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I put down exactly 20% for my first house. I think it's better to save up some money rather than put down a really small down payment and take more debt. Inability to save for a down payment is a good indication that a person is not a good candidate for home ownership. And weak lending standards that allow such low down payments inflate housing prices, making the affordability/foreclosure problem worse.
I think that is a very broad statement. Many people for various reasons choose to not put down twenty percent. I do not think it always equates to an inability to save.
No, I put down $10,000 (including closing costs) on a $112,000 home in 1985. Some of the $10,000 was borrowed. I was a young kid, just started my first professional job. My wife and I had one kid and one on the way, and had to live somewhere. We could have kept renting and having to move every year or two (that's what the SFH rental market is like) but with kids that is not a good idea. The mortgage was subprime and the rate was 13.375%, about 2% above prime.
I paid off the borrowed part of the down payment when I got my next bonus, paid off the mortgage with a prime mortgage in 1993, and paid off the prime mortgage in 2005. The house is now worth about $600K and "it's all mine"!
That is what the subprime market is for. It is possible to make subprime loans profitably. It is not possible to do so when the government is telling you whom to lend it to.
It has been asserted in another thread that putting 20% down is an outdated concept. In fact, this assertion is something I often hear from would-be first time buyers who don't know "how anyone could save 20%".
I bought my first home in 1985 with no down payment. In addition, I rolled 100% of the closing costs into the 12 year mortgage from the credit union. Sweetest real estate deal I ever had!
Just bought this year and put down 20%. Cash on hand of $30K was insufficient, so I borrowed from my 401K @ 2% for the rest. It was the best source of funds available to me. Selling funds from my brokerage account would result in a lot of cap gains tax, and withdrawing Roth IRA contributions would put a dent in my retirement plans.
I put down less than 20% many years ago, but would never do that again, nor would I consider selling to someone who could not put 20% down and pay all their own closing costs to buy my house.
I put 50% down buying my first home (in FL), but part of that downpayment was life insurance proceeds from when my mom passed away two years prior. Last year I bought my second home, a co-op in NYC, and was only able to put slightly over 20% down - much, much higher COL situation and it took me living here for almost 10 years to save and get the downpayment high enough.
I think that is a very broad statement. Many people for various reasons choose to not put down twenty percent. I do not think it always equates to an inability to save.
The vast majority of the 'reason' isn't savvy financial maneuvering. It's inability to do so.
Mine was 10% but the seller held the paper with a 5 yr balloon. Interest rates were about 14% so I refinanced at 4th yr when rates had dropped.
Today I would suggest to never put down less than 20%. When PMI is required (usually when the buyer puts down less than 20%), that is just money down the drain.
Normally, I'd agree on the 20%, but:
In our case, the insurance is less than $800 over a 5 year period {at most},and we feel we can get it to the 20% equity in far less than that, so worth it.
Once a home owner reaches the magical 20%, they can have it eliminated, it may cost another appraisal fee to drop it, but again, in our case, a moot point. The $12-1300 it will take to get there{the $800 plus $4-500 for appraisal} is a moot point compared to sacrificing and putting the 20% down.
Many people don't have the 15% we are putting down, or even a nice round 10% for down payment, so we are lucky in that. We can always lump-sum it for the break in the insurance.
We want to leave ourselves some breathing room fro moving and immediate improvements to the house so we decided on 15% instead.
Now, if we can get an agreement on the deal. THE seller wants seller's market rates in a strong buyer's market!!!
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