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It is cheaper to buy than rent in many metro areas.
Sure. I'm just saying you plunk down a large wad of cash to buy a house. That would be a very good reason to have your savings depleted.
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Serious question. According to articles the vast majority of Americans have little to no savings with various levels of debt. The question is, how can so many people then afford down payments on homes?
The problem is that most of these articles don’t consider home equity to be a form of savings.
The problem is that most of these articles don’t consider home equity to be a form of savings.
Which it technically is.
On the other hand, I also see plenty of articles that say people have too much of their net worth in their home, which is NOT a liquid asset, even if right now they're pretty easy to move in most places. I know plenty of people who have been stuck with 2 mortgages and struggled over the years when buying a new house before selling the old one.
Yes, many saved for the down payment, bought the house, and now have no more savings. That's how it was for us when we bought our first house in 1978. We currently have more savings than ever before but that's because we bought this house in 1993 and have stayed here, so no more need for another down payment. Our 3 savings accounts are all in different credit unions.
Yes, when we were young newlyweds, we put all our money into our first home (I was 21) and thus liquidated our savings. But we never minded that, since we felt secure with our very own house (in 1977).
Serious question. According to articles the vast majority of Americans have little to no savings with various levels of debt. The question is, how can so many people then afford down payments on homes?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by Sand&Salt
Yes, when we were young newlyweds, we put all our money into our first home (I was 21) and thus liquidated our savings. But we never minded that, since we felt secure with our very own house (in 1977).
Time to save again later....
I remember that my wife cried, at the "30 year commitment" as her parents had always rented. Our 1978 loan was at 7%, and that was a 1% discount since my wife worked at the bank. Our payment with tax/insurance was $369, that was $119 more than the house we were renting before.
I remember that my wife cried, at the "30 year commitment" as her parents had always rented. Our 1978 loan was at 7%, and that was a 1% discount since my wife worked at the bank. Our payment with tax/insurance was $369, that was $119 more than the house we were renting before.
Those 30 year loans were designed to extract extraordinary amounts of interest, in a time when interest rates were much higher than today. I signed off, then because the actual principle that was paid was minimal, often paid the monthly loan PLUS five or six months of principle for only the equal amount of that loan payment. The 30 years quickly became ten years and at around that point I just made the basic payment or with only the principle for the next month added. I would NEVER have signed anything with a pre-payment penalty.
It all is a balancing act - value of house, value of money, rate of inflation, need for cash in the immediate time frame, financial goals long term, overall economy, whether the neighborhood is going up or down in value.
VA, FHA, USDA and other non-conventional loans. This isn't rocket science.
Exactly. If you want it, you figure out a way. I bought a house (condo/townhouse actually) and I had no savings at all. I borrowed the down payment for a 3.5% FHA from my pension fund, which doesn't show up anywhere as a debt. I just had to pay it back before retirement or my pension would be permanently reduced, which I did (and retired a little less than six years later). Last year I refi'd to a 15-year conventional.
I had the salary by then to make a mortgage payment but never was in a position to save money earlier in life. Doing that enabled me to be able to buy my own place instead of rent, and the mortgage/taxes/insurance payment was less than the rent I'd been paying.
Oh, and now that I am out of all other debt, I have a growing savings account in retirement.
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