bought a house with 10% down

thanks for the comments everyone. It would be unfair for me to spill who the bank was, as that's the professional service that mortgage brokers provide. I do think 10% is a rare deal, there were only two banks she works with that would consider doing it. One of them fell through because they couldn't find PMI from a company that they are allowed to work with. The other one popped up at the last minute. It was all very down-to-the-wire and hairy.

Yes there's PMI of about $300 a month. Sucks but will hopefully be worth it in the end. Our plan is to spend what we have left (which was more about a month ago) on the renovation, re-appraise and get out of it. But this clearly won't fly if values depreciate in the short term.

Yeah I guess I don't know what moderate income is, but we make a lot less than doctors, lawyers and bankers for sure, and we spent years in school. Your number is pretty close.

Posted by: cottontop at November 15, 2008 4:30 PM

I'm not a financial guru, but my thinking was that by only putting 10% down (rather than 20%), I save the 10% to put into the remodel, which I can start immediately. Without having to borrow it, get approval from a bank in this climate, I can do the work myself without a general contractor, etc, etc.

And somebody who is in finance, correct me if I'm wrong, but If I essentially give myself an 80K loan by only putting 10% down, and it costs me $3600 in PMI per year, is that not the same as borrowing the money at 4.5% interest (without the strings & headache)? Like I said, I have no training in this stuff. Really just making semi-educated guesses as I go along. We're first-time home buyers.

Plus the money I had left over in reserves was probably a big reason I got the loan in the first place. And it helps me feel more secure that I have some cushion left over if I get laid off in the near future. We'll postpone the remodel if we have to. The house is livable, or at least it will be with a fresh coat of paint and some odds and ends.

As for our monthly payment, it's $5000 with taxes, insurance, and PMI. Take away the rent for a one-bedroom apartment in a decent neighborhood, and the tax deduction, and it's not such a bad deal. (for a cpzy three-bedroom house with a yard). Trying to figure out how to raise a family and a dog here, though no kids yet. Or a dog.

Of course unless real estate depreciates substantially, I'm stuck with the PMI for 10 years max, and am unable to unload the house without losing my shirt. This COULD happen. I've lost sleep over it believe me. But if it does, we'll stick it out, fix up our place incrementally, raise the rent whenever we can, and try to make the most of it. As architects we've always dreamed of having our own place, and now we do. Be careful what you wish for I guess. We'll know more in ten years if it was the right thing to do.

Posted by: cottontop at November 16, 2008 9:50 PM

searcher:

I didn't use a buyer's agent for a few reasons: 1) I knew that the seller's agent would be more motivated to sell to me because they wouldn't have to split their commission, 2) you're required to hire a lawyer in NY anyway, who handles the paperwork, 3) I knew what I wanted better than a realtor would, and 4) you can find so many things on the internet. No realtor succeeded in finding me something that I hadn't already found on my own.

We looked on streeteasy, trulia, craigslist, NYtimes, and realtor's websites. I found the house we bought on the NYtimes online section, the day it was posted. We arranged to see it the following morning (before there was an open-house) and made an offer that evening. Times were different then, way back in the first half of september. If I were looking to buy now, I'd be trying to lowball the houses that have been sitting on the market, rather than pouncing on something as soon as it came up. But the price seemed right so we went for it.

Johnny: thank you for the analysis.

Posted by: cottontop at November 17, 2008 11:12 PM