How Much Home You Can Buy with $17,550 Down
My purpose for this post is to hit it home what a great window of opportunity we have with FHA Jumbo 
mortgages which are only around until December 31, 2008 unless Congress passes an extension of some sort (which is a possibility-but not guaranteed).
For the remainder of this year, you can use $17,550 to buy a home priced at $585,000 using FHA Jumbo with 3% down. FHA requires the buyer to invest 3% into the transaction (which can be a qualified gift). 3% of $585,000 = $17,550. (With roughly 5% down, utilizing FHA Jumbo, you can puchase a home for $600,000). The Seller can contribute up to 6% towards closing costs and prepaids as long as the buyers 3% required investment is met. With this scenario, the Seller is contributing around $14,000. The loan amount is just under the maximum allowed FHA Jumbo for King, Snohomish and Pierce County of $567,500.
With FHA there are no income limitations and much easier on credit scoring than conventional mortgages which ding you if your score is 719 or lower. Effective January 1, 2008 2009 (as things currently stand) the FHA loan limit will be reduced to their actual loan limit of $362,790 for King, Snohomish and Pierce Counties.
Of course, you’re not limited to FHA if you only have around $17,550. There’s also Fannie Mae Flex (someone please knock on wood fast before Fannie shelves decides to put this product on the shelf) which allows lower down payment–currently as low as 97%. However the highest loan amount allowed is the true conforming of $417,000. Utilizing a Fannie Flex program, you could purchase a home priced around $434,000 with the seller contributing about $12,000 towards your closing costs and prepaids.
So we’re talking $585,000 sales price using FHA Jumbo (while supplies last!) or $434,000 with Fannie Flex97 (while this product is still available) if you have $17,550 for a down payment. Can you see why I’m so crazy about FHA Jumbo? This is a window of opportunity for those who qualify for the payment but may be shy on the down payment that’s scheduled to close on December 31, 2008.
Stay tuned for my follow post on Seller Contributions and Buydowns, thanks to Leanne! 
About the Author: Rhonda Porter
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Thanks Rhonda, this is great information!
Thank you Rhonda. This is exactly the kind of cheerleading by realtors and mortgage brokers that got us into this credit/housing mess and I’m not surprised that it continues still…
If I have 17K for my downpayment and you are saying I can buy a 585K house, how in the world do you expect me to keep making my mortgage payments going forward? Unless that 17K came from a couple of months of salary, and I am going to make at least that much for the next 30 years, I don’t see a way to afford that house.
Please be responsible when you write posts and at least include some disclaimers or sound bits of advice at the end of such posts. Gosh! I hope the realtors and the mortgage brokers were a bit more accountable…
SitkaJohn,
Did I say anywhere that you don’t have an income? This mortgage payment would probably require a gross income of approx. $12,000 per month (depending on property taxes, home owners insurance and the borrowers other monthly obligations).
In addition, it is very likely that the underwriting findings would require a minimum of 2 months reserves of approx. $9,300 after the down payment and closing costs are paid.
The type of buyers I’m seeing using the FHA jumbo do have plenty of savings; they just don’t want to use them for their down payment. The buyers still must qualify for the program–this is not subprime.
PS: You’re welcome!
Some buyers pay cash. Some buyers who could pay cash want to put as little down as possible, because they want to do other things with their money. To each his own.
Sitkajohn,
I think a lender should require to see the difference between their current housing costs and the new loan payment going into savings to create that $17,550 downpayment.
Say they are currently renting a house for $2,000. The new loan payment with taxes and insurance is $4,000 a month. The $17,770 accumulated should have been saved via a minimum $2,000 of regular deposits every month for the last 8 to 9 months. This provides proof that they can afford the new payment.
Of course the amount going into savings should be a bit in excess of the difference and the amount left in their savings after closing should provide enough reserves for additional costs of owning a home. But if they received the $17,770 from a discontinued source of income vs. a real overage of income vs. expenses, the fact that they “have” it shouldn’t be the only criteria.
Kary,
I don’t think FHA’s purpose is to provide options for investors or for people who can “pay cash” for the house. Nor do I think most FHA buyers CAN buy it all cash…at least not hisotrically. If you think FHA will become the new means of financing for investors and flippers, I’m hoping that is NOT the case.
Well, the only type of buyer where “most” of them can pay cash is the cash buyer.
I don’t recall whether there are any wealth limitations on FHA loans. But as to purpose of the FHA, it really doesn’t matter. The purpose of a carpool lane isn’t to allow a mother to drive three children to school, but it ends up serving that purpose too.
But I was only thinking of people that would be residing in the home–I’m not sure why you brought up flippers and investors. I’d suspect few of them would be cash buyers (especially investors, where the lack of leverage makes the investment make little sense).
Ardell, it’s perfectly fine for borrowers who can pay cash to use FHA for financing as long as they are occupying the home. It will not work for investment property or flippers.
The payment I’m coming up with is higher than what you’re estimating (maybe you’re not factoring the upfront mi to the principal?)…here’s the breakdown:
principal and interest: $3640.79
est. re taxes (@ 1.25% of sales price/12): $609.38
est. homeowners ins.: $75.00
monthly mortgage insurance: $236.46
Total est. monthly mortgage payment = $4561.62
Based on a note rate of 6.5% (apr 7.285%).
Taxes are probably high for the Seattle area…however I always use 1.25% when we don’t have an identified property w/specific tax info.
There is no income limits with FHA–that’s one of the many great features of this loan.
That’s affordable for a family grossing 12K a month?
Do you guys expect that this will be easily renewed to extend the new loan limits through 2009? I see this as one of the only things propping up the new buyer market right now, is that a mistaken impression?
biliruben, that’s roughly what would pass for qualifying based on income alone. If they have monthly debts, they would need more income to qualify.
What’s affordable to one family would make another panic. Often times there may be other incomes that we’re not able to use and give credit to. This would take $144,000 annual gross income salaried. If either borrowers are self employed, paid commission or receive bonuses, their income will need to be averaged out for the past 24 months.
b-I do think it will be renewed. In fact, there’s legislation that’s currently “on the floor” for FHA modernization…so we’ll see.
If it is renewed, I think it will either be for current amounts (at 125% median sales price) or rolled back to something like 110% in order to “ease” the loan limits back to where they really are. Some are talking of making the new limits permenant.
We won’t know until it’s said and done. All we know for certain, as of now, is that the limits are temporary and here until Dec. 31, 2008.
When and if the do change, you know I’ll be posting it at RCG.
I don’t think you’ll see a lot of flippers using FHA mortgages.
They have a non-refundable upfront mortgage insurance premium of 1.5%, in addition to standard closing costs. It’s like an “upfront” pre-payment penalty.
The FHA underwriters are not the same folks who were pressured to crank thru as many subprime 80-20s two years ago either. They scrutinize the files and borrowers carefully, to make sure they comply with FHA rules.
Still, if you want to buy a just better than average Eastside or north Seattle home ($500K plus), with a minimal down payment, and a 30 yr fixed, the FHA Jumbos will generally beat the non-conforming conventional rates and costs.
Thanks Rhonda
Rhonda, This post sounds very misleading. I read through the comments and SitkaJohn has a point. You didn’t say anything about the income but didn’t the post essentially say: “Hey look! You an buy a 585K home with just 17K down and it wont last long so this is the best time to buy!!!”
For the sake of full disclosure why don’t you also include all the numbers there (monthly payment, estimated tax and other dues) So it will give a complete picture to the reader.
And while we are on this topic, it makes sense to include that the rising rates and stricter lending standars are the ones putting downward pressure on the home prices and making homes more affordable to buyers. How about adding that as well?
Chaina,
the post was all about how much $17k could buy you and offers comparisons to other programs. There’s nothing misleading about it.
Payment info is in comment 8, in case you missed it.
Rising rates and more strict guidelines would be another argument possibly for not delaying your purchase. I’ve written about that before.
Whether or not it impacts pricing further–we’ll have to wait and see. I’m of the opinion that the closer in city (Seattle, Bellevue, Redmond) the less prices will be impacted due to rising gas prices for the right house. Homes that are further away may continue to be impacted more.
Galen, is this the post you’ve been wanting to see?
Chaina, I think income is sort of implicit whenever you’re talking about getting a loan over $10,000.00.
Also, I don’t think Rhonda gets into valuation issues. That’s not really her area.
Kary, very true…it’s just my opinion–I’m not a RE Agent nor am I an appraiser…nor do I play one on TV…and my darn crystal ball is in the shop again!
I also don’t see where I say “it’s the best time to buy”…I do say this is a “window of opportunity” because of the limited time FHA Jumbo is available (6 more months) and lower rates. Anyone is welcome to wait and see where housing prices go while mortgage rates continue to go up. It’s a trade off and a choice we’re free to make.
Hi Rhonda,
The year in the above sentence seems to be a typo. Should be 2009?
Thanks, Yang…I’ll go fix it…although I guess on 1/1/2008 that was the limit too so I was technically correct but it wasn’t what I was intending to say.
[...] was to tell my friends about something very subtle that Ronda Porter had done. She just wrote a post that I was compelled to click on solely based on the title. The title was almost daring me to see [...]
It seems unlikely that there is a large pool of potential mid-market buyers with household incomes over $144k who are conversely unwilling to invest more than $17k in a down payment for their home. Maybe if they have 8 kids
Are there any mortgage products out there designed to help those of us with higher savings ($40k) and lower incomes ($90k)? It seems to me that the long-term market would benefit more if FHA insurance was used in certain loans to reduce interest rates rather than support a lower down-payment.
I.m.o if you make ~150k a year you should either be able to save to a 20% downpayment on a $585k home in a few years or you live on margins where you probably shouldn’t buy a home.
If you have the money already and don’t want to use it for a downpayment you are effectively taking out a loan at ~6% for consumption or other investments. Why would you do that?
The only reason I can see that makes sense would be if you are prepared to foreclose if prices continue to plunge and want to minimize your losses. Then again, is that a good scenario to buy into?
Granted there are exceptions but I must agree that to call it an “opportunity” is misleading to most.
Chaina and Sitka John:
There is no replacement for a direct discussion with a mortgage professional. Rhonda consistently states as much in nearly all of her posts.
Real Estate Agents, Loan Originators, and a whole host of other people make a living by explaining what is possible, and potentially optimal, for buyers and borrowers, to attain their greatest satisfaction. Explaining the positives, and possibilities is not the same thing as cheerleading.
She is doing about as good a job in the public arena as anyone that writes about mortgages, and still has time to do individual’s actual mortgages.
Many of the other writers talking about mortgages don’t actually do mortgages, so they are content to take potshots from the sidelines, rather than actually joining the scrum, and getting mud on their uniforms.
Cut her some slack. Even if she is cute enough to be a cheerleader (OK, it was an old picture, but still!), in my book, she is a player.
Benny:
There have been some programs directed to your scenario, hopefully they are still around.
Talk to a mortgage professional (I recommend a broker, rather than calling a bunch of different banks), and explain what you need.
TJ:
Here’s one reason why you would borrow more, (at a higher interest cost than a comparable investment return) rather than put down 20%:
Liquidity.
Too often, I see the same mistake repeated: Not enough liquid reserves to survive one of life’s unfortunate bumps; job loss, illness, divorce.
Liquidity gives you (and the theoretical borrower we refer to here) a chance to recover from a temporary setback, stay in the home, make payments, sell the home, make new plans, whatever.
I am NOT arguing that someone should buy way more home than they can afford (and generally FHA won’t allow that anyways). I am arguing that the value of liquidity is often ignored, in pursuit of false savings.
As people are finding out all over this country, the money they have (or had) in their homes is not as liquid as they thought.
OK, now I sound like a cheerleader
Rhonda, I hand the pom-poms back to you.
Rhonda, good grief!
Thanks for writing continually and clearly about choices buyers and borrowers have.
It really is an important job of a lender and a real estate agent to educate people. The internet is full of good information, and garbage, and to find someone like you who takes time to write clearly and to basically offer ‘free advice with no hooks’ is rare.
The plain and simple fact is that FHA loans can be a good choice for many buyers. People reading this may not realize that FHA can also be a good choice for an owner-occupied refinance.
Many people thinking about simply refinancing might do well to consider an FHA loan.
Which reminds me, Rhonda, FHA used to have ARM’s that could only adjusted 1% up or down per year. Is that still available?
Leanne, you REALLY know your FHA! FHA does have ARMS with a 1 year cap.
I’m just back from a loan consultation so I’m reading my comments from the bottom up.
Thanks Roger…I never was a cheerleader…I did try out for drill team my senior year at Hazen and tied for last place!
Roger’s correct that everything is about personal consulation with a mortgage professional to create a plan that best suits their individual financial needs.
Is FHA right for everyone? Nope…neither is 20% down. Personal finances are not very individual as are one’s goals.
If I did have some pom-poms…maybe I’d do a cheer using Dustin’s handy video feature…NOT!
I’m pretty sure I saw a picture of you in a cheerleader-like outfit, big hair, 1980’s.
Seahawks cheerleader???
Can’t find it now.
I’m SOO thankful my 80’s pix aren’t on the net!
Roger, that wasn’t a cheerleader outfit…that was Kenny Easley’s actual jersey…BIG hair…we’re talking sholder pad to shoulder pad (pro football shoulder pads, too).
Rhonda, trust me, we’re all going to do lots of FHA loans again! And, I always liked them. Listing agents really need to get acquainted with these loans too, so they can properly advise their seller clients.
Real estate agents need lots of educating on FHA loans, since not many of the ones who started working even in the early 1990’s have done them. I’ll keep writing about FHA loans too, since really, it’s beneficial to everyone to have as much factual education about loans as possible.
Conventional loans became the standard, everyday stuff because they were easier to get and process, and they didn’t have such low, low loan limits that FHA had for so many years.
Today, we’re going to see a return to basics, and that sure includes FHA.
Leanne, I may have to borrow you for my test run on my on-line FHA class I’ve created.
You’re right on about getting the word out and educating buyers, sellers and agents alike.
I was just talking with a potential FHA borrower who was upset because the LO told her that they just can’t buy right now and thankfully she searched the internet and is learning more about FHA due to posts like ours.
Yes, many, many, many agents have a fear of FHA that just comes from the unknown, as well as being told by other agents that FHA is “really hard”. The last two FHA deals I did, I had to do basic smoozing with the listing agent and the seller that “this really won’t be that hard, I’ll help make it as smooth as I can, and my lender really knows what they are doing too”.
What I won’t allow for my listings this year is for them to have a buyer who is dealing with a lender I either don’t like, or can’t have a decent/good conversation with that indicates they really do know what they are doing. Too many times when a transaction gets dicey it isn’t the buyer — it is the lender.
And, guess what? FHA isn’t that hard, and what’s hard about it makes sense
— back to basics means document, document, document! Lots of sellers and sellers agents are going to whine when they see offers coming in that are FHA, but they are going to be seeing them. Not everyone has 20% down, or 50% down or all cash.
I’d be happy to test your on-line FHA class. Clock hours?
How about this for the name of your new class …
FHA: FEAR NOT!
Or,
I LOVE FHA, YOU CAN TOO
Gotta have some catchy titles these days!
Leanne, Actually I’m calling FHA ABC’s…
I may submit it for clock hours…many moons ago in a past life, I was a clock hour instructor.
In addition to making sure I’m covering what agents need to know to understand (and rid their fear of) FHA, is testing that the conference call system works correctly, internet presentation…etc.
Okie dokie – when you have time, go for clock hours on this, and you’ll have even more classes being taken! I’m happy to test anything you want.
BennyD wrote: “t seems unlikely that there is a large pool of potential mid-market buyers with household incomes over $144k who are conversely unwilling to invest more than $17k in a down payment for their home.”
If you’d said unable, I’d agree. But unwilling, I have to disagree. People make all sorts of decisions for all sorts of reasons. Some of those reasons are good, some are bad. But people are not all the same.
An interesting question would be would more people buying houses for $500-600k pay cash, or put only 3% down?
I would rather have $500-$600k liquid than pay cash for a house.
Seattle household income distribution:
Less than $10,000 24,932 (9.5)
$10,000 to $14,999 15,525 (5.9)
$15,000 to $19,999 13,380 (5.1)
$20,000 to $24,999 14,141 (5.4)
$25,000 to $29,999 11,483 (4.4)
$30,000 to $34,999 14,641 (5.6)
$35,000 to $39,999 12,958 (5.0)
$40,000 to $44,999 13,628 (5.2)
$45,000 to $49,999 11,475 (4.4)
$50,000 to $59,999 20,236 (7.7)
$60,000 to $74,999 24,268 (9.3)
$75,000 to $99,999 27,491 (10.5)
$100,000 to $124,999 20,478 (7.8 )
$125,000 to $149,999 10,332 (4.0)
$150,000 to $199,999 14,191 (5.4)
$200,000 or more 12,274 (4.7)
So, just about 10% can afford to pay the nut on this kinda loan. Probably the vast majority are already homeowners; probably in a house at least that expensive, no not looking to move up. My guess is those buying a 600K house are like us – putting about half down and getting the monthly nut down to where you can afford things nicer than Raman for dinner.
The only wild-card is immigrants, and those appear to be vanishing pretty quickly.
biliruben, this is really interesting–where did you get this data?
You’re proving that this loan is not for everyone. It’s not stated income — FHA is a full documented loan. Perhaps your data proves why FHA Jumbo has not taken off as many had expected (although you don’t have to go up to the maximum limit–anything over $362,790 would be a jumbo in our tri county area).
Hey Rhonda –
Yeah, I find it interesting too!
I was curious last year when thinking about Jumbos and the legislation to up them, so I looked up the census data in the American Community Survey:
http://seattlebubble.com/forum/viewtopic.php?f=1&t=623&hilit=+income
Look at the final post – only 1.9% of non-homeowners make more than 150K. That’s pretty much your market for this kinda loan, I guess.
biliruben, is there more current data available?
Why is the government runnings programs that assist the top 10% household incomes in home ownership?
The choices I see are:
A. Sacrifice some liquidity by a bigger downpayment and keep good monthly cash flow that will help regaining and growing your liquidity.
B. Retain most liquidity and sacrifice cash flow which will hamper liquidity growth in the future.
So to say that a small downpayment favours liquidity and/or creates a safety buffer for unpredicted events is only true in the short term. In the long term it’s a negative for both.
I’m definately for choice A. I like good cash flow and low debt level. For me that is part of the fundementals of financial safety and freedom.
Alan, I think the sad answer to that is that the program is not to help home buyers. It’s the result of successful lobbying from the real estate industry. I’m a potential home buyer and there is no way I would ever touch a loan like that outlined by Rhonda in this post but then perhaps I’m just part of a small dying breed of financially conservatives.
Um, FHA is over 34 years old.
No matter how you slice it, $600,000 is a nice place. Go a half hour out of Seattle, Bellevue, Redmond, Kirkland and you get more for the money, many homes are close to train or light rail now too.
Go an hour away, and homes get even less expensive. It just depends on what you want. $600,000 isn’t often thought of as a “first time buyer” category house either, so most people will have solid down payments like Bili, and likely won’t choose FHA for financing.
Whether some choose to go FHA is up to them. The point is, there are choices out there from low to high, and I think Rhonda presented well the idea that a fairly minimum down payment could be an option for someone buying a $600,000 property.
According to Bili’s chart of wages, not too many will be using FHA on those $600,000 properties, which should surprise no one.
# 50, I meant to say FHA has been around since 1934, which is 74 full years. FHA is no new government program, it’s seasoned, and just like anything, has changes.
And, these changes have made FHA loans more difficult to obtain than they were just 20 years ago. I wouldn’t call FHA loans a risky government program by any means. It’s a proven method to encourage homeownership.
Alan, the example used is at the maximum local loan limit…it’s not just the top 10% that is being helped–it’s everyone who can qualify for a full doc FHA loan.
bili, as to post 45, not all people buying a home are non-homeowners before they buy. That sort of connects up with my argument against comparing median prices to median income–many have gains from prior ownership.
Alan, as to post 47, buying a home is a great economic engine, probably especially so for the top 10%. It’s not over when closing occurs. Things occur afterward which stimulate the economy–such as trips to Home Depot and buying furnishings. In other parts of the country the old limits probably included the bottom 95%+, so the increased limits just equalize the country better.
tj wrote: The choices I see are:
A. Sacrifice some liquidity by a bigger downpayment and keep good monthly cash flow that will help regaining and growing your liquidity.
B. Retain most liquidity and sacrifice cash flow which will hamper liquidity growth in the future.”
I’d add “C” and I’m sure there are others.
C. Invest the money in something that makes you more, after taxes, than the cost of the mortgage.
tj wrote: “Alan, I think the sad answer to that is that the program is not to help home buyers. It’s the result of successful lobbying from the real estate industry. I’m a potential home buyer and there is no way I would ever touch a loan like that outlined by Rhonda in this post but then perhaps I’m just part of a small dying breed of financially conservatives.”
Undoubtedly real estate lobbying helped, but don’t forget the $600 checks the government sent out which real estate lobbying had nothing to do with. This is just another thing that government did to help stimulate spending (the type of spending I noted in post 54 responding to Bili).
It’s also not the type of loan that I would do. But if we based government programs based on my spending habits, we’d have the economy of Afghanistan. The point of the program isn’t to dictate peoples’ financial choices, but instead to allow the financial choices to be made by people.
With Fannie Mae’s new DU 7.0 and with loan to value restrictions, I think we’re going to see more 20% down FHA loans. FHA does not consider declining markets and will not ping your rate if your score is 719 or below.
tj, as Kary mentioned (and I have too) this program is not for everybody. If you have 10-20% down (or more), great credit scores and a 2 year job history, you’ll probably do fine with a conforming loan.
The intent of this post was to point out that this loan limit (unless Congress passes additional legislation) is here for 6 more months. And I believe many consumers are under the impression that you need a 720 credit score and 20% down to buy a home now and that’s simply not the case.
Information and education are necessary for those considering buying or refinancing a home. That’s all we’re trying to do here.
Regarding FHA, it is my understanding that it is government sponsored, but not tax payer funded, insurance program. I have been told that it is entirely self funded, from the monthly mortgage insurance payments and the up front premium. FHA itself does not fund loans.
Clearly it is government influenced, as witnessed by the recent government directives.
The point I’m making is that (unless someone cares to prove otherwise) non-homeowners are not subsidizing the lifestyles of FHA homeowners with below market rate loans. Arguably, the less well of FHA homeowners are subsidizing well-to-do FHA homeowners, but the same can be said in reverse.
In most insurance programs (which is ALL that FHA is), it is safer to increase the pool of the insured, especially the group that will not need to use the insurance, as long as the added insureds do not increase the overall payouts by more than they pay in.
The recent changes simply allow for a greater number of borrowers to CHOOSE to be in this program, which I find hard to argue is a bad thing.
I wouldn’t mind hearing a contrary view, especially those supported with data. I find this is one of the quicker pathways to true learning.
Yeah, Rhonda, 2006 data is out now:
http://factfinder.census.gov/servlet/DTSubjectShowTablesServlet?_lang=en&_ts=231934922625
They’re generally about 2 years behind in compiling and making the data public. I would doubt the distributions have changed drastically.
Kary, I realize not everyone is a first-time homeowner. All I was saying was those who only have 17K to put down very likely are.
Rhonda wrote: “And I believe many consumers are under the impression that you need a 720 credit score and 20% down to buy a home now and that’s simply not the case.”
Most consumers thought 100% went away long before it did. And that was even the case of many bubble bloggers, who presumably follow the real estate market and purport to be knowledgeable as to real estate matters. They do read a lot of press reports, so that gives you some idea of the accuracy of press reports..
biliruben, right now I’m working with three clients who are considering FHA jumbo for buying a home…2 are not FTHB.
Are they putting only 17K down?
bili wrote: “Kary, I realize not everyone is a first-time homeowner. All I was saying was those who only have 17K to put down very likely are.”
I thought you were talking about the new higher limit FHA loans in general, without regard to how much they put down.
Kary:
That’s the point I was trying to make as well.
I read the papers so that I know what information the general public may believe to be true. I know that information is intentionally managed by vested interests, with the money to do so.
I go to sites like these to get the real story, vetted by folks like you and me who have to know more than what is in the papers to able to do our jobs. We who read and write here have our axes to grind as well, but the grinding must be done in public view, with appropriate feedback.
That the general public gets a chance to watch and learn is one of the true miracles of the internet.
Understandable. I’ve tossed up data that is relevant to several different situations. When looking at the overall distro in 43, that would apply to all buyers in general considering a jumbo, whereas the link in 45 where I reference my bottom post and the 1.9% of renters who could stretch to afford the Jumbo, I was thinking that would be someone who might have little to put down.
Agreed. It’s hard to fathom sometimes when you see a type of loan that is losing companies billions of dollars, and many companies are doing away with it, the logical conclusion is that all companies realize it’s a massive money-loser and are doing away with it. As you point out, that’s not the case! Those CEOs have rocks in their heads, but if they want to throw money away, it’s great for folks like Rhonda to point out they are still doing it!
There is a distinction between people who only HAVE $17K available for a down payment, and those who only CHOOSE to make $17K for a down payment.
I would not advise anyone to buy a house of that value if they only had $17K in liquid reserves available for a down payment.
It leaves them too vulnerable to life’s unexpected bumps.
However, if a person were to say to me,” I have $34K saved up for down payment, and I want a home that costs $585K”, I would encourage them to only put the $17K down, and hold the rest liquid, as the benefit of putting the remaining $17K down is negligible, compared to the security of having $17K in reserves.
biliruben, they are doing minimum down and it’s not because they have to.
biliruben:
Interesting point. Sometimes it seems that is precisely what our job is: “The bank is offering this riduculous deal for you, and we recomend that you take advantage of it”!
I do feel a bit sorry for the banks, with CEO’s losing their jobs, and getting shoved out of the plane with a $100M parachute, but no, not really.
They have enough money to hire an army of the best actuaries, economists and marketers in the world. The game is always rigged in their favor.
We can only huddle together with amatuers and semi-pros under our 2nd hand umbrella, and shout at the hurricane whipping overhead. I’m always happy to make room, and take my turn shouting.
bili, banks play a numbers game. Look at car loans, where they are upside down most of the loan, or credit cards, where they are entirely unsecured. They’ve learned they make money off the masses, even though a few default. I’d even put it blunter than that for the companies that give credit cards to people with lower scores. They make money off of the suffering of the masses, even though some default.
I think the thing that got them into trouble on real estate loans was it wasn’t really risk based. The 20 on an 80/20 should have been considered an unsecured loan regardless of the market. Also, even though they’re now using credit scores more, credit scores are lousy tools for mortgage lending. They really need to come up with better ways of assessing risk, and pricing accordingly.
There’s only two reliable ways to get ridiculously wealthy: From the suffering of the masses, or the vanity of the rich.
Everything else is just gonna get you your daily bread.
Nothing wrong with that.
I would have never guessed that this post would get this much attention–thanks everyone! This is great conversation and a big part of why I keep on writing.
Now I’m off to a mortgage consultation–I’ll be back this afternoon.
I had to comment on whether it makes sense for someone to put $17k down if they could afford more…maybe 20%. There were several posts that say that many people only put $17k down even though they could afford more.
I think it’s very difficult to say that it makes sense to NOT put 20% down. Using Rhonda’s example in #8 the individual is paying $236/month or $2,832 per year by not putting an extra 17% or about $100,000 down. That adds up to 2.8% ($2,832/$100,000) in mortgage insurance for of not putting 20% down. This mortgage insurance is not tax deductible. You also have to pay 6.5% interest on this money. So, you’re looking at 9.3% on the $100,000 that you could have put down, but chose not to. Someone show me a guaranteed investment that pays that much and I’ll jump on it. This is why those piggyback loans were so great.
Whether you pay cash or only put down 20% is another matter.
Mortgage insurance is tax deductible, but not for everyone (and perhaps not many in the price ranges being discussed). Also, I’m not sure FHA loans have mortgage insurance (Rhonda can answer that when she gets back.
It’s not deductible for adjusted gross income over $100,000 for married individuals and $50,000 for single. I thought we were discussing individuals whose income would support a such a large mortgage.
I don’t know whether FHA loans have mortgage insurance or not, but her example included that as a cost.
Well, at the risk of doing a Rhonda impersonation, FHA requires monthly mortgage insurance of 0.5 annually, and a onetime upfront payment of 1.5% (the upfront will change soon, by FICO score).
Both apply on 30 yr fixed at 97% LTV or at 70% LTV. In other words, the MI does not go away at 80%.
Still using her numbers (purchase, $585K), 20% down leaves you with a loan amount of $468K, still Jumbo territory, and still having to have MI with FHA.
I agree, that at minimum, you will have to pay 6.5% annually for the extra $100K, and only earn about 5% in interest, for an annual loss of $1,500, (assuming interest rates for savings do not go up or down) but you have access to that cash when you need it.
There are limitiations on the tax deductibilty of mortgage insurance that may apply, but I would argue the merits of liquidity over the tax deductibility.
Mustu:
Does the entire MI tax deduction go away after the $100K income mark, or is it phased out?
Also, there are some limitations on the deductibility of mortgage INTEREST at higher income levels, right?
Roger wrote: “Well, at the risk of doing a Rhonda impersonation, FHA requires monthly mortgage insurance of 0.5 annually, and a onetime upfront payment of 1.5% (the upfront will change soon, by FICO score).
Both apply on 30 yr fixed at 97% LTV or at 70% LTV. In other words, the MI does not go away at 80%.”
I knew about the 1.5, but not the .5. And I suspected the thing on 80%, as it applied to the 1.5. But what I have absolutely no idea on is whether that is deductible for anyone. I seem to recall that for higher income people the PMI deduction gets phased out–it does not just disappear at $XXX,XXX.xx.
I ususally avoid definitive discussions of tax deductibility, as it’s not my field.
To paraphrase an old saying,
One man’s tax deduction is another man’s prison sentence!
biliruben, they are doing minimum down and it’s not because they have to. -Rhonda
I understand if you don’t feel comfortable doing this, but I’d love to hear some details to see why it makes sense for them, so that I can understand whether we should be considering this. Even when we were grossing 12K/mo (which we aren’t quite doing right now), I can’t imagine paying $4500/mo PITI.
The only way I can imagine this working is for them to have austerity of monks, be grossing substantially more the 12K/mo, completely neglecting retirement, or have a substantial alternative income stream.
http://www.mortgagenewsdaily.com/1262007_PMI_Tax_Deduction.asp
I have no idea whether the above site is correct, but they indicate:
It would include FHA MI. They also indicate that it’s AGI, not GI that is the $50,000/$100,000 limit, and that the phaseout entirely is at only $55,000/$110,000.
One point they make regarding the temporary nature of this deduction is it might not apply to future FHA payments, even if your loan was made in the period allowed.
Bili, don’t expect that is necessarily makes sense. Go back to my post 41. People do all sorts of things for all sorts of reasons.
Here are a few things to consider when deciding to pay 20% down or $17k on a $585k home.
- If you pay $17k the extra $100k you borrow will cost you about $550k at 6.5% interest rate before you paid off your mortage. That’s what interest does over time.
- The argument to keep money to get a better return is pretty weak. Say that you are lucky and can average 7% return. That’s 0.5% profit since you have lended the money to 6.5% interest rate. For $100k that is about a $16k profit over 30 years. If you instead use your savings and pay 20% you regain the savings from the ~$800 lower monthly mortgage payment in about 10 years. Put it to work at the same 7% return for the remaining 20 years and you endup with about $280k profit. That’s not counting the reurn you got while for the first 10 years while re-building the $100k
Sorry I realized that the cost of the $100k borrowed will not be as big due to that the loan is paid down. Someone else casn probably give the correct number if they are interrested. I assume it will be more than twice the borrowed amount over 30 years but not nearly $550k. My apologies, that was misleading.
FHA mortgage insurance is tax deductible for a few more years for incomes up to 100k (I believe–as Rogers says, check w/your CPA).
FHA mortgage insurance is on all FHA loans even if you’re putting 20% down.
biliruben, once the transactions have closed or more time has past, I’d feel more comfortable discussing the whys…but there may be many different reasons…is it right for you or me or what we would do, maybe or maybe not.
tj
For the record, I was not arguing that you could keep the $100K and get a better rate of return. While it’s plausible, I state the opposite (#78).
My argument for a lesser down payment centers around the greater security afforded by liquidity. This may not be important to some people, but it is something that is often overlooked, in the pursuit of maximizing returns, and minimizing interest costs.
There are quite a few bankruptcies and business failures that could have been averted with greater liquidity.
I’m sure Roger and other LO’s are in the same boat that I’m in, seeing home owners who need or want access to their home equity yet their not able to get it during this time unless they can sell their home. This is the big example of why it’s important to consider keeping liquid assets. Plus, taking cash out of your equity cost money rather than planning your mortgage upfront.
Biliruben,
There is never only one way for all buyers to view optimal conditions.
I have had clients told by their accountants to increase their deductions and decrease their downpayments, based on the “marginal return”. That is not the overall tax rate as a net effect, but the % that the last dollar earned is taxed. Generally lenders and agents do not get involved in these types of discussion, as we do not get as involved in all of the particulars of a buyer’s tax return. Many times buyers come to us and say “My accountant said I should do X”. By and large we do not question the advices of the client’s tax professional, nor do we double check to make sure they are correct.
I have contacted the attorney or accountant to make sure they considered a few key points, particularly for elderly people. but aside from assuring myself that the professional had all of the available facts, I do not second guess the attorney or accountant, nor do agents or lenders warrant an after tax consequence of a purchase. There are too many individual differences at play. One person can already have all of the deductions they can use, and the marginal rate depends largely on the clients other deductions that we are not privy to.
Another factor is the timeframe that it will take someone to save 20%. If their family would be largely better off owning now with 10% down, that is a family decision and not one that only involves the financial aspects.
I do know from experience that often families are much happier in a home that they own vs. rent. Children’s use and decoration of their rooms is one huge consideration. When it is your house you can say yes, you can paint it red. Yes, you can tack 8,000 pictures of Buffy the Vampire Slayer on your walls and ceiling. Obviously both of these are real life examples of my children
When you rent a property, you cannot offer your children as many rights of free expression.
Waiting until your children are in college to save up 20% down is not generally a good plan of action. If your children are already 8 and 10 and you are switching from renting to owning because the landlord told you to move 5 times and the kids are suffering, you likely are going to do that without saying NO, we have to wait until we have 20% down.
Real life does not often tip toward best financial choice. Best choice for this family at this time usually wins out.
Remember, the purpose of FHA and minimum down is for more families to be able to own. If 20% down were the one right answer for all…FHA would not exist. It’s kind of an American thing…think Scarlett O’Hara and Gone with the Wind.
When talking about FHA…understand what FHA IS. It’s ALL ABOUT those who don’t have 20% down.
biliruben,
if you (or someone like you) can swing at least 20% down and avoid pmi, I would recommend going that route. Other factors include what payments someone qualifies for and what other programs are available to them. For some, FHA may be their only option because they only qualify for expanded approval w/conforming or they have less than 10% down payment available.
Ardell, we’re going to be seeing more 20% down FHA with how Fannie Mae has tightened up her belts IMHO.
In a “soft” or declining market, would you rather have a majority of your assets (savings) invested in your down payment? Your home equity does not pay you interest–there is no rate of return.
Or would you rather put less down (doesn’t have to be as little as 3%) and have your money someplace safer?
Even if the market was stronger, I’ve had clients who put as much down as possible and then have “life” happen, like a major illness, and once they realize they’re in trouble and need cash…even though they’re sitting on a bunch of equity, because of their lack of employment or credit situation (due to the life happening) they can’t touch it.
Roger, I agree that it’s good to have a buffer but my view is that it’s better to hold off until you can have both. 20% down and a buffer. With $150k in income that should not be so hard over a few years and the savings in the end is pretty substantial.
Roger wrote: “There are quite a few bankruptcies and business failures that could have been averted with greater liquidity.”
In the context of business bankruptcies, being solvent (assets greater than debt) is not all that uncommon. In such cases the debtor has to pay all allowed claims in full, with interest. You can be a multi-millionaire and be forced into bankruptcy as a result of liquidity problems.
I’m not sure what the conditions are right now for business loans, but I’ve had some rather wealthy clients forced into bankruptcy as a result of banks simply not being able to make loans. It’s entirely possible an FHA loan could be easier to get than a business loan.
Finally, it’s entirely possible that someone needs to invest a certain amount into a project to invest in it at all, and reducing that amount by even $50,000 would make that investment impossible. If the expected return of that investment was $50,000 a year, not borrowing that $50,000 on a house would cost them effectively 100% interest.
tj-many people would not ever be able to buy a home if they had to have 20% down…especially a first home.
Thanks Ardell and Rhonda. Good things to think about. I wasn’t trying to be overly critical, just pondering my own situation, and looking for the pros and cons of putting more or less money down. I think I’m going to have to think about tax implications a little harder, when considering what, between 20-50%, makes the most sense for us. I always was going to keep some cash buffer, but maybe I’ll consider a larger one.
An obvious reason to consider putting more cash down is to have a smaller, more comfortable payment. When we bought our last home, my husband put more down than what I wanted us too…right now, with the economy the way it is and with both of us in “the biz”, we’re glad to have a smaller payment.
I guess one point I’m trying to make is that I often see people zap their savings to have a lower payment. Then the come to me for a refi or second mortgage a few months or year later (after not considering my advice of a slightly larger mortgage w/savings in the bank). It’s all about balance.
Good discussion, and I don’t think folks should necessarily expect Rhonda or other LOs to defend FHA’s policies. If people really want to gripe we can all call our congressmen. Leanne provided some historical context, but I doubt FDR envisioned FHA helping the top 5% earners (I think he was too busy taxing them at 91% marginal rates).
Rhonda asked: “In a ’soft’ or declining market, would you rather have a majority of your assets (savings) invested in your down payment?” Jim gave an example of having $34k down and wanting to use only half to provide some security.
I think buyers in that situation are deluding themselves to think they’ve got much of a buffer. If you’ve got $17k in liquid reserves, that will last you through <4 months of mortgage payments. Add in the other living expenses and you’re probably talking a 2 month buffer fund if your income stops.
What happens if you lose your job and need to relocate, or even move from one side of the Sound to another? That two to three months will go by very quickly, and folks will have no equity buffer to rely on when they sell.
laxtosnoco, I agree completely with you that people should have a much larger buffer. I wish everyone had a minimum of 6 months worth of reserves…if only we made the rules! Instead, we just get to play by them.
Lax, I’d also agree on the buffer thing. And that might be another reason to only put $17k down–to keep your buffer at 6 months or even a year. Whatever you’re comfortable with.
But Rhonda’s statements about living by the rules raises an interesting point. I’m always amazed had how small of a buffer lenders require. And how small of a buffer they require where the mortgage itself will raise the monthly living expenses over what they were before the purchase. I think we’ve discussed that here before.
Rhonda,
Great information! As a Seattle Realtor, information like this is very important to have to be able to pass on to clients plus this helps educate the general public on what mortgages are available. If a program like this type works for someone then this may be the best time we have had in years to buy a home in Seattle. There is so much gloom and doom out there in this business, both on the real estate side and the lending side that I think a lot of people are just putting their heads in the sand and possible missing out on huge opportunities. Sure interest rates are higher than they were but historically they are still extremely low!
I just quickly pulled some numbers off the NWMLS and there are so many homes for sale between $500,000 and $600,000 in the Seattle area right now that it’s like a kid in a candy store. You have to still be careful however and not buy that bad piece of candy for too much money however. Right now, in area MLS 700 and 705, (basically Magnolia, Queen Anne and all of Ballard) there are 156 Active Listings between $500,000 and $600,000. That’s a huge number of Active Listings to choose from. Let’s take a little closer look at those listings: The average Sq. Ft. is 2012. The average home has 3 bedrooms and 2.25 baths. The average List Price of $564,000 and the Average Days on Market is 61. Last spring the average days on market for a good home in these areas was about 10 days and many were getting multiple offers. Now you can buy a home for less than the asking price…yes a new concept here in Seattle but that’s reality now. With so many homes on the market that long there is some real softness in the list prices, making this one of the best times we have had since maybe 1999 to buy a home at a really good price….and for about $18,000, if you qualify and if it’s the right program for you, you can buy a good home with little or no stress like buyers have had that past several years in this market.
We look at national figures, trends, and charts everyday about what’s happening all over the country in real estate and in some parts of the US it’s pretty bleak to say the least. Seattle is not one of those areas where the real estate market is expected to keep falling. Seattle’s economy is strong and very diverse and there are still a lot of people moving here, in-spite of all the rain this year
. Moving to the desert, any desert, was looking really good about the end of March I have to say…but then the sun came out for a day and Mt Rainier re-appeared and we looked around at how beautiful it actually is here in the spring and summer and decided to stay.
Buyers need good sound advise from their lender and Realtor. They don’t need a program that will just get them into a home they can’t afford later. Buyers actually need to be able to afford the home they buy and be able to base that affordability on some pretty conservative ratios. Buyers can’t get carried away and pay too much for a home either. Many times buying a home is a very emotional process and a buyer needs to have at least one foot FIRMLY planted in reality.
Again, great information Rhonda, keep it coming!!
Kary, are you referring to DTI?
David and Karen, thanks for visiting RCG and for sharing those stats!
Moving to the desert does look interesting…I ha a co-worker just return from Phoenix and I was amazed at the homes and how much they’ve been discounted. I’m glad you’re planning on sticking it out in Seattle 
I hear it IS going to be very sunny tomorrow.
David and Karen -
I am moving up to the area from sunny silicon valley in a few months and I am looking at rental houses in those areas you mention. Similar houses that cost in the $550k+ range are on craigslist right now for $1800-2300, depending on how updated they are. If you don’t think that means Seattle real estate will keep falling, then I am curious if you believe there is now a fundamental disconnect where buying is going to cost people a minimum twice as much a month as renting the same property?
Rhonda, where? I don’t know what DTI is, so I doubt it, but I don’t know what you were referring to.
Sorry Kary, DTI is debt to income (ratios) and I’m responding to your comment 101.
Oh, no. I’m talking about something I think we discussed here before, where someone might be living on the cheap (e.g shared housing), has only a relatively small amount of money built up for a down payment despite living cheap, their total expenses will go up by $1,000 a month when they buy, but they’ll still qualify for a loan. Changes in circumstances don’t seem to be taken into account–or at least weren’t the last time this was discussed.
B from Sunny Silicon Valley.
It’s suposed to be 75 degrees and sunny today…hurray the first day of Summer in Seattle!!
Here is what I think, and it’ a bit of crystal ball gazing but that’s what’s anyone does when we try to predict the future of anything. I also want to get very specific with regards to neighborhoods as well so we can keep the numbers manageable. If you take a neighborhood like Magnolia, it’s one of the best areas in the city. It’s about 12 minutes to downtown Seattle but has a very suburban feel to it. Magnolia has quality homes that were mostly built in the 1930’s to 1950’s and there are some the best views in the city. Great Parks and Schools and easy local services. Between 1/1/07 and today there have been 359 homes sold on Magnolia ranging from a low of $335,000 to a high of $4,100,000 with the average being $781,167.
Right now there are 15 homes for sales between $500,000 and $600,000, with the average price being $565,000. The average DOM (Days on Market)is 91, last year it was 31. Now some of these homes are really bad homes to buy and are way way over price. One home priced at $549,000 is at least $100,000 over priced and another is at least $75,000 over priced but should only only be purchased at that price if the buyer wanted to do a major remodel and then stay there for several years because the location is so good. Then there are are homes that would have sold last year for for $649,000 that are priced at $599,000 and could most likely be purchased at about $575,000.
So, and here the big question, if the real estate market in Seattle rebounds after this correction will prices continue to increase at double digit rates or at least 6% a year? History tells us they will, the local economy tells us they will, the number of people moving to Seattle tells us they will, traffic tells us that more people will want to live close in to the city and prices will be strong in those areas, and we believe they will.
Are we at the bottom of the market right now? You never know that until your past it. Home sales in King County have picked up for the first three months of 2008 according to a report we heard this morning. And are you better off renting or buying right now? That depends on several factors. Is the glass half empty or half full? How long are you going to live in Sunny Seattle? If you know you will be here for at least 5 years or more, then you may be better off buying, if it’s just for the next 18 months, then by no means should you buy. Then if you buy what and where do you buy. There are good areas that hold their value more, that are likely to be in hight demand as the city grows and other areas that won’t do so well. There are homes that are priced $100,000 over market and there are homes that are priced well for this current market but can be purchased for even less. If you spend $2300 a month for rent in 2 years that’s $55,000 and if you can save $75,000 on a good home in a good location over what it would have cost just 6 months ago that’s about $130,000 not to mention the tax advantages of buying. If the Seattle market stabilizes and then turns around it won’t take long for that home to appreciate back to where it was last year and then the crystal ball says “you made a smart decision to buy.”
What we love about this business is that every situation is different and people can make a lot of money in a declining market as long as you know what you are doing!
David + Karen -
You really believe that prices are going to go up at least 6% a year, and likely in double digits, after this correction? History has shown that real estate corrections everywhere else in the world generally overshoot on the way down and then stagnate for many years before returning to even normal long term appreciation rates (1-2% above inflation). Seattle has a solid economy and ok population growth (its basically at the same population it was in the 1960’s), but so do most other desirable metropolitan areas of which there are many. I can’t see how this would fuel double digit appreciation rates, unless we see a return to easy lending and a huge credit expansion.
I was just about to compile a list of current economic realities to counter the historic references outlined in the post above to why prices instead are more likely to not recover or appreciate in quite a long time. Instead I decided to wish everyone a happy summer! When temperatures rises above 80 it’s like a happy elixir flowing through the veins. My family and I are going to have a long vacation and enjoy the summer to it’s fullest and not follow things like the housing market until fall. Again, have a very good summer!
tj – happy first day of summer (and many more) to you and all.
b
I said that I want to be very specific to a neighborhoods because location plays a very important part of home values. I believe it will because in “close-in Seattle neighborhoods” homes will be a rather scarce commodity. Gas prices, an expected 1 million growth in population by 2020, traffic problems that really can’t be fixed, and a strong economy creating many new high paying jobs will drive up prices is these close-in neighborhoods much faster than outlining areas. In 1989 when the housing market corrected, prices fell about 6% to 10%…basically where we are today and by 1994 we were seeing 6% to 8% appreciation on Queen Anne (one of those close-in neighborhoods) and by 1995 it was 15% and then 20% etc. Other neighborhoods fell behind that but soon caught up depending on the area. Magnolia lagged behind Queen Anne but then in just two years Magnolia saw 25% and 30% appreciation.
The housing market is one of the most important factors in our national economy and lenders and the feds won’t loss sight of that and while money won’t be free flowing it will be available to grow the home market after this knee jerk reaction is over. As you go father out from the center of the city the appreciation won’t be anywhere as strong, but most likely will keep pace with inflation. Seattle is very much like San Francisco but we are usually about 5 to 7 years behind SF’s housing prices and we are still today 5 to 7 years behind their housing prices. We are not the rest of the country our housing market has stayed strong relative to almost anywhere else and this is perhaps the best place to live anywhere…Seattle will continue to grow and they aren’t making any more land to build on close in! There is my 6 cents worth today, it’s almost 80 out and we’ve started the BBQ…and if you move here I’ll bet you a bottle of good bottle of Napa wine I’m right on this
b, where do you get this stat? “Seattle has a solid economy and ok population growth (its basically at the same population it was in the 1960’s” … If it were true, traffic congestion would be much less, even given the fact that most households in the 1960’s only had one car.
TJ, have a wonderful summer! Don’t let withdrawals from the internet interfere with your plans! I’m listening to the birds still chirping, at 7:52 pm, and the sun is out, and it’s true, we live in the most beautiful part of the world! Go enjoy, life is short, and full of wonderful things. I’m jealous
.
Was that a goodbye for the whole summer from tj? He must be a teacher. Who else can take a vacation with his family for the whole summer?
Have fun tj! Does this mean I have the summer off from Suday Night Stats?
Ardell, my mother was a teacher, but my step-father worked in the ship yard in Bremerton. One year he took 3 months off so that we could travel around the entire US towing an Airstream trailer. That was 40 years ago.
We went to Atlantic City…once, for a week. That’s the only trip I remember as a whole family. Come to think of it my Dad drove us there on the weekend, then went home and worked the whole week, and came back on the weekend. I guess that’s why most people don’t have seven kids anymore
Well, it seems this post was met with mixed reviews. I actually found this information very helpful. I have been looking for Miami homes and have found this great site that helps me look at specific areas with the aid or a great Google maps tool. This site has helped me a lot, and so has your information. I was surprised to read the negative comments – I guess they felt pretty naive to me – I don’t need disclaimers on all the information I read.
Thanks, shell. I was a little surprised at the reaction and how much attention this post received. It’s funny…sometimes you can write something and think it’s fantastic and receive very little attention for it…ya never know!
Bottom line, this post is about educating consumers and agents…and getting information out there.
I’m glad we were able to help!
[...] median home value to 115% of the median home value beginning January 1, 2009. As I mentioned, your days of a loan amount of $567,500 are numbered. The new conforming/FHA jumbo limit may be closer to [...]
Looks like our new loan limit will be $522,100 for King, Snohomish and Pierce County as of January 1, 2009. After December 31, 2008, instead of being able to buy a home at $585k w/FHA min down of 3%, we’ll be closer to $540k. (still pretty amazing).
Just want to correct my last comment, which was estimating the new jumbo-conforming loan limit based on the home values at that time. With lower home values, the new “high balance” (which replaces the conforming jumbo product) loan limit for King, Pierce and Snohomish counties is $506,000.
Also, FHA requires a 3.5% down payment effective January 1, 2009.