smdion t1_iydsb9l wrote on November 30, 2022 at 5:30 PM

Reply to comment by nolesrule in Am I/we crazy? In need of a reality check by [deleted]

It seems 20% is falling out of fashion for first time home buyers. Even Ramsey is saying 5-10% is OK now.

Source:https://www.ramseysolutions.com/real-estate/how-much-money-do-i-need-to-buy-a-house

nolesrule t1_iydsuxh wrote on November 30, 2022 at 5:34 PM

Sure, if you want to pay even higher interest (PMI) in an already rising interest rate environment, be my guest.

We bought our first house with 5% down, an 80% conventional and 15% second mortgage when rates were mid 6%+. I don't recommend it.

I also tend to tell people to run away from Dave Ramsey except for his basic get out of debt advice.

smdion t1_iydt8un wrote on November 30, 2022 at 5:36 PM

Yea agreed. Point is even the more conservative "always do 20%" are backing down to 5-10%. 20% is stopping a lot of people from being able to own a house.

nolesrule t1_iydu3wn wrote on November 30, 2022 at 5:42 PM

I was a homeowner back during the GFC with that house. We were lucky when we moved out that we had enough equity to be able to sell it below what we paid for it when we moved for work.

Smaller down payments are one of the reasons home prices have become unaffordable. It's no longer about saving up to have enough, but the instant gratification of getting the house and worrying about the larger payments that result from it later. That's part of what went wrong in the GFC. When you make a smaller down payment you are taking on more risk, and you have to pay the lender for that risk.

smdion t1_iyduhgg wrote on November 30, 2022 at 5:44 PM

Agreed again, partially. You need to make sure your monthly mortgage is still within reality. You can have a smaller down-payment and still a healthy ratio of monthly outflow for the house.

nolesrule t1_iyduywe wrote on November 30, 2022 at 5:47 PM

What the bank is willing to lend you and what the reality is of what you can afford given all of your other priorities are 2 very different things and a lot of people lose sight of that.

smdion t1_iydv5ev wrote on November 30, 2022 at 5:49 PM

Yep. Have to be disciplined and not just go "bank says I can get this big of a home" and buy that big of a home.

Ndi_Omuntu t1_iydtxj9 wrote on November 30, 2022 at 5:41 PM

I think people should do the math themselves to estimate their PMI rather than just consider it a non-starter. Mine shook out to an additional $30 a month-hardly the back breaking expense I was expecting given how people talk about it. Yeah it's money just going away, but I was able to get a good first time home buyer program my state has and keep my cash to stay liquid. The cost was worth it for me.

nolesrule t1_iydujfe wrote on November 30, 2022 at 5:45 PM

Don't look at PMI as a raw number, but rather as a percentage like mortgage interest is. Don't get caught in the "I can afford the monthly payment" mentality.