Downpayment question

amother

Sun, Jun 03 2012, 11:04 am

How much of savings should we use for a downpayment? How much should we leave in savings? Obviously, the higher the downpayment the lower the mortgage but we don't want to use all of it for our house.

Any advice?

Liba

Sun, Jun 03 2012, 11:20 am

Use a loan calculator. Look at your budget, figure out what you can afford in a mortgage. Get pre-approval and figure out how much of a loan you qualify for. If you can keep 3-6 months worth of expenses in savings and afford (and qualify for) the mortgage still, it is likely a good idea. Most mortgages don't have penalty for early payment (check and make sure yours doesn't) so paying extra is usually an option and saves a lot. You are locking in a minimum amount you are paying each month, not a maximum.

amother

Sun, Jun 03 2012, 12:44 pm

I'm wondering how much money should be left in savings as a cushion.

Mortgage payments need to be paid each month, regardless of whether you paid extra the month before so I would be wary of doing that. Knowing DH though, he'd rather us live as paupers and then pay every extra cent towards the mortgage. Gosh I wish we could just live like normal people, not cutting back all the time for one reason or another.

chocolate moose

Sun, Jun 03 2012, 3:08 pm

It also would be a good idea to tell us if you are buying a house or apt. And by apt, I mean co-op or condo.

Liba

Sun, Jun 03 2012, 3:11 pm

amother wrote:

As I said before if you can keep three to six months worth of expenses in savings it is ideal.

thatgirl

Sun, Jun 03 2012, 3:12 pm

We just bought a home. Dont use up your last cent becuase things will come up..new roof etc...
Go middle range I would say. Also they will always tell u that you can spend more then u can so know yourself dont rely on what the bank says.

amother

Sun, Jun 03 2012, 4:11 pm

op here:

condo with a 30 year mortgage. We've saved up for years and we really want this to work out!

chocolate moose

Sun, Jun 03 2012, 5:36 pm

You will have to give at least a 10% downpayment in a condo. Those rules are stricter than a house.

Lady Bug

Sun, Jun 03 2012, 7:00 pm

If you are buying a condo, your interest rate will be cheapest if you put down at least 25%. Add another 5% for approximate closing costs, and the bank will usually want to see between 3 and 12 months of expenses in reserves (depending on your income). Any mortgage over 80% of your purchase price will be very tough to get.

alpidarkomama

Mon, Jun 04 2012, 1:00 am

amother wrote:

Gosh I wish we could just live like normal people, not cutting back all the time for one reason or another.

I think this IS normal! Smile

alpidarkomama

Mon, Jun 04 2012, 1:03 am

amother wrote:

Mortgage payments need to be paid each month, regardless of whether you paid extra the month before so I would be wary of doing that. Knowing DH though, he'd rather us live as paupers and then pay every extra cent towards the mortgage. Gosh I wish we could just live like normal people, not cutting back all the time for one reason or another.

DH and I are chopping 10 years off our 30-year mortgage by paying extra, so it really is worth it if you can do it. Also, if something comes up, you're not locked into that higher amount so you can bow out as needed.

Ideally, you should have at least 3-6 months of living expenses in the bank.

Lady Bug

Mon, Jun 04 2012, 8:50 am

alpidarkomama wrote:

amother wrote:

Then why not take a 20 year mortgage to begin with?

alpidarkomama

Mon, Jun 04 2012, 9:01 am

alpidarkomama wrote:

Then why not take a 20 year mortgage to begin with?[/quote]

Like I said, because you're not locked into the higher amount and can revert to the regular amount if needed (like if you have a big medical expense that month or something...).

ElTam

Mon, Jun 04 2012, 9:55 am

Three to six months living expenses need to stay in the bank--depending on your health and employment prospects. And then a cushion to cover unexpected repairs, although this is smaller in a condo than a house.