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Conventional mortgage?

My sister's fiance was telling me that for a conventional home loan you needed to put down %20? Is that right? We were planning on moving in about 5 years or so.

 
Anonymous

Asked by Anonymous at 3:48 PM on May. 29, 2009 in Money & Work

This question is closed.
Answers (6)
  • You can put less down on FHA mortgages, but let me tell you why you really should put 20% down. If you don't put 20% down, you will have to pay for PMI, that is Private Mortgage Insurance. They will tack it on to your mortgage payments, so figure an extra $100 per month until you have paid down 20% of your mortgage. Even when you finally get to the point where you have paid 20% of your mortgage, you have to call and ask them to stop charging you the PMI or they will keep charging you. It takes years to get to the point where you have paid down 20% because they tack all of your interest on to the first 20 years of a 30 year mortgage. PMI is not a benefit to you at all, but you pay for it. It is insurance for the mortgage company that they will get paid should you default. It won't keep you from being foreclosed on if you don't pay, they'll still foreclose you.
    slw123

    Answer by slw123 at 4:10 PM on May. 29, 2009

  • currently it is 5% down for the purchase of a primary residence.
    Kari126

    Answer by Kari126 at 3:52 PM on May. 29, 2009

  • Yes.. Otherwise you can get an FHA loan and put 3% down
    scout575

    Answer by scout575 at 3:52 PM on May. 29, 2009

  • When looking for you home consider a lot of different factors before deciding on a price range. The smartest thing to do is to have at least 20% to put down on a 15 year mortgage and make sure that that payment won't be more than 25% of your income. Another thing to consider is that you are required to carry homeowners insurance and most mortgage companies these days also include your property taxes into your mortgage payment. Where we are in FL, that's an additional $200 per month to tack on too.
    slw123

    Answer by slw123 at 4:13 PM on May. 29, 2009

  • OP:

    Thank you! We already own a home right now, it is FHA. We were hoping to move out to the country (we hate city living) in a few years but I think it's going to take MUCH longer to save up 20%. That would be $20,000 for a $100,000 home...eeek!
    Anonymous

    Answer by Anonymous at 5:54 PM on May. 29, 2009

  • When you sell your current home will you make any kind of profit on it? I hope so and then you can use that money towards your 20% down. But having that 20% in hand is so much better than just GIVING them $100 a month for PMI. Just think, you may end up paying $20k over the life of the loan in PMI just for being too impatient to save $20k to put down. Plus the additional interest on that additional loan amount. Set financial goals for your family and do things the smartest way possible. Have you ever heard of Dave Ramsey? He's a financial guy and he has a book called The Total Money Makeover. It is a good all around personal finance book and an easy read. He helps with budgets and also explains how to do mortgages right. Get that book from the library and work on getting that 20% down payment together. Not to mention taking care of any debt you may have. There's a Dave Ramsey group on here too.
    slw123

    Answer by slw123 at 8:11 AM on May. 30, 2009