Saving for down payment? Give up posh coffee

PUERTO RICO COFFEE CULTURE
Starbucks employee Vanessa Cassagnol prepares a tray of caramel macchiatos.

If you can forgo those 3.5 grande caramel macchiatos you drink at Starbucks every day, you can save the money you don't spend and use it for a down payment on your first house.

That is, of course, if you have the patience to put the $15 or so you save in the piggy bank seven days a week, 52 weeks a year for the next five years.

According to Clare Trapasso, writing for Realtor.com, the typical Philadelphian needs 12.1 percent of the current $235,000 median regional home sale price, or roughly $28,000, to become a homeowner.

Not 20 percent?

In the Philadelphia region, Trapasso found, 12.1 percent is the average down payment.

She based the daily saving rate on — to choose an indulgence — caramel macchiatos, which she pegged at about $4.50 (although prices can vary nationally).

For those who have never consumed a caramel macchiato, Starbucks describes it as "freshly steamed milk with vanilla-flavored syrup, marked with espresso and topped with caramel drizzle for an oh-so-sweet finish."

The Philadelphia region was among the 15 largest U.S. urban areas Trapasso studied for Realtor.com (http://goo.gl/Y4WK2E).

Only the Detroit and Atlanta areas required less of a daily sacrifice of caffeine to ante up a down payment than Philadelphia — 2.95 cups in Detroit, 3.3 cups in Atlanta, Trapasso's study showed.

In Detroit, 2.95 cups (or just over $13 a day) would add up in five years to a 12 percent down payment on a house with a $200,000 median price.

In Atlanta, about $14.75 a day would add up to enough for a 10 percent down payment on a home with a $269,000 median price.

Coming up with enough money for a down payment and closing costs has long been considered a stumbling block to homeownership for first-time buyers, but is it true today?

"There are a number of low down-payment programs, including FHA financing, where down payment is only 3.5 percent and also allows up to 6 percent seller assist," said Christopher Somers, broker/owner of Re/Max Access in Northern Liberties.

"For conventional loans, it can be as little as 5 percent down and sometimes 3 percent," he said, so it is not as big a barrier as it was five years ago, when lenders were more tightfisted after the housing bubble burst.

Somers considers appraisals and home inspections bigger stumbling blocks these days.

Jerome Scarpello, president of Leo Mortgage Inc. in Ambler, disagrees.

For first-timers, "the combination of down payment plus closing costs remains the biggest stumbling block," he said.

Unless it's a U.S. Department of Agriculture rural loan or VA mortgage with 100 percent financing, most loans require a minimum down payment, Scarpello said.

Fannie Mae has lowered the down payment to 3 percent — even lower than the FHA's 3.5 percent.

"But when you add up the costs of transfer tax, title insurance, recording, escrows of taxes and insurance —the closing costs can be as much as 4 percent to 5 percent — making it even more costly than the down payment," Scarpello said.

Los Angeles requires forgoing 15.2 grande caramel macchiatos a day. In New York, it is 8.8, while in San Francisco, it's a whopping 23.5.

In San Francisco, with an average down payment of 21.8 percent, this adds up to $104.60 a day to raise $190,750 for an $875,000 house.

Then, of course, there is the problem of price increases while you are saving for a down payment.

Kevin Gillen, chief economist for Meyers Research and senior research fellow at Drexel University's Lindy Institute for Urban Innovation, noted that in Philadelphia alone, prices have risen 23 percent since the housing bubble burst in the third quarter of 2007, while those in the suburbs have increased only 4 percent, meaning that they "have to rise another 21 percent to erase their losses."

aheavens@phillynews.com

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@alheavens