bought a house with 10% down
for better or for worse, my wife and I just closed on a house yesterday, in the middle of this mess. I’ve been reading so much about how hard it is to get a loan, and that banks aren’t lending, that I thought I’d share our experience to encourage any of you who might be…
for better or for worse, my wife and I just closed on a house yesterday, in the middle of this mess. I’ve been reading so much about how hard it is to get a loan, and that banks aren’t lending, that I thought I’d share our experience to encourage any of you who might be considering taking the plunge.
My wife and I have moderate incomes, with credit in the mid-high 700’s. No debt. We were able to close with 10% down, no points, at 6.5% interest rate.
We bought a 2-family in south slope (15th street between 4th and 5th) for less than $800. It’s a bit of a fixer but totally livable. Having the income from the rental unit is key. We hope to remodel and add onto the house eventually.
SO MANY PEOPLE swore to us that 10% down was IMPOSSIBLE, that I thought I’d pass on the contact info for our mortgage broker: Nicole Crete-McCarthy at Trachtman & Bach. 646-228-7820. I have no idea how she did it but she did.
Anyway, best of luck to all of you. Who knows if we’re doing the right thing, but at least we’re doing something, ya know?
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.
Hi,
I buoght a small two family on 19th Street [7th and 8th Ave] for 520,000 and totally new to area. Did I do the right thing?
Congrats Cottontop. Your financial logic’s directionally sound I think. You’re essentially financing your renovations with cheap mortgage dollars and kinda paying an additional 4.5% interest through your PMI (ignoring compounding) for the privilege (you’re paying mortgage interest on the 10% but maybe getting a point or two off the money in the bank.)
So, I think, total cost is mortgage rate plus 4.5% minus the interest you’re maybe getting on your cash in hand. But, if the alternative was 20% down and borrowing against a credit line to renovate, then the real cost is less than that ’cause your mortgage rate is probably quite a bit lower than any other rate of borrowing. Plus you have a little extra in the bank. Prudent.
PMI’s a bummer, but you can’t put life on hold forever. Speaking from experience, a few sleepless nights with a big purchase like this come with the territory. This too shall pass. Still, it’ll give you motivation to pay off that next 10%. Welcome to the ‘hood!!
congrats, cottontop! can you please let us know what real estate agent you used (buyer’s agent, or whoever had the listing as a seller’s agent)?
the median income in nyc is not 70,000… is it?!
-rob
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.
At the margin the $300 per month can be a big deal. It depends on how much cottontop’s financial wiggle room is.
Whoa, let’s get some perspective on the PMI thing. We’re talking about a $7,000 per month mortgage payment. Paying $300 per month for PMI is less than 5% of the mortgage amount. To me that’s less than beyond insignificant.
Whoa, let’s get some perspective on the PMI thing. We’re talking about a $7,000 per month mortgage payment. Paying $300 per month for PMI is less than 5% of the mortgage amount. To me that’s less than beyond insignificant.