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How to Get the Down Payment for a House (and EVERYTHING else you'll need to know)



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hey guys simon bryson here and today i

want to talk about exactly how you

actually save up the money for a down

payment

how much do you put down and how do you

find out exactly how much house you can

actually spend money on

and what they'll actually qualify you

when you actually go to the bank

to get a pre-approval letter okay in

this video we're gonna cover

everything by the way okay when i was in

college i asked my professor hey

how did you go ahead and buy your first

house he said tommy it's easy

what's hard to actually get is the down

payment for your house to the point

where you're breaking piggy banks

looking for pennies around the house and

try to find

every single dollar to go ahead and pay

for the down payment for the house but

in reality

if you plan for it ahead of time and

save up for it you don't have to be

scramping around

and breaking your kids piggy bank so

then go ahead and buy

a brand new house okay that's why i'm

going to cover everything in this video

right here

and by the way if you're new here guys i

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thank you guys so much now the first

thing is okay whenever you hear about a

down payment you usually hear about

three types okay you hear about hey i'm

gonna put down zero percent which is

actually very unlikely

i'm gonna put down three point five

percent with a fha loan

or for example i'm going to put down 20

to avoid

a lot of the fees so what other pros and

cons

of putting down a small amount of money

or basically

a large amount of money with basically

around 20 or so okay

the answer is this okay to actually get

a loan that zero percent is actually

very unlikely because basically

you have no skin in the game okay no

skin whatsoever so if you actually

don't pay you never had any money in it

whatsoever so then the lender

is taking a massive risk with you so the

likely chance of you actually getting a

zero percent loan

is actually very low unless you're doing

for example like flipping and you

actually have collateral like another

house

like that but the reality is your

percent loan is actually very unlikely

on top of that although it's a very

small amount of money

no money in a sense guess what you will

have a very large payment

every single month so always consider

that also okay now if you do put down

for example a small amount of money for

example a 3.5

loan and that is an fha loan okay if you

actually get one of those the answer is

well

these are very popular and the good

thing is that basically you don't

require a lot of money to buy a property

only three point five percent and on top

of that you can go ahead and buy a

property

with not the best credit score around

like 580 points and boom you're good to

go

so you don't even need like a 600 or 700

580 is just fine but the main con is

this okay

you will require to pay mortgage

insurance

premiums m-i-p now that might range from

around 1.5

but then you also have other fees of

like around point eight percent so in

reality you might be looking at fees

around two percent

every single year of your total house

value so imagine if you have a house for

like

a hundred k and you have to pay around

two percent every single year adjusting

fees

in reality that's around two thousand

dollars

every single year plus your mortgage

plus the interest rate so also keep that

in mind

and by the way one cool thing about an

fha loan by the way that stands for

federal

housing authority oh very fancy right

fha

the answer is the cool thing is that

basically you can actually go out there

and buy

a four unit property and basically live

in one rent three and hopefully

live free okay but in reality that is

also a massive risk because if somebody

doesn't pay

and you can't afford the mortgage well

you might just go into default so also

keep that in mind

risky because a low down payment means

that basically

your payments every single month are

going to be high and by the way

some people actually use fha loans so

basically go out there buy an investment

property stay there for a year then move

out to another property

justify and then buy it there for 3.5

percent and they keep doing that over

and over again and then boom before you

know it

they have a whole portfolio of real

estate and they didn't put that much

money in it's all rented and it's also

giving them money

and it's also paying the mortgage itself

because the tenants

the renters are paying the mortgage

themselves by paying you rent but again

that's very risky also complicated so

you might want to do research

before you try to attempt this also but

now what if you actually want to put

down 20

on a down payment now that is a lot of

money although you might say tell me

that's not a lot of money the answer is

yeah it is a lot of money because

basically

a 200 house is going to cost you a down

people to run like forty thousand

dollars which is a lot of money

hundred thousand dollars twenty thousand

dollars five hundred thousand dollars

a hundred thousand dollars okay so the

answer is it can get very expensive very

quickly

so 20 down payment is very expensive but

also

if you do put down 20 you do not require

any mortgage insurance whether it's

private or whatever it is okay

that's the cool thing so you kind of

waive that entire

1.5 fee every single year by the way

mortgage insurance ranges from like 0.5

or 0.2 percent

all the way up to 1.5 so keep that in

mind it's actually based on your credit

score

how much money you're putting down and

on top of that also your loan term and

all the details okay so keep that in

mind now tell me

how do i find out exactly how much money

i'm going to pay

in mortgage insurance well the answer is

again i'm going to give you guys all the

websites all the sources and that way

you know exactly what to do well right

here

link down below is a website this

website is going to tell you exactly how

much your mortgage insurance is actually

going to be so say for example

you're going to buy a property it's 400k

you put down 10

that's 40k you borrow 360k okay

and in reality you're going to borrow

the money for around 30 years at a 3

interest rate and you have a credit

score of around 620

to 639 very very low right very very low

in reality your pmi private mortgage

insurance is going to be like around 282

not that much money by the way that's

every single month

which means that that's basically guess

what 281 dollars already two dollars

times 12

that's only around like 3 384 but

usually

it's supposed to be one percent right so

if it's one percent should be like

around four thousand dollars but in

reality because you don't have such a

bad credit score

that's why it's like that but say for

example you have a great credit score of

around 760. okay

if you calculate it it'll be like around

84 because again

it's based on your credit score how much

money you're putting down but more

importantly

how good are you with debt and how much

of a risk

are you really so again link down below

go test it out and go try it out with a

calculator that way you find exactly

how much money is actually going to cost

you every single year

mortgage insurance now the second thing

i want to talk about is basically well

tommy

okay i get mortgage insurance i get that

putting down 20 is best

but what about for example how do i find

exactly how much house

can actually qualify for like how much

money is the bank actually going to give

me

to go out there and actually buy the

home i actually want to buy

the answer is well they're going to use

a formula called

debt to income ratio and that means

exactly what it sounds like okay

how much money do you owe when you

compare it to your income if you owe way

too much money

they're not gonna lend you a lot of

money if you owe way too much money

they're not gonna lend you anything

they're not gonna prove you whatsoever

you're not going to be able to actually

go out there and buy a home that's the

idea okay so tell me

how do i find out exactly what my debt

to income ratio

actually is well i have a calculator

right here

but i also have a link down below to

basically do it online also but my

calculator right here is going to show

you exactly well

how much income do i need to make to

qualify for the house that i actually

want to buy

based on all the calculations that she

found online so for example okay

say you actually found a house now say

for example the house you want to buy

costs you around four hundred thousand

dollars you're putting down ten percent

40k

and the mortgage around like maybe like

one thousand seven hundred dollars

every single month well with the debt to

income ratio usually

looking for a ratio of around 43 that's

what they usually want now to understand

this all you have to do

is put it into my calculator here or

basically with your calculator

at home the answer is okay you put down

1

700 and also 43 and then all you do is

basically

divide the mortgage by the percentage

and that's going to give you how much

income you need to make every single

month to be able to afford that mortgage

right there at a 43

level on top of that you multiply it by

12 to get the annual

and that way you find your basing to

afford a mortgage around 1

700 you need around 47 000 in

income that is how it works and that's

how crazy

it actually is okay so imagine for

example that's not all you have because

on top of that

you also need home insurance that's

around 175

you might also have some property taxes

around 466 dollars

but if you also have for example credit

card debt student loan debts

will they grab all that stuff to

calculate your back end income to debt

ratio

and then finally exactly how much all

your debt would be and if you can

actually afford it if it's a no

they will not approve you for the house

you actually want to buy

in this case right here guys i will need

to have around

67 000 in income to be able to afford a

house is around 400k

and also cover my other bills that is

the idea and by the way

that gives me room for other

discretionary income for example like

buying food

paying for my car bill whatever it is

okay by the way when you do this

they grab for example your car payments

your student loan debts

your personal loans they grab everything

to find out exactly

how much money do you owe and if you can

actually afford the entire thing by the

way you have

front 10 income to debt ratio that's

basically just the mortgage in your

income

and you have the back end which

basically everything you actually owe

and then divided by your income to find

exactly

if you can ask you for the house you

actually want to now if this sounds

confusing

don't worry about it just use a

calculator online

and that way you find it exactly if you

can actually afford the house or if you

can't afford the house now remember

you're looking for a 43 debt to

income ratio that's the except the

standard usually

anything beyond that is gonna be risky

and you're gonna be paying a high

premium or for example

they might just reject you so keep that

in mind

now we understand putting down a down

payment that's high is good

making sure you can actually afford the

house with the dental income ratio is

actually very

good also and by the way one more thing

is this guys okay

whenever you're buying a house the bank

might actually give you a lot more money

than you can actually afford

but my math is always hey i'll always

buy something for example a property

as long as not cost me more than 30 of

my after tax income

every single month so for example if i

make four thousand dollars

i'm not gonna spend more than thirty

percent of my income and that's around

one thousand two hundred dollars that

way i'm good to go

and i'm not worried about like hey oh my

gosh how am i going to go for this and

by the way

1200 is not that much money just like

buy a house like around 200k like 250

like 300k

that we can actually afford it but

actually not have a burden

of a house on you now the last thing

i want to talk about exactly tommy how

do i save

up for the down payment because

basically this thing sounds like it's

very expensive

now most likely right now in your head

you probably have a deadline tommy

i want to buy a house by next year or

the year after that

or tomorrow or this year the answer is

if you rush into this

you're going to rush into a brick wall

because basically

you're buying something it's going to

take you around 30 years to pay off so

it's going to be very very expensive

so you want to make sure you don't rush

into it and calculate everything so

everything is sound and everything is

solid okay

so for example let's say you want to buy

a house

and you have a deadline and you're also

saving up a specific amount of money

okay so so

here's how i would do the math myself

okay so say for example

every single month i make around five

thousand dollars right that's right

is 60k income every single year a lot of

money if you ask me now say i'm actually

able to save half of my income every

single year so i'm able to save around

half of this divided by two i'm saving

around two thousand five hundred dollars

every single month

multiplied by 12 i'm saving around 30k

every single year of my income great now

say for example the house i want to buy

costs 500 000 i'm gonna put down

20 how much is that that's going to be

around a hundred thousand dollar down

payment

which means okay what's 100 000

divided by 30k which i'm saving up every

single year the answer is

guess what 30 000 is going to take me

around

3.33 years to be able to sail for the

house and be done with it

have the down payments and be ready to

go but on top of that

i always recommend when you're buying a

house and saving it for a down payment

you want to have a separate bank account

that way you don't get

tempted to spend that money on something

else for example i recommend

warfronts or so find money that way your

money is separating

and you're not able to spend it and just

transfer it over very quickly okay

that's what i like to do now the main

thing is this okay the down payment

is not the only cost because on top of

that you also need the closing fees we

usually are around two to five percent

so imagine again

a five hundred thousand dollar house

well on top of that i'm going to need

around two percent for closing fees

right or 2.5

so times two five that's around twelve

thousand dollars additional on top of

that i also need an emergency fund of

around three to six months in case i

lose my job

that way i'm solving this for example

imagine if you bought a house back in

february before the pandemic and then

boom you can't afford

it that is a nightmare so the point is

this okay

buying a house is going to be very

expensive and it's also going to take

some time

as long as you're actually doing it the

correct way if for example you buy a

house you can't afford

you don't put that enough money it's

costing you way too much money over to a

month well

if something happens for example you

lose your job you're going to be in big

trouble so again

i recommend buy a house a you can afford

it

b save up all the expenses the down

payment the closing fees and also

an emergency fund of around like six

months or three months that way you're

good to go when you buy that house

you're good you don't have to worry

whatsoever okay that's the idea but guys

comment down below and let me know was

the video helpful did it help you

understand everything

and by the way right now i'm saving for

a house also the household wants around

500k

i'm gonna put that around twenty percent

so i need around 100k plus the closing

fees around like 12

500 so this whole example here is kind

of like my example and that's how i do

everything

is all my math and everything so the

answer is in like around

two years or so i'll be ready i'll buy

my house everything's gonna be fine but

i'm not gonna rush into it because

basically

how do you rush into buying something

that costs like 500k where even like a

one percent mistake

it's like five thousand dollars the

answer is you don't want to rush into it

okay but comment down below let me know

if it was helpful

or not helpful comment down below let me

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top of that if you wanna watch another

video basically on how i

budget my money and how i like spread it

around the answer is watching it right

here

i'll switch tomorrow thanks for watching

and as always peace

mortgage insurance down payments

debt to income ratio and also

saving up for the down payment the

closing fees and also an emergency fund

all this stuff very important