Trying to predict when I would be able to look to buy vs rent, want to rent for 1 year for sure but after that deciding what percent down payment would y'all say is safe to buy. Looking in Houston suburbs, both myself and my soon to be wife have solid jobs as an engineer and nurse.

I waited until I had 20% and purchased a very modest home several years ago. We have been very conservative with our purchase, The home value was around 2x our combined salaries at the time. I know it's not easy to save, but it would be my recommendation.

On an engineer/nurse salary, it shouldn't take long to have a solid down payment. I would recommend not overextending yourselves, don't try to replicate what your parents owned when you were growing up.

Counterpoint to BattleGrackle's post: We still got a conventional loan but did not put down the 20% originally. Where we live, it would've been a while before we could have saved up to get 20% for not much house. Rent was high. We were able to quickly refinance the home (<2 years after the original mortgage start) and get rid of the PMI.

In both cases, the original close and the refi, we seemed to have been very fortunate with timing though. Closed a month or so pre-Covid and refi'd last year with low rates which aren't so low anymore...knocked out PMI and got a better interest rate.

Recent 30-yr fixed numbers have grown a bit recently from what I've seen. It will be very interesting to see what happens with property values and supply/demand over the next couple of years. The devil on my shoulder says if you find a house in this tight market, go for it, the angel says save up for 20% down. There is risk in both approaches. I think you could hedge a little on the down payment saving by investing some (or all) of that and not just having it parked in cash and potentially losing a lot of value.

BattleGrackle said:

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I waited until I had 20% and purchased a very modest home several years ago. We have been very conservative with our purchase, The home value was around 2x our combined salaries at the time. I know it's not easy to save, but it would be my recommendation.

On an engineer/nurse salary, it shouldn't take long to have a solid down payment. I would recommend not overextending yourselves, don't try to replicate what your parents owned when you were growing up.

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That is definitely my instinct and I have said that line before of not replicating your parents lifestyle at a young age but most of the people around me are less conservative financially than me and that is why I came here for more opinions, thank you!

Z3phyr said:

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Trying to predict when I would be able to look to buy vs rent, want to rent for 1 year for sure but after that deciding what percent down payment would y'all say is safe to buy. Looking in Houston suburbs, both myself and my soon to be wife have solid jobs as an engineer and nurse.

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You are too late.

We bought our first house in 2013 with 5% down. Sold it in 2017 and had enough equity in it to put 20% down on our next house. Sold for $31K more than we paid. Just sold that 2017 house for $290K more than we paid.

Obviously the market timing was a huge deal for us but if we hadn't bought that house with 5% down we would never be in the position we are now. The best time to buy a house was 10 years ago. The second best time is now.

oldarmyjess66 said:

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Z3phyr said:

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Trying to predict when I would be able to look to buy vs rent, want to rent for 1 year for sure but after that deciding what percent down payment would y'all say is safe to buy. Looking in Houston suburbs, both myself and my soon to be wife have solid jobs as an engineer and nurse.

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You are too late.

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I'm aware, kinda hard to buy a house while in college

I'll echo what coolerguy said. We bought in early 2009 (steep discount thanks to housing crisis) with an FHA loan at 5.5% and 3.5% down. We refinanced to a 80/10/10 a few years later at 3.75% and sold that house in 2014 and walked away with 80k in our pockets, enough to put 15% down on our next house and have cash to put in a yard, fence, blinds, etc (new build).

Point being, if we hadn't bought what we did, when we did, this new build would not have been an option for us. So the time to buy is (almost) always "now".

BattleGrackle said:

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don't try to replicate what your parents owned when you were growing up.

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Great advice. I've witnessed 20 somethings buy pre children only to sell.

Z3phyr said:

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Trying to predict when I would be able to look to buy vs rent, want to rent for 1 year for sure but after that deciding what percent down payment would y'all say is safe to buy. Looking in Houston suburbs, both myself and my soon to be wife have solid jobs as an engineer and nurse.

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I would be happy to look at rates or help answer any questions you may have. There are many loan programs out there and you can get into a house with as little as zero down payment with a USDA loan in certain locations, VA Loan (if qualified) or 3% for some first time buyers with a conventional. FHA has been mentioned in the thread at 3.5% down payment.

Depending on your situation and what your goals are with the cash you have, we could look at single premium mortgage insurance options as well to save some cash in your pocket.

I'd be happy to go over any questions you and your wife may have.

Brian

bbailey@gomycity.com
903-five seven four-0960

https://mycity.mortgage/brian-bailey/

We went 5% down and don't regret it for a second, we have great credit so our pmi is incredibly low. If we would have waited, we wouldn't have been able to buy as nice of a house now and lost out on tons of equity due to our location.

I get the 20% thought, but location in the current market matters a ton. There's a huge difference between being near the city like us demand wise in kc and living out in Clearlake like my wife's sister. If the area you're looking at is further out with slower appreciation I understand it more. Like most things, it depends.

I would put as little down as possible and hang on to your cash. Our first home was FHA (3% at the time).

Save 10% and hope for a downturn in rates and demand. Make sure lease is month to month if you can

These low down payment scenarios look great now, but are we realistically expecting the same rate of appreciation the market experienced the last 3 years?

I second 10% down. But looking ahead, calculate what your budget would be at an 8% rate. Once you jump in, if rates are lower, great. If they rocket up? You can't control that.

just rememember if you put less than 20% down you will be required to pay PMI which is expensive

You have the option of lender paid mortgage insurance and split financing. As someone else mentioned mortgage insurance for borrowers with very good credit isn't nearly as expensive as it once was.

Scientific said:

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These low down payment scenarios look great now, but are we realistically expecting the same rate of appreciation the market experienced the last 3 years?

I second 10% down. But looking ahead, calculate what your budget would be at an 8% rate. Once you jump in, if rates are lower, great. If they rocket up? You can't control that.

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That's why I said location matters. If you're buying a 200-300k it probably makes more sense for 20%, but if your like what our first around 500k in a high demand area, it doesn't make sense at all and would have been a terrible decision for us.

In non shocking news, there is no definite answer to the questions without more specifics. Both 3% and 20% could be make sense.

harleyds2 said:

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just rememember if you put less than 20% down you will be required to pay PMI which is expensive

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I pay $40 a month and it's tax deductible so basically free

I did 5% down at age 27 to buy a modest 2/2 townhouse style condo with a garage. Monthly costs ended up being the same as local area rents, and actually cheaper after 3-4 years. A few years later I refinanced it for 1% lower interest rate and dropped the PMI because of the price appreciation so monthly cost went down. I since moved out of it to a new city and rent it out, and I rent an apartment. The condo value has doubled and so has the area rent so it's a phenomenal rental property now.

I'd try and do 10-20% down if you can, but if 5% is all you have, it can work too as long it's really not buying above your means. Meaning you can easily afford the mortgage, but just didn't have a big lump sum saved yet for 20%.

At the rate home values and rates are moving up, I would move now with 3.5% down and not wait and pay 20% more for the same house next year at a 2-3% higher mortgage note rate to boot. Call Jamie at Red Pear as he will give you a 2% rebate to help cover closing costs, so you can get into a house with less cash.

I would expand on that "Don't expect to replicate your childhood home" and say don't expect to get what your parent's had as their first house these days. We played that game with my in-laws and their "starter home" is worth 420k today.

Seriously look at house hacking. If at all possible, find a duplex and rent out the second unit.

NoahAg said:

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Seriously look at house hacking. If at all possible, find a duplex and rent out the second unit.

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Don't want to deal with tenants living next to me

aggiepaintrain said:

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harleyds2 said:

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just rememember if you put less than 20% down you will be required to pay PMI which is expensive

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I pay $40 a month and it's tax deductible so basically free

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Tax deductible does not at all mean it's basically free. Also, isn't household income threshold for the deduction like $110k? Feel like an engineer and nurse will be well beyond that.

Unless you have gobs of free cash, then put down the minimum. Bare minimum. Pay the extra few bucks in mortgage insurance. Keep your cash in your control as much as possible. I've tried the different down payment "strategies" and learned that life events can change rapidly for families. Dropping big down payments only reduced my available cash buying power. Disclosure: I'm a real estate broker and investor.

htxag09 said:

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aggiepaintrain said:

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harleyds2 said:

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just rememember if you put less than 20% down you will be required to pay PMI which is expensive

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I pay $40 a month and it's tax deductible so basically free

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Tax deductible does not at all mean it's basically free. Also, isn't household income threshold for the deduction like $110k? Feel like an engineer and nurse will be well beyond that.

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well maybe it's not deductible with AGI of $275k
I don't care about $40 a month is that I should have said

Maybe I'm not getting the full picture, but I keep hearing about cash buyers and homes going for way over asking.

If youre putting the minimum down, how do you compete with that when the market is already extremely limited

Jinx said:

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Maybe I'm not getting the full picture, but I keep hearing about cash buyers and homes going for way over asking.

If youre putting the minimum down, how do you compete with that when the market is already extremely limited

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I think it depends on the market, from a buddy in Denver, it's pure hell. 788 sqft house, listed 380, offered 430 someone offered 460. Lords knows how they'll get something under 500 (they care about being around Sloan's lake/Denver, burbs can be slightly better but still rough),

In KC it seems like the less than 400k market is insane between entry levelers and flippers/investors. Ours we think was just high enough to not be an issue with investors, but low enough to not get the big spenders who were looking more in the 6-800k range and didn't quite get everything they wanted from our house.

As mentioned it is very market dependent but most markets in Texas it is very tough to get a low down payment accepted. 20%+ down payment or of course cash is seen as a better offer by sellers as there is less chance of the loan not closing.

Our Dominate with cash product is designed to get around this issue: https://hurstlending.com/dominate-loans/dominate-with-a-cash-offer/

Thanks for the answer. I'm in B/CS and it feels pretty insurmountable at the moment.

Love to speak with you then. You still have to be in the same price ballpark with your offer with the Dominate with cash offer, but we are getting multiple successful bids a week with the product.

For a first home? I'd do whatever you can to get in. If that means the minimum down, just put the minimum down. Once you get your foot in the door and start gaining the house appreciation it will give you options for later, as others have mentioned. You have to get in for that to happen.

There are mortgage brokers out there that have products for buyers that appear as full cash offers. Some larger real estate brokerages have ability to make offers for their buyers that appear as full cash offers too.
A google search will lead to this rabbit hole

One is mentioned two posts above yours

I am one of the Lenders witb a "cash offer" program. PM me if interested or email me at brian.bazar@ccm.com