) per month in mortgage insurance and you pay the mortgage for the full 30 years, you will have paid $40,500 for insurance that benefits the lender.

Make sure you weigh the long-term costs to the short term benefits before you go get a loan.
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Allyson Adam…, Agent, Canandaigua, NY
Mon Mar 18, 2013
No worries there , you can put as low as 3% down with a 640 credit rating. Shop around for banks that allow this or Real Estate companies , has a lot of contacts to choose from!

Allyson Adam-Anderson, Realtor
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Don Tepper, Agent, Burke, VA
Fri Jan 21, 2011
If the only thing holding you back is the lack of a 20% down payment, that's easily overcome.

First, FHA mortgages only require 3.5% down. Other programs have low or no down payments--VA, for instance, is zero down. It's possible your town, county, or state also has some special programs.

Second, a growing number of owners are selling with owner financing. That's totally negotiable, but unlikely to be in the 20% range. Often, it's more like 5%-10%.

Third, there are other ways to purchase--lease-options, land contracts, contracts for deed, equity sharing, and more. Those are all negotiable, too. But most likely you'd be looking at maybe 2%-5% out of pocket. I've done lease-options with no out-of-pocket costs.

So, check with a good lender and a good Realtor to find out what your options are. The third category, above, will require an especially creative Realtor. But they're out there if you look hard enough.

Hope that helps.
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Spirit Messi…, Agent, Tucson, AZ
Fri Jan 21, 2011
No, you are not doomed. Please call a lender, if you need to start someone try your local bank (whom you bank with). A good lender will tell you how much you qualify for now but more importantly in your situation what you can do to improve your FICO and credit scores. You can talk with a financial consultant to help you start saving X% every month, until you have the 20%. It might take a year or two but anything worth acheiveing is worth the time. I am no fortune teller, but I sincerely doubt the market is going to take off again, so you have time.

Best of luck.
Spirit Messingham
Tierra Antigua Realty
Tucson, AZ
0 votes
Sally Grenier, Agent, Boulder, CO
Fri Jan 21, 2011
By all means, please talk to a lender or mortgage broker! There are many different loan options out there, and you don't need to put 20% down. FHA minimum is 3.5%. Keep in mind that a lender will check your credit score, job history & income, debt to income ratio, etc. Be prepared to provide bank statements, tax returns, paycheck stubs, etc. Good luck!

P.S. If you need the name of a Realtor in your area, give me a shout.
Web Reference:  http://www.sallygrenier.com
0 votes
Phil Rotondo, Agent, Melbourne, FL
Fri Jan 21, 2011
Good Afternoon Sarah;
With FHA financing your down payment will be nowhere near 20%.
Contact your bank or a local lending institution to get yourself pre-approved for a mortgage.
Web Reference:  http://www.321property.com
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