why does down pay % matter even it is over 20%?

It has something to do with appraisal value and mortgage contingency. If they accept your offer with the minimum 20% down. In the case the appraisal comes back lower than the agreed price, the deal will be off if the buyer refuses to put in more down payments. Therefore, a higher down payment percentage gives the seller more room to keep the deal and not wasting valuable time.

there are a few thoughts with higher down payment:

1 - it is generally easier to get a mortgage with higher down payment as if the coop/condo mortgages cannot to sold to Fannie, the private investment firms will pick it up.
2 - if the place does not appraise for the $$ offered, you will still be stuck with the deal if the 30% down is 20% or more of the appraisal value.
3 - if it's a coop, the board will look favorably on people who put more than 20% down.

thanks vic64 and ab_11218.

a follow up question is... to secure a deal AND minimize "unnecessary" down pay, can a buyer tweak the down pay # once the appraisal number comes out? or is the down pay # submitted in the offer is something "set in stone"?

I don't think the down payment % is set in stone, unless maybe you're dealing with a co-op? Once you have the signed contract, and as long as you can secure financing, you should be good to go with whatever % you decide to put down.

So you can tell the seller you will put 30% down and finance 70%. But when it comes time to secure your financing, work with your lender to only put down 20%. At the end of the day, the seller just wants to make sure your bank will cut him his check at closing. Even if it is in the contract, the seller shouldn't care as long as he gets his $$. If you can't secure financing, though, that may be a different story.. Speak to your lender and real estate agent.

You must spell out your flexibility in your offer and subsequently in the contract.

i would say not set in stone, but the seller has to be willing to change the contract. most of the time, that will not happen.

all committment letters say that the bank can decide not to give the loan. by the time the committment letter comes in, the underwritting has been done based on the numbers provided. making this change will cause a new underwritting review that can delay closing and, possibly, an issuance of a new committment letter.

thanks innershock, vic64 and ab-11218.

innershock's answer was very close to what i heard from my buyer agent, and with clear explanation.

innershock's suggestion will work the best if you can afford and are prepared to pay the say 30% down should the appraisal comes back lower.

What about people who pay all cash, renovate the apartment, re-appraise the apartment and refinance after the 6 month requirement and take out a mortgage. Are there pros/cons to this approach?

Elleinad85,

Looks like the Op plans to purchase with financing now.

Steve, what is spelled out by innershock is exactly what I did. In offer inidicated 30-35% (or something), but then when completing contract I tweaked it. Seller obviously did not care. This was for a condo and I think they just wanted to know that I had that much so that financing was not an issue.

Overall why 30% v. 20% actually matters is beyond me.

Nothing magical about 20%. The number comes down to a question of risk and exposure. A foreclosure sale typically gets sold at a 20% discount to market, a short sale 15%. Both numbers don't include broker commission, legal fees or changes in the market price. Clearly a 70% LTV loan is far safer than an 80% loan all other things being equal.

Riversider: Yes, clearly that is a safer loan. The question is more in terms of what is attractive to a seller.