Buying a Home with 10% Down and No PMI by Victoria Alexander

A recent NY Times article spoke with our mortgage broker Mark Maimon from Sterling bank about how first time buyers are getting ahead with putting less then 20% down. Some buyers may not have to funds to put more than 10% down but there are some other very sound reasons for choosing to put down less. Here are some of them.

Saving For Renovations – Sometimes buyers who would normally be putting a larger    percentage down can avoid needing construction loans by attaining 90% financing and using  the  funds they would have put toward a larger down payment toward the renovation costs  instead.

Low Appraisal – When an appraisal comes in low, a buyer may have the option to finance 90% of the appraised value to avoid the need to come up with additional cash to cover the shortfall.

Opportunity Cost – In a situation where a buyer has investments yielding a higher rate of return than the current mortgage rates, it may be beneficial financially to leave the money invested rather than taking it out for a larger down payment.  This is especially true with higher net worth clients.

So how do you overcome a seller’s reluctance to move forward with an offer like this?  Here are a couple creative tactics to consider:

Waive/Lower Appraisal Contingency – When a buyer waives their financing contingency or sets an appraisal contingency at an amount less than the purchase price, a seller may be willing to allow the buyer to finance as much as they want to since the buyer won’t have the option to back out of the transaction if the appraisal doesn’t come in high enough to attain 90% financing.

Add Additional Financing Post-Closing – A seller can only try to control what happens on the initial purchase transaction.  We have options that allow a buyer to take out the additional financing up to 90% after closing.  This also applies to all-cash buyers who prefer not to liquidate investments and want to take out financing to replenish the funds they used from their investment accounts.  So if a seller won’t let a buyer finance as much as they want to at the initial purchase, then we can do it right afterwards when the seller is out of the picture.

We work closely with Mark to help buyers facing these challenges. The mortgage market is constantly changing and that is why having the right team (your lawyer, mortgage broker and real estate agent !) are so important to making you competitive in this market. I hate seeing people avoid exploring purchasing a home because they can’t get the down payment together!  Start the discussion by using this rent vs own calculator The Times has created.

So you can stop paying your landlord and start building equity!

You can reach out to Mark Maimon to talk more about the options.

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