Money Down Strategy

3 Replies

I'm currently living in an apartment and I want to buy my own home to start. I was referred to a couple of mortgage brokers who said I qualify, but I need anywhere from 3.5% to 5% of the loan to move forward! In addition, I am told that these funds need to be "seasoned" at least 60 days.

I'm a little taken back by this! I'm talking about a home I'm going to move into, not an investment property. Foreclosure or not, are there strategies for moving into a home that you're going to live in without having to come up with a 3.5% to 5% down payment????

This isn't 2005, you generally need SOME money to buy real estate. If you're buying a $100k home with 5% down that's only $5,000 and if you can't save up that much you may not be in a financial position to own a home. An investment property would require 20-30% down so being able to buy with only 5% down is an amazing opportunity.

Uh, no, not really. Your expectations don't match reality if you're thinking you can buy a residence with nothing down. During the bubble that was possible. A lot of people were seriously burned.

That said, in some areas cities and counties have programs to assist first time home buyers with the down payment. And in some areas with slow markets (most are pretty hot or at least warm now) the seller may be willing to help with closing costs. Closing costs are typically another 2% in addition to the down payment. 1% of that will be the loan origination fee. You will have insurance and tax escrows, inspections, appraisals and other up-front fees. And some costs on the closing like the lenders title policy and various recording and title company fees. Buying real estate requires cash, even for owner occupied properties.

Realize too that if you do buy with 5% down and then have to sell within a few years you will be under water. The costs to sell a house are at least about 8%, higher in slow markets where you have to give seller concessions. So with only 5% down you'll have to bring another 5% to closing to sell.

Also keep in mind that owning a house incurs more expenses than renting. Anything that goes wrong is your problem. No landlord to call to fix the heater in winter or the AC in summer.

Originally posted by @Guy Heath :
I'm currently living in an apartment and I want to buy my own home to start. I was referred to a couple of mortgage brokers who said I qualify, but I need anywhere from 3.5% to 5% of the loan to move forward! In addition, I am told that these funds need to be "seasoned" at least 60 days.

I'm a little taken back by this! I'm talking about a home I'm going to move into, not an investment property. Foreclosure or not, are there strategies for moving into a home that you're going to live in without having to come up with a 3.5% to 5% down payment????

Welcome to BP

Yes that is correct. The seasoning period is to show you can hold money in your account and that it just did not pop up there out of no where. The bank will also most likely want to see the source of your down payment. And the bank may also require you to have reserves....maybe 3 months worth of mortgage payments in addition to the down payment and closing cost. Not requiring all of this is what partially crashed the economy some years back.

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