Down payments?

[cj25]

Are there creative ways to get money for a down payment?  I just can't see that we'll ever be able to save enough cash.  We have no one to borrow from, there are no inheritances that will come our way and we don't get bonuses at work.  We won't ever qualify for a down payment assistance program because we make too much.  Those programs just don't make any sense to me - people who can afford the payments but don't have the DP make too much to quality, but yet they give the DP to people who can't afford the payments.  No idea.  In our area to buy a basic house that needs some help, looking at around $600k (or higher).  Thats $120k down, plus closing costs and any home improvements the home may desperately need. So at least $150k.  Since homes have gone up $200k in the last 4 years, I don't see how we could ever just save the cash, even once we are out of debt since they will increases faster than we save.  And moving further away does't matter in SoCal, prices seem to stay the same or get higher.  Am I just missing some secret way people get houses?

[Bucksandreds]

Are there creative ways to get money for a down payment?  I just can't see that we'll ever be able to save enough cash.  We have no one to borrow from, there are no inheritances that will come our way and we don't get bonuses at work.  We won't ever qualify for a down payment assistance program because we make too much.  Those programs just don't make any sense to me - people who can afford the payments but don't have the DP make too much to quality, but yet they give the DP to people who can't afford the payments.  No idea.  In our area to buy a basic house that needs some help, looking at around $600k (or higher).  Thats $120k down, plus closing costs and any home improvements the home may desperately need. So at least $150k.  Since homes have gone up $200k in the last 4 years, I don't see how we could ever just save the cash, even once we are out of debt since they will increases faster than we save.  And moving further away does't matter in SoCal, prices seem to stay the same or get higher.  Am I just missing some secret way people get houses?

Lots of 80/10/10 loans with 80% financed regularly, 10% financed Heloc, 10% down and no PMI. That's only $60,000 for a $600,000 house.

[Scortius]

Unfortunately, I'm not sure there's any trick to it other than saving aggressively as possible and keeping the money in a fairly liquid account.  You could also roll the dice and put your savings directly into a taxable brokerage account if you don't mind the fairly high short-term risk.  Of course, if you're struggling to save that much in the first place, the risk may be worth taking.

I have a number of friends in HCOL cities.  Most of them plan to rent forever and many of them could afford to buy if they wanted to.  To them the housing prices just don't make sense and the rent vs. buy calculation is skewed highly towards renting.  Renting isn't a bad thing in the right market, and there's no reason to push towards home ownership just because "that's what you're supposed to do when you grow up".

Further, you mention that homes are appreciating faster than you can save.  I would guess that over the course of many years, this appreciation won't continue at the same rate.  But no, you're not missing anything, real estate is just crazy right now in pretty much every city on the West Coast.  Focus on your savings and debt and don't feel bad about renting, it's the smart decision right now anyway.

And yes, it's totally fine to put down less than 20%.  Piggyback loans are a great idea and even PMI is not the end of the world when you calculate it out and plan for it.  Just don't get caught thinking that the standard 'American Dream' of buying an 80/20 house in a HCOL city with a reasonable middle class job is the norm anymore.

[Bracken_Joy]

Based on your description, it sounds like you live in an area where it makes more sense to rent than to buy. Here is a calculator to verify that: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Sometimes, especially with a quickly appreciating market, it makes sense to NOT put down 20% and to take PMI. Here is a calculator to see about that: http://www.mtgprofessor.com/calculators/Calculator6a.html

Sadly no secrets. Just slashing expenses ruthlessly. We moved to the ghetto for a year and lived with a roommate in a tiny, un-renovated, 1920s worker's cottage our first year of marriage to save up a down payment. Save, save, save.

[surfhb]

Am I just missing some secret way people get houses?

No.   They either have the sizable down payment or they take on too much house.    Id imagine its a little of both here in So Cal.   
Many folks are upgrading.   I have a friend who bought a Condo in the late 90s and just sold it to buy a $650K home in Canoga Park!   doh!   Instant $300K drop in your net worth. 

Worst part for this guy is he works in a dying LA film business industry and will likely sell if he loses his gig.   

My advice is get your rent as low as possible and save/invest the difference.    Another So Cal RE market implosion is very possible with the next recession.  If not, then you need to make more money, move or buy RE out of state.    I rent in Huntington Beach and take part in the latter. 

Ask yourself why you are so keen on buying a house is such a HCOL area?    Its just a drag on your financial goals

[cj25]

I just want a house that's mine.  We've lived in 4 houses in the past 4 years and I can't do this forever.  1. Landlord sold. 2. Long term rental and while the house looked okay, it was extremely mold infested in hidden areas and we got sick and had to move out after 2 months.  3. Landlord raised the rent too high much year. 4. Another landlord that doesn't property care for the house.  I just want something I can't be kicked out of and that I have control how it's cared for and it's not a waste of money to do improvements to. I also can't handle living in a tiny condo for the rest of my life.  I'm going to be 40 this year and still waiting to be able to do things I enjoy like washing my own car, painting walls, having a garden, not having to ask if I want a kitten.   Unfortunately to rent a 3/2 is $3k/mo now.  No winning. Because we weren't ready before 2002, we just missed the boat.  DH tried to get a job in another state to no avail, so we're just trapped here.

I didn't think 80/10/10 loans were available for jumbo loans. 

[Goldielocks]

okay.  Age 22 to age 40:

Goal-- $120k
Annual savings needed with 7% interest rate: $3500 per year.
Savings rate on $120,000 combined income:  3% per year

Impossible?!?

Most people, of course, start with a condo, so the initial down payment is half that amount, allowing one to enter the housing market before age 40..or have an 80/10/10 mortgage (on a condo), or have a partner to help split the cost with, etc.

[Ocinfo]

I think a big part of the concern is the rapid increase in prices more so than the ability to save.

When homes are increasing at 10%+ per year it can be demoralizing as the goal line keeps moving. This is especially true when homes are already $500k+ for one bedroom condos.


Sent from my iPhone using Tapatalk

[rpr]

Recommended (sensible) Home Price to Gross Annual Income ratios are around 3. So a $600K house would require a gross income of $200K. Assuming total taxes (Fed/State/FICA) of 50K, after tax income should be around $140K to $150K. At this level of income it should be possible to save up for the down payment in 2-3 years.  How much have you saved in the past 2-3 years? 

[inline five]

I don't think we've ever had a point in history where large increases didn't preclude a large downswing as well. It's just how it works. Give it six months to a year, I'd bet there will be some signs of breakage in the housing market.

[surfhb]

I just want a house that's mine.  We've lived in 4 houses in the past 4 years and I can't do this forever.  1. Landlord sold. 2. Long term rental and while the house looked okay, it was extremely mold infested in hidden areas and we got sick and had to move out after 2 months.  3. Landlord raised the rent too high much year. 4. Another landlord that doesn't property care for the house.  I just want something I can't be kicked out of and that I have control how it's cared for and it's not a waste of money to do improvements to. I also can't handle living in a tiny condo for the rest of my life.  I'm going to be 40 this year and still waiting to be able to do things I enjoy like washing my own car, painting walls, having a garden, not having to ask if I want a kitten.   Unfortunately to rent a 3/2 is $3k/mo now.  No winning. Because we weren't ready before 2002, we just missed the boat.  DH tried to get a job in another state to no avail, so we're just trapped here.

I didn't think 80/10/10 loans were available for jumbo loans.

You  don't make enough money to buy the kind of home you want in So Cal......Its as Simple as that.    Don't feel bad, I'm right there with you. 

However, if you think this massive appreciation curved will continue like this forever, you have another think coming.

[PDXTabs]

However, if you think this massive appreciation curved will continue like this forever, you have another think coming.

Play around with these graphs: http://www.economist.com/blogs/graphicdetail/2016/08/daily-chart-20
I'm pretty sure that we are going to see some lower housing prices in the next 10 years.

[JLee]

I just want a house that's mine.  We've lived in 4 houses in the past 4 years and I can't do this forever.  1. Landlord sold. 2. Long term rental and while the house looked okay, it was extremely mold infested in hidden areas and we got sick and had to move out after 2 months.  3. Landlord raised the rent too high much year. 4. Another landlord that doesn't property care for the house.  I just want something I can't be kicked out of and that I have control how it's cared for and it's not a waste of money to do improvements to. I also can't handle living in a tiny condo for the rest of my life.  I'm going to be 40 this year and still waiting to be able to do things I enjoy like washing my own car, painting walls, having a garden, not having to ask if I want a kitten.   Unfortunately to rent a 3/2 is $3k/mo now.  No winning. Because we weren't ready before 2002, we just missed the boat.  DH tried to get a job in another state to no avail, so we're just trapped here.

I didn't think 80/10/10 loans were available for jumbo loans.

On the bright side...imagine if you had bought house #2.

[Frankies Girl]

So why not aggressively save and invest, then FIRE in 5-10 years and move to a low cost of living area and buy your dream house then?

And both of you should still be putting out feelers/searches for jobs in LCOL areas every month or so. You'll find something eventually that might not pay as well, but the LCOL would be worth it considering. The idea that there are literally zero jobs anywhere but right where you are is a defeatist attitude and you just need to stay with it in order to get lucky.

I'd advice a combo of both. Save/invest AND search LCOL areas for job opportunities.

[Socmonkey]

There is a vast world out there. Why live somewhere where you have to bust your ass all your life to pay for crazy high taxes and wildly overpriced things like houses?

It's not about how much you make, its about how much it costs to live compared to how much you make.

So do what humanity has done since the beginning - move to an area that offers you better opportunity.

Or not, I don't care what you do.

I've lived in multiple US states to include Hawaii (cheaper than SoCal), and in other countries such as Turkey and United Kingdom.

Right now I'm happy where I am in my $98k house. That's a payment of $715 (property tax and insurance included) on a 15-year mortgage.