Need your help! Buying my first house and need advices on financing.

[James Yang]

Hi guys!

This would be my first post at BP. I am in the process of purchasing my first house (woo hoo!) and need your help figuring out what to do with my loans. 

Purchase price of $1.1mil, and I am planning to put in some work into it ($200 to 300k) since the house hasn't been renovated for over 30 years. 

My question to you guys is:

1. Should I put down 20% as a general rule? or should I put down as low as possible?

2. Let's say the appraisal comes in at a good value after repairs/renovations, should I refinance? or just leave it as it is. I don't think I immediately need cash, and even I do cash out refinance and get some cash back, I dont' know if it makes sense to get a larger loan amount and higher monthly payments. 

3. does amount of down payment matter if I end up doing/not doing cash out refinance?

I would sincerely appreciate your help!

thank you very much guys

[Manny Vasquez]

James - Congrats on your first purchase! Like @Ko Kashiwagi stated above, if you are planning on living in the property, you can go in with as little as 3.5%. If this is an investment, you will more than likely need about 20% to purchase the property.

Depending on how much cash you have on hand, if you can afford to put 20% down payment and still have $200K-$300K for rehab, then my all means put down the 20%.  Anything less than 20% and you will pay MI (mortgage insurance).  I don't like to pay MI unless I really have to and I'm pretty sure most people would agree about this.

Once you are done with the Rehab, you can refinance and pull out as much money as the bank allows, or how much risk tolerance you are willing to accept. Typically, most banks allow up to 80% LTV. If you need to pull out more than 80% LTV (and some banks allow that) you will be paying into some hefty interest rates. Keep in mind that the higher the LTV, the higher the interest rate and the higher the payment. I hope this helps and good luck!