Is it worth trying to find a better minimum down payment for a first time home buyer?
It's worthwhile to try and find a better minimum down-payment.  When I bought my home, I got an FHA loan, which drastically reduced the minimum down-payment required (I think the minimum is 3% under FHA).  Be aware that any down-payment percentage under 20% means that you'll have to pay for private mortgage insurance (PMI) as part of your monthly mortgage.  Here's a good definition of it. Part of the challenge you're experiencing may be that banks are only now exercising the due diligence with borrowers for mortgages that they should have been all along.  I hope you're successful in finding the right payment.  Getting a mortgage to reduce your spending on housing relative to rent is a wise move.  In addition to fixing your monthly costs at a consistent level (unlike rent, which can rise for reasons you don't control), the mortgage interest deduction makes for a rather helpful tax benefit. If you are putting down less than 20% expect to need to pay PMI.  When you first applied they should have described you a group of options ranging from minimal to 20% down. The monthly amounts would have varied based on PMI, down payment, and interest rate. The maximum monthly payment for principal, interest, taxes, and insurance will determine the maximum loan you can get. The down payment determines the price of the house above the mortgage amount.  During the most recent real estate bubble, lenders created exotic mortgage options to cover buyers who didn't have cash for a down-payment; or not enough income for the principal and interest, or ways to sidestep PMI. Many of these options have disappeared or are harder to get. You need to go back to the bank and get more information on your different options, or find a lender broker who will help you. "When I first purchased my home six years ago, I was able to get into a Bank of America First Time Homebuyer program that required no down payment and no PMI. While I hope you find a lower initial payment, the banks have tightened their requirements so that buyers have ""more skin in the game"" so to speak. Exotic loan options coupled with the subprime mortgage crisis caused the housing bubble to burst. Now banks are being very selective about who they provide a mortgage. The other things you need to look at are interest rate and terms. Do you feel you will be in the home for the next 30 years? Have you considered a 15 year mortgage? Shop around. PMI used to have a bad connotation (at least it did when I bought my home six years ago), but I feel now that it would have been worthwhile for the banks and the economy in the long run had banks required buyers to utilize PMI."
Sorry, I don't think a bounty is the issue here. You seem to understand LTV means the bank you are talking to will lend you 60% of the value of the home you wish to purchase. You can't take the dollars calculated and simply buy a smaller house.  To keep the numbers simple, you can get a $600K mortgage on a $1M house. That's it. You can get a $540K mortgage on a $900K house, etc.  Now, 60% LTV is pretty low. It might be what I'd expect for rental property or for someone with bad or very young credit history. The question and path you're on need to change. You should understand that the 'normal' LTV is 80%, and for extra cost, in the form of PMI (Private Mortgage Insurance) you can even go higher. As an agent, I just sold a home to a buyer who paid 3% down.  The way you originally asked the question has a simple answer. You can't do what you're asking. "Trying to determine what the best investment option is when buying a home is like predicting the stock market. Not likely to work out. Forget about the ""investment"" part of buying a home and look at the quality of life, monthly/annual financial burden, and what your goals are. Buy a home that you'll be happy living in and in an area you like. Buy a home with the plan being to remain in that home for at least 6 years. If you're planning on having kids, then buy a home that will accommodate that. If you're not planning on living in the same place at least 6 years, then buying might not be the best idea, and certainly might not be the best ""investment"". You're buying a home that will end up having emotional value to you. This isn't like buying a rental property or commercial real estate. Chances are you won't lose money in the long run, unless the market crashes again, but in that case everyone pretty much gets screwed so don't worry about it.  We're not in a housing market like what existed in decades past. The idea of buying a home so that you'll make money off it when you sell it isn't really as reliable a practice as it once was. Take advantage of the ridiculously low interest rates, but note that if you wait, they're not likely to go up by an amount that will make a huge difference in the grand scheme of things.  My family and I went through the exact same thought process you're going through right now. We close on our new house tomorrow. We battled over renting somewhere - we don't have a good rental market compared to buying here, buying something older for less money and fixing it up - we're HGTV junkies but we realized we just don't have the time or emotional capacity to deal with that scenario, or buying new/like new. There are benefits and drawbacks to all 3 options, and we spent a long time weighing them and eventually came to a conclusion that was best for us.  Go talk to a realtor in your area. You're under no obligation to use them, but you can get a better feel for your options and what might best suit you by talking to a professional. For what it's worth, our realtor is a big fan of Pulte Homes in our area because of their home designs and quality. We know some people who have bought in that neighborhood and they're very happy. There are horror stories too, same as with any product you might buy." Your best bet is to talk with a banker about your specific plans.   One of the causes of the housing crash was an 80/20 loan.  There you would get a first for 80% of the value of a home and 20% on a HELOC for the rest.  This would help the buyer avoid PMI.  Editorially, the reason this was popular was because the buyer could not afford the home with the PMI and did not have a down payment.  They were simply cutting things too close. Could you find a banker willing to do something like this, I bet you could. In your case it seems like you are attempting to increase the value of your home by using money to do an improvement so the situation is better.  However, sizable improvements rarely return 100% or more on investments.  Typically, I would think, the bank would want you to have some money invested too.  So if you wanted to put in a pool, a smart banker would have you put in about 60% of the costs as pools typically have a 40% ROI.   However, I bet you can find a banker that would loan you 100%. You don't seem to be looking for advice on making a smart money decision, and it is difficult to render a verdict as very little detail is supplied about your specific situation. However, while certain decisions might look very profitable on paper, they rarely take into consideration risk. When I bought my own place, mortgage lenders worked on 3 x salary basis.  Admittedly that was joint salary - eg you and spouse could sum your salaries.   Relaxing this ratio is one of the reasons we are in the mess we are now. You are shrewd (my view) to realise that buying is better than renting.  But you also should consider the short term likely movement in house prices.  I think this could be down.  If prices continue to fall, buying gets easier the longer you wait. When house prices do hit rock bottom, and you are sure they have, then you can afford to take a gamble.  Lets face it, if prices are moving up, even if you lose your job and cannot pay, you can sell and you have potentially gained the increase in the period when it went up. Also remember that getting the mortgage is the easy bit.  Paying in the longer term is the really hard part of the deal. The short answer is, with limited credit, your best bet might be an FHA loan for first time buyers.  They only require 3.5% down (if I recall the number right), and you can qualify for their loan programs with a credit score as low as 580. The problem is that even if you were to add new credit lines (such as signing up for new credit cards, etc.), they still take time to have a positive effect on your credit.  First, your score takes a bit of a hit with each new hard inquiry by a prospective creditor, then your score will dip slightly when a new credit account is first added. While your credit score will improve somewhat within a few months of adding new credit and you begin to show payment history on those accounts, your average age of accounts needs to be two years or older for the best effect, assuming you're making all of the payments on time. A good happy medium is to have between 7 and 10 credit lines on your credit history, and to make sure it's a mix of account types, such as store cards, installment loans, and credit cards, to show that you can handle various types of credit. Be careful not to add TOO much credit, because it affects your debt-to-income ratio, and that will have a negative effect on your ability to obtain mortgage financing. I really suggest that you look at some of the sites which offer free credit scores, because some of them provide great advice and tips on how to achieve what you're trying to do.  They also offer credit score simulators, which can help you understand how your score might change if, for instance, you add new credit cards, pay off existing cards, or take on installment loans.  It's well worth checking out. I hope this helps.  Good luck! I think we would be good with paying around $1200 monthly mortgage fees (with all other property fees included like tax etc.) You probably can't get a $250k house for $1,200 a month including taxes and insurance.  Even at a 4% rate and 20% down, your mortgage payment alone will be $954, and with taxes and insurance on top of that you're going to be over $1,200.  You might get a lower rate but even a drop to 3% only lowers the payment $90/month. Getting a cheaper house (which also reduces taxes and insurance) is the best option financially. What to do with the $15k that I have? If you didn't have a mortgage I'd say to keep 3-6 months of living expenses in an emergency fund, so I wouldn't deplete that just to get a mortgage. You're either going to be  Since 1) the mortgage payment would be tight and 2) you aren't able to save for a down payment, my recommendation is for you to rent until you can make a 20% down payment and have monthly payment that is 25% of your take-home pay or less.  Which means either your income goes up (which you indicate is a possibility) or you look for less house.  Ideally that would be on a 15-year note, since you build equity (and reduce interest) much more quickly than a 3-year note, but you can get the same effect by making extra principal payments. Also, very few people stay in their house for 30 years - 5 years is generally considered the cutoff point between renting and buying.  Since you're looking at a 10-year horizon it makes sense to buy a house once you can afford it. If you can get a mortgage with 10% downpayment and the seller will accept (some may want at least 20% downpayment for whatever reasons) and with PMI it still lower than your rent, sounds like it's a good idea to buy now.  Of course this assumes that the money you'd be otherwise saving for 20% downpayment will be used to pay off a mortgage faster. If you don't think you're necessarily going to stay in this area for five years, consider another option: renting. Five years is often quoted as the minimum length of time for buying (over renting), as the costs of the house purchase and the mortgage are significant - and if you're buying a new house every 5 years you're putting several thousand dollars of fees up front each time.  If you don't assume that house prices will increase (as they won't necessarily), then you can consider these costs - say, $5000-$6000 for a $500k house - an extra 1% or so of interest that first year.  If you are there 5 years, then you're paying 0.2% extra (more or less); that's reasonable, but if you're there only 2 years, you're adding 0.5% to your rate, which is pretty significant. You won't necessarily come out ahead here (versus renting). Renting for a year or two gives you enough time to find out if you do like the area, and if you do, you buy then - with more knowledge of the area and a chance to make a purchase at the right time for you. You pay off your loans, or at least a chunk of them, now, save some of the rest, and then rethink in a couple of years.  If you then don't qualify for a doctor's mortgage anymore, you just save up the rest of the 20% before making the purchase. "This is the meat of your potato question. The rephrasing of the question to a lending/real estate executive such as myself, I'd ask, what's the scenario? ""I would say you're looking for an Owner Occupied, Super Jumbo Loan with 20% Down or $360K down on the purchase price, $1.8 mil purchase price, Loan Amount is ~$1.45 mil. Fico is strong (assumption). If this is your scenario, please see image. Yellow is important, more debt increases your backend-DTI which is not good for the deal. As long as it's less than 35%, you're okay.  Can someone do this loan, the short answer is yes. It's smart that you want to keep more cash on hand. Which is understandable, if the price of the property declines, you've lost your shirt and your down payment, then it will take close to 10 years to recover your down. Consider that you are buying at a peak in real estate prices. Prices can't go up more than they are now. Consider that properties peaked in 2006, cooled in 2007, and crashed in 2008. Properties declined for more than 25-45% in 2008; regardless of your reasons of not wanting to come to the full 40% down, it's a bit smarter to hold on to cash for other investments purposes. Just incase a recession does hit.  In the end, if you do the deal-You'll pay more in points, a higher rate compared to the 40% down scenario, the origination fee would increase slightly but you'll keep your money on hand to invest elsewhere, perhaps some units that can help with the cashflow of your home. I've highlighted in yellow what the most important factors that will be affected on a lower down payment. If your debt is low or zero, and income is as high as the scenario, with a fico score of at least 680, you can do the deal all day long. These deals are not uncommon in today's market. Rate will vary. Don't pay attention to the rate, the rate will fluctuate based on many variables, but it's a high figure to give you an idea on total cost and monthly payment for qualification purposes, also to look at the DTI requirement for cash/debt.  See Image below:" In such a situation, is there any reason, financial or not, to NOT pay   as many points as mortgage seller allows? I can think of a few reasons not to buy points, in the scenario you described: If interest rates decrease you could be better off refinancing to a lower rate than buying points now. If buying points reduced your down payment below 20% then the PMI would more than offset the benefit of having purchased points. Your situation changes and you aren't able to stay in the home as long as planned.  That said, current interest rates are pretty low, so I'd probably gamble on them not getting too much lower anytime soon. I also assume that if you can afford as many points as they allow, that you wouldn't have to dip below 20% down payment even with points. Edit: Others have mentioned that it's important to note opportunity cost when calculating the benefit of purchasing points, I agree, you wouldn't want to buy points at a rate that saved you less than you could earn elsewhere. Personally, I've not seen a points scenario that didn't yield more benefit than market average returns, but that could be due to my market, or just coincidence, you should definitely calculate the benefit for your scenario and shop for a good lender. Don't forget that points are tax deductible in the year paid when calculating their benefit. My in-laws are pressuring me to buy a home.  I don't really have much financial experience. In fact, I'm a nightmare with finances. I almost have my student loans payed off from school.  My in-laws and husband are great with finances and with real-estate.  My husband has a good job and $200k in savings.  I have a good job too, and still have some debt from school. (approx $60k left of 180k).   They say the house will be available in Jan or February for purchase, and that we should really try to buy it (prob $2-3 mil).   My guess is they want to make it available to us off the market (which is a huge benefit in this area,  there are really no houses available lately) .   The problem is:  I am uncomfortable because I don't have all of my loans payed off,  I could divert money away from paying off the loans in order to save for a larger downpayment. I just got a bonus of $35k (after taxes)   I don't think I'll have all of my loans payed off by January. Should I save my money for the downpayment or focus on my loans, should I go for the house?  I don't know how to weigh these options against each other with such little experience. Since I have 10k in my account after down-payment, will I get a   good interest rate on the loan? When the bank considers your loan, they will see $70K. Regardless, they will want to see certain amount of savings that would allow you to continue paying your loan in case of an emergency, and $10K might not be enough. I was planning to put down 15%, but I have been told that I should buy   something called PMI to satisfy the rest 5% and if I take that my   interest will be more and sometimes, bank will not go for anybody who   pays less than 20%. Is that true? Yes. After downpayment + closing costs, how much money in the savings   accounts, is the bank looking for to say that I am a good buyer? Depends on the bank, my wild guess would be they're looking for several months' worth of loan payments (you should have ~6 months worth of savings for emergencies, regardless of loans). As other people have said, a few thousand dollars isn't going to make any significant difference in what you pay - if you put an extra 1% down, and redraw all the documents accordingly, your payments are going to be roughly 1% less per month.  So, for example, $1800 per month would become $1780 or so per month.   You're much better off keeping the money as an emergency fund: When you buy a house, there are a lot of things that can go wrong (as is the case with your car, if you have one, and with medical expenses, and helping out a relative, not to mention losing your job, and so on).  It doesn't sound like you have all that much money, because if you did, you would have put 20% down and avoided Private Mortgage Insurance, saving yourself a lot more money than 1%. So having a few more thousand in the bank sounds like a good thing. It's easier to get approval for a smaller loan, and more down means less borrowed.  Also, more down means more they can recover if they have to foreclose. "With no match, the traditional 401(k) for someone otherwise in the 15% bracket makes little sense. I'd suggest contributing just enough if you were in the 25% bracket to be in the taxable 15% but no more. Use a Roth IRA if you are saving more than that.  I'm adding this based on OP's statement that the fees on the 401(k) range .8-1.4%. I wrote an article Are you 401(k)o’ed? in which I discuss how fees of this range negate the benefit of the mantra ""save at 25% to withdraw at 15%"" and if one were in the 15% bracket to start, this level off fee will cost you money in no time at all.  The people advising you to max out the 401(k) first, given the rest of your situation and that of the account, are misguided. I'd given them the benefit of the doubt and assume they don't have all the details.  And with all due respect to the other posters here, everyone of them a bright, valued colleague, your answers should be addressed to the OP's exact situation. 15% bracket, no match, high fees. I suspect some of answers will change on reviewing this."