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March 10, 2009
Possible to only put 10% down?
Is it still possible to get a mortgage with only 10% down? We recently had a deal for the sale of our co-op apartment fall apart because our buyer could not get PMI (she was only putting down 10%). We were advised that in this economic climate, banks are very reluctant to finance 90%. We've put our co-op back on the market with a 20% down payment requirement, but I'm seeing other apartments listed that only require 10%. Are we losing a lot of prospective buyers by requiring 20%? (By the way, our apartment is priced at $409K, so even with 10% down, a buyer would still be getting a conforming loan.)
Thanks for any advice/experiences/thoughts!
Comments
There are a few options but I'd say the bigger obstacle is what your co-op board requires. A lot of co-ops require the 20%.
It is possible to buy with 10% down and less than 90% from the bank...
...I bought with 10% down, less than 90% financed, and then I provided the difference at closing. My bank was fine with it once I proved the existence of the funds (I just preferred to keep the balance in my savings account instead of escrow. Once it was proved to exist the bank was fine waiting until closing for the balance).
Granted it was a 4 fam. building, not an apartment, but if the buyer can prove 20% available a bank might allow 10% down 80% financing with the additional 10% from the buyer at closing.
But a lot hinges on your co-op and what they allow/tolerate...
Posted by: christopher at March 10, 2009 7:59 PM
The co-op allows 10%. Another apt in our co-op is for sale and is listed as only requiring 10% down. But, we are really reluctant to go down that road again, as it resulted in losing 4+ months to a buyer who, after a lot of wrangling, couldn't get a mortgage. Just curious if we're losing out on a lot of potential buyers with the 20% requirement.
Posted by: jxc187 at March 10, 2009 8:09 PM
You are NOT losing out on many potential buyers. Remember, most buyers who cant afford the 20% down on a $400K apartment in Manhattan will have a tough time getting a mortgage in this economy. My buddy had two offers fall through for that very reason.
Posted by: saminthehood at March 10, 2009 10:11 PM
20% down on co-ops is a pretty standard requirement (from the boards).
Even if your co-op board doesn't require it most buyers are accustomed to seeing the 20% down metric.
I don't think you are turning anyone away with a 20% requirement
Posted by: christopher at March 10, 2009 10:27 PM
You can get a loan for 90% (10% down payment) if you have an excellent credit score (excellent = above 730, I think) and your mortgage payment stays within .28 of your monthly gross income and your total recurring monthly debts (including the mortgage) stays withing .36 of your monthly gross income.
So if you are vetting buyers, if they can substantiate those numbers, that should be enough (though I am unsure if buyers are required to disclose any of this to anyone but a mortgage lender.
I know this because I just got a 90% mortgage.
Posted by: intersloper at March 10, 2009 10:41 PM
We are selling our unit as well, and even though our building accepts 10% down, our realtor told us that no one is getting 90% financing in this lending climate, and to say we require 20% on the listing to avoid the hassle of your same experience. My conversations with mortgage brokers confirm this - that for 4 unit co-op buildings ESPECIALLY, no bank is allowing 90% financing. I find this ironic since we put down 10%, but it was a very different time.
Intersloper, was your deal for a co-op in a small building? This seems to be the crux of the issue, from my understanding. Also curious about your deal for personal reasons: we are unlikely to come out of our deal with more than 10% down for our next place.
Posted by: wishinone at March 11, 2009 6:34 AM
I assume your first buyer wasn't pre-approved for a mortgage? Why not allow 10% down but require pre-approval to save your time?
Posted by: alsawo at March 11, 2009 9:15 AM
I'm curious about the matter of it depending what the co-op requires... I have a coop in Manhattan for sale now, and we had a buyer (at a good price, right before the market crashed...) who only had 10% down but who had very solid income (cardiologist just finished with residency, just recently started making good money). Our co-op board said their 20% was just a guideline and that they'd consider them, but ultimately the buyer had two different mortgage brokers tell them that if what was on the books (in the offering plan) said 20%, no bank would finance them for 90%... so they didn't go through with it, didn't want to lose the months and the steep application fees, etc... Anyone ever heard of THAT?
Posted by: tanner at March 11, 2009 9:46 AM
Even banks who will do 90% financing for a single family home are much less likely to do it for a co-op.
Co-ops are very specific to the NYC market (and maybe Cali) and the banks are largely nationalized now (fewer local banks), so they are not looking to write mortgages outside the "norm" on two different metrics (lower down payment and uncommon type of residence).
Posted by: setancre at March 11, 2009 11:27 AM
My mortgage broker says the rules are constantly changing and uncertain and there is no way to know right now whether or not a buyer will be able to get PMI ahead of time. It depends on so many things: The credit score of the buyer, the type of property and its condition, the location of the property, the whim of the insurance company. There is no hard-and-fast rule at the moment.
Posted by: mopar at March 11, 2009 12:20 PM
Other posters, the issue is not the lender. The issue is the insurance company. Two different things.
Posted by: mopar at March 11, 2009 12:21 PM
"Other posters, the issue is not the lender. The issue is the insurance company. Two different things.
Posted by: mopar at March 11, 2009 12:21 PM"
True, but aren't they related? I'm sure it would be easier all around, in this climate, for a buyer with 20% down to get all the proper financing and insurance. One follows the other, right?
Posted by: christopher at March 11, 2009 1:39 PM
Christopher, if the buyer has 20 percent down, the buyer doesn't need private mortgage insurance.
What has been happening recently is that lenders are sometimes willing to give out mortgages with 90 percent financing, and the buyers get commitment letters, but sometimes the insurance companies won't insure the mortgages, so then the lender waits for the insurance that never comes, and the deal can't close.
Posted by: mopar at March 12, 2009 5:41 PM
mopar -- that's exactly what happened to us with our first buyer. She was pre-approved, the bank closed the loan file, and then she was unable to get PMI. (not to say that there weren't many, many other issues along the way. the bank made crazy demands on our building like increasing fidelity bond coverage, completely changing the building's insurance carrier, etc, etc. After months of drama, the deal collapsed because of PMI.)
Posted by: jxc187 at March 12, 2009 7:17 PM
Oh my god, jxc187, that is absolutely out of control. You should tell your story to the NYT real estate section (or something). That is a nightmare.
Posted by: mopar at March 12, 2009 11:31 PM
You will probably not get a loan now. It is not the percentage amount but the amount that is an issue. Banks are deleverging and banks will not give 90% financing on 400,000 dollars when they know the value is 200,000 dollars. The banks know that 400,000 dollars is a ballooned price. It is not an easy thing to tell homeowners that bought in the last 5 years or so, sorry you were taken as a fool by the real estate market and now deal with it. People have been sold into slavery and don't even know it. Wait for prices to come down another 50% and then start to look.
Posted by: hannible at March 13, 2009 9:23 AM
Actually, mopar, the Times already wrote an article about it. They didn't interview us, but wrote about many, many of the things that happened to us, about a month after they happened.
http://www.nytimes.com/2009/02/01/realestate/01loans.html
Then, I think, two weekends ago, there was an article about how buyers aren't able to get PMI either. We've had the unfortunate luck of hitting every change in bank policy just as it was happening.
Posted by: jxc187 at March 13, 2009 11:40 AM
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