- This topic has 7 replies, 6 voices, and was last updated 17 years, 11 months ago by PD.
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October 27, 2006 at 9:40 AM #7790October 27, 2006 at 9:50 AM #38570poorgradstudentParticipant
Remember though that you earn interest on the savings in the same timeframe.
A lot of first time buyers get help from parents or grandparents in coming up with a down payment.
My anecdotal impression is that 20% downpayments are far from the norm right now. I’d be curious to see statistics on what the mean and median % down payments are.
October 27, 2006 at 10:07 AM #38575PDParticipantWe put 5% down on our first house. We had no help from family but we also did not sink ourselves into stupid debt on our wedding (unlike so many young couples these days who are spending 30k -40k that they don’t have).
We got lucky and made enough on our first house to put down 20% on the second (we also saved in the interim).
October 27, 2006 at 10:46 AM #38578ltokudaParticipantTwo things will make this strategy work:
1) You have to invest your savings in something that will at least keep up with inflation. A 5% CD would do.
2) You need to increase your monthly savings at the rate of inflation. So if you start off saving $1000/month and inflation is at 4%, you should be saving $1040/month a year later. Hopefully, your job will give you pay raises that will outpace inflation.
If you do these two things, you should be able to accumulate your %20 downpayment in less than 8.3 years.
October 27, 2006 at 10:49 AM #38579(former)FormerSanDieganParticipantThe number of first-time buyers putting 20% down has always been a small fraction, IMO. The exception woudl be those who receive support from parents to purchase their first home. Like PD, we purchased our first house with 5% down. Next house 4 years later 10% down. Third house 5 years after that for 20% down.
We were third-time buyers before we put 20% down.
October 27, 2006 at 10:51 AM #38581guitar187ParticipantI’ve been a mortgage broker for many, many years. I have seen very little in regards to first time home buyers putting 20% down (+closing costs) recently. But this can be attributed to the high rate of appreciation. Most people opt for 100% financing believing their property will increase and they can refinance at 80% in less than two years. They use what would be a down payment (savings) to offset a mortgage payment they can’t afford. I don’t know the # of first time buyers that have done this. But it seems significant from those that have come past my radar.
We will see what happens as the market turns south. 100% financing guidelines will become much more stringent and many people will have to bring a down payment to get into their first property.
October 27, 2006 at 10:59 AM #38583PDParticipantIt is scary that people have to use savings to pay their mortgage.
October 27, 2006 at 10:59 AM #38584PDParticipantDuplicate.
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