I want to buy a home in Claremont California. With the 5% down that is now required that puts a big hole in my pocket. I mean 300,000 dollar loan is going to cost me 15,000 dollars get to get the home. Is there anyway to go around this? If it jumps to 10% i'm totaly out of the market. Where do people come up with these outragous prices.

Go to your bank and find out your options. They may even have a branch in the town you want to move to or nearby.

First off, welcome to the board! You'll find lots of good advice here.

In terms of how people come up with the downpayment, I can tell you our experience. We bought our first home in early 2002 (in the same price range you mentioned). We had been married for about a year but from the time we got engaged we lived off of one salary (even though we were both working) and banked the other salary entirely. That savings plus the cash wedding gifts we got (and put away in savings) allowed us to put about 17% down. We took an 80/3 loan to avoid PMI.

Back then a lot of our friends were buying too and it seemed the norm to put at least 10% down if not the full 20%, so when we went to sell I was surprised at the very low amounts buyers were putting down. (we had 3 offers, one was only putting 1% down another 3%) Things have changed so much since we bought the first time around.

The buyer we went with was financing through Wells Fargo with a plan called the 3% option or something like that (I looked into it to make sure it was legit). I think if you search Wells Fargo and 3% it'll come up.

Good luck in your search! Claremont is beautiful I have family there.

This message has been edited. Last edited by: HopeToSell07,

That 5% is what the GSEs (Fannie, Freddie, etc) are asking for to insure those loans. This includes FHA. Buyers are asking for down assistance from sellers to close. Now that Fannie and freddie are cracking down on appraisals, sales are going to slow even futher.

In the area you're looking at, you're better off waiting until next year and save a bit more. We saved aggressively for 7 yrs to get our downpayment money.

It may get worse as far as the down payment:



NEW YORK, Feb 27 (Reuters) - Wells Fargo & Co, the second-largest U.S. provider of home loans, has identified more than 200 troubled housing markets nationwide, showing how the mortgage crisis has spread beyond a few select U.S. regions.

In a February 25 document sent to mortgage brokers, San Francisco-based Wells Fargo said it had identified “soft,” “distressed” or “severely distressed” housing markets in 24 states and Washington, D.C. Most of the markets are counties, while a handful are cities.

Wells Fargo is tightening its lending standards in the affected markets on February 29, often by limiting the size of loans as a percentage of home values, regardless of borrowers’ ability to pay. In some markets, it will not allow purchasers to borrow more than 75 percent of the value of their homes.

…

In the document, Wells Fargo said California has at least 33 housing markets “at risk,” and that at least 20 counties, including Los Angeles and San Diego, face severe distress.

Florida also has 33 at-risk markets, followed by Michigan and Virginia with 15 each, and Maryland and Ohio with 13 each, Wells Fargo said.

Other at-risk markets are located in Arizona, Colorado, Connecticut, the District of Columbia, Illinois, Louisiana, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, Wisconsin and West Virginia, Wells Fargo said.

quote:

Originally posted by Gwynster:
Now that Fannie and freddie are cracking down on appraisals, sales are going to slow even futher.

quote:

Fannie Mae, the biggest source of financing for U.S. home loans, told lenders it will probably ban their use of appraisals by in-house employees or those arranged by brokers.

Latest news on the Fannie Mae appraisal front....a step to help curb appraisal fraud.

I just encourage you to save every penny you can. When we bought our first house in Southern California, the down payment was 10%, we scrimped and did without. I can tell you once you save and make your first downpayment, in the future buying a house is much easier. Once you cross the first hurdle the next one is easier.
Claremont is a nice city, it is costs more than the surrounding for the same reason you want to buy there when you now live in Pomona. That said, stretching to buy in Claremont will pay off in the future, you will be happier there in the long term.
Tutti Mangia and Harvard Square are wonderful restaurants!

I thought that the lenders had learned their lessons and that no loans were given at that low %.
I guess we will be seing a lot of more foreclosures.

Rker,

That 5% is on top of the 3% that FHA already asks for a fixed plus closing costs. The more that is required for a down, the more inventory we will have, and the more prices will decline. This is what a deflationary spiral in RE looks like. Add increasing interest rates and it's ugly.

Hard work and dedication. If you have a 401k you are allowed to take up to a certain percentage out without penatly for purchasing a home. But, that all depends on your age too. You don't want to be hitting your retirement fund if you are going to be retiring any time soon. But I would leave the 401k as a last resort.

Here's a suggestion for you. Find out what your friends may be paying for their mortgage. Average that out. When it's time to pay the rent, figure on that amount. Now minus out what your current rent is. Pay your rent, and then put the extra money away. Not only will this help you save up money, but it will help you know what it's going to be like to have to make that payment every month. So many people found out the hard way that they really could not afford their mortgage, and by that time, they owed more than their house was worth.

A few other things to consider. Home maintanance. I've spent about 10,000 in the past year alone on maintance. Hot water tank, city water, and new boiler. And these things always like to go when your checkbook is empty. When doing your budget, make sure you are adding money into a "maintanace fund". Do your cosemtic improvements a little at a time. But take care of any structural or mechanical problems asap before they become bigger nightmares. That dripping pipe can soon become a major flood if ignored for too long.

quote:

That 5% is on top of the 3% that FHA already asks for a fixed plus closing costs. The more that is required for a down, the more inventory we will have, and the more prices will decline. This is what a deflationary spiral in RE looks like. Add increasing interest rates and it's ugly.

I am sorry to disagree with you, but, I feel that we have all been seeing the amount of people that walk out of properties because all or a sudden they are upside down in equity. When you put at least 10% down on a property you are going to be quite reluctant to just walk away and loose your down payment. When there is nothing to loose, people don't have the necessary commitment to stay when the chips are down.

This message has been edited. Last edited by: rker321,

quote:

That 5% is on top of the 3% that FHA already asks for a fixed plus closing costs. The more that is required for a down, the more inventory we will have, and the more prices will decline. This is what a deflationary spiral in RE looks like. Add increasing interest rates and it's ugly.

I agree it is ugy but also totally necessary. Too many people have been using their home as a piggy bank or a status symbol. That mentality has to change and the only way it will, is increasing down payments and forcing borrowers to live within their means. That way housing prices will eventually realign with incomes. The quicker the better.

I think you misuderstood me.

I was saying that the increases in down payments and interest rates would drive purchase prices down futher and that was ugly (necessary but ugly). I would never say that downpayments aren't a good thing.

i hardly think being required to put 5% down is outrageous.

if you don't have 5% saved, rent and save.