What is the recommended down payment for a first time home buyer ?

Question

Trying to get all the benefits of first time home buyer clauses and such

Answer 1

With today's market the way it is, some lenders will not help you unless you have at least 10%.  However 20% is better, you will get a better rate provided you have good credit.

Answer 2

Most, if not all, of the first time homebuyer stuff is really geared towards lower income people.  First time home buyer is in many cases just a marketing ploy.  Normally, you do have be a "first time home buyer", meaning you haven't owned a property in some time period, typically within the last 3 years.  

The major benefits of these programs is down payment assistance.  Sometimes these are good, sometimes they are used in a marketing sense to get people in the door - or bait-n-switch.  I don't mean to say that these are all bait-n-switch schemes, but, if you don't qualify or there isn't money available, then you aren't gaining anything by working with that particular bank/person/lender vs. another.  

I would recommend putting 20% down.  I realize that sounds steep, but if everyone had to do that, we wouldn't be where we are today.  Now, if you know you can afford the payments but don't want to cash out your 401k/IRA to put a large chunk down then maybe, you can finance more.

FHA loans were created to assist people with low down payments.  As low as 2.25% into the deal.  However, if you put less than 20% down you will pay more for that remainder and possibly the entire loan than if you put 20% down.  Either through mortgage insurance, a higher rate or both.

Mortgage insurance was/is a great tool, but it is used to protect the lender and you are paying a premium to use it.  

Don't put all your money down b/c you will undoutedly have more expenses owning than renting, at least on an out of pocket basis.  I still think it is a great time to buy and would recommend it to anyone who knows they will be staying put for 3 or more years.  Any less than that and you may not receive much benefit.

Hope that helps.

Joe...

Answer 3

I don't know where Joe gets his information, but there are plenty of FTHB programs that don't require the buyer to be low income.  Most programs are based on local income figures.  For instance:  In Oregon, the income qualifications in Portland are much different than in Lakeview, a small rural community.  

I would recommend you talk to a local lender (internet lenders will not know about local programs) about what is available to you in your area.