Quote:
Originally Posted by moorhosj1
The same price? did you forget the $16k more you need for the down payment.
This also highlights the potential damaging impact of interest rate hikes in our near future.
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Good point. And even then there's more factors:
1) Yes, it's predicated on 20% down for financial institutions but each lender does allow you to put down less than 20% down in various circumstances. And the terms of that are always different per lender. For example, at the institution my wife has some money in, they didn't even require PMI if you put down more than 15% based on her account status and our credit scores. For where our joint money is (elsewhere) though, they wouldn't allow anything under 20% unless we showed that we have other liquid (or could become liquid) assets outside of our source able funds (even 401ks) that amounted to 18 months of our monthly mortgage+insurance+property taxes. And that limit was 15% so they wouldn't allow it under 15% - we would have gotten denied for our mortgage if we tried to go below 15% down.
For properties under a certain value various programs may allow pretty low down payments like 1.7%, 3%, 5%, etc. But then you'd have to pay monthly PMI which increases your costs for awhile anyway. And if you have a jumbo loan then a lot of lenders won't even allow anything below 20% and the ones who do maybe the minimum is still 15%. And most likely you'll be bidding against people with actual money which brings me to this next point...
2) In a hot market with multiple bidders on a property, a seller may actually pick a bid which puts even more money down. So you might have saved the ~$81K for a down payment but someone else may have committed to putting down $120K and the seller may go with them instead of you only because that buyer is putting more money down and you'll lose anyway despite having that money. Other factors obviously but it is something that sellers do factor in. Oh and don't forget about earnest money down. Being able to pay some $$ right away instead of waiting until closing is attractive to sellers/agents too.
I don't know, anyone who just thinks they're going to walk into a hot market even with the ability to pay 20% down and automatically win a bid has probably never purchased property before let alone in a hot market where they might be up against multiple other bidders for the same property. There's a reason why property values increase in various areas. It's supply and demand - and you get a few people bidding on a property, and an area has enough of that going on then voila - prices are going up.
The fact that people don't even see the current issues in some places right now as a supply/demand type of issue and are still blocking new housing development blows my mind.
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