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It depends on the circumstances. I have a great paying job and good job security and just bought a condo. Had I waited to have 20% down, I would have had to wai

by muninn_ 10y ago

It depends on the circumstances. I have a great paying job and good job security and just bought a condo. Had I waited to have 20% down, I would have had to wait at least 10 years, and in the meantime still pay rent somewhere. So I can either go in with very little down (in my case I actually walked out with a check) so that I can pay extra each month toward the principle, or I can save that down payment and essentially pay for somebody else's property. Many of my friends simply can't afford to save for a house because rent is so high that they just don't have savings. You can argue that they should move to cheaper housing (and they did) but at some point the balance between cheap and safe will tip away from safety.

gfo 10y ago
I'm in the same boat right now - I'm paying >$2k/mo in rent. I could certainly wait to get the full 20% down payment, but it makes more sense to me if I buy a condo now, build the equity, and down the road I can keep saving for a nicer place once I outgrow the condo. Sure I'll be mostly paying interest to start, but this way I'm at least seeing some sort of investment if I have to spend that much per month on living. I could certainly have found a roommate or a cheaper place but frankly, I've gotten used to what I'm paying now and I still have plenty leftover to contribute to a 401k, savings, and enjoy myself.
AWildDHHAppears 10y ago
If everyone had to pay 20% down, house prices would be lower.
- vibrio 10y ago
  Probably, but from an economics perspective, i'm not sure who will push that position. There seems to be plenty of Lenders willing to take a chance with someone offering a lower down payments and in turn charge them a higher rate.
  - toomuchtodo 10y ago
    Because the mortgages are backed by the US government.
    - sokoloff 10y ago
      For conforming loans, yes. For jumbo loans, no.
      - deleted 10y ago
        [deleted]
nugget 10y ago
What would you do if property values declined such that you were underwater 20% on your condo? It seems like some minimum amount of equity is a stabilizing force in turbulent markets, the lack of which contributed to some of the unpleasantness in 2008.
- panzagl 10y ago
  walk away
  - phhlho 10y ago
    Just remember - state matters heavily in that decision! If I had lived in a non-recourse state, I would have gladly performed a strategic default a couple of years ago and left the bank to pay the loss in value of my place.
- AnimalMuppet 10y ago
  Then you can't sell (without taking a financial bath). But you can still live in the condo, and the payments don't go up. Or you can try to walk away in some fashion and leave the bank with the problem. As you say, that contributes to instability.
- hx87 10y ago
  People walking away from houses wasn't the problem. People walking away from houses they were underwater on was the problem. Besides, if you were underwater and could still afford the payments there is no reason to walk away. I am currently underwater on my car, but I can still, you know, drive it.
  - codegeek 10y ago
    yes, but you make the assumption that you don't have to sell the house due to factors such as sudden job loss, unplanned events such as accident/injury causing disability etc. The point of 20% down is that you have enough equity even for a turbulent market and if you do need to sell quickly due to possible factors above, you still should be ok. Otherwise, you are assuming that nothing bad will happen and you can continue paying the mortgage.
overcast 10y ago
Same position as I was in 2006. My decision was either waste money renting a one bedroom, or just buy a house for a mortgage of about the same. Twenty houses, and two week later, I moved into a house, with zero money down. Granted 20% was in a HELOC, and the other was a 30 year. Five year later, refinanced to 15 year loan, and now I'm racking up $1000 equity every two months. 20% down is great if you can, but early on, I don't see how that's possible unless you're SERIOUSLY making bank. Also side note, just got done watching The Big Short, as well as reading the book. So depressing what happened to all these people.

by muninn_ 10y ago

gfo 10y ago

I'm in the same boat right now - I'm paying >$2k/mo in rent. I could certainly wait to get the full 20% down payment, but it makes more sense to me if I buy a condo now, build the equity, and down the road I can keep saving for a nicer place once I outgrow the condo. Sure I'll be mostly paying interest to start, but this way I'm at least seeing some sort of investment if I have to spend that much per month on living. I could certainly have found a roommate or a cheaper place but frankly, I've gotten used to what I'm paying now and I still have plenty leftover to contribute to a 401k, savings, and enjoy myself.

AWildDHHAppears 10y ago

If everyone had to pay 20% down, house prices would be lower.

vibrio 10y ago
Probably, but from an economics perspective, i'm not sure who will push that position. There seems to be plenty of Lenders willing to take a chance with someone offering a lower down payments and in turn charge them a higher rate.
- toomuchtodo 10y ago
  Because the mortgages are backed by the US government.
  - sokoloff 10y ago
    For conforming loans, yes. For jumbo loans, no.
    - deleted 10y ago
      [deleted]

nugget 10y ago

What would you do if property values declined such that you were underwater 20% on your condo? It seems like some minimum amount of equity is a stabilizing force in turbulent markets, the lack of which contributed to some of the unpleasantness in 2008.

panzagl 10y ago
walk away
- phhlho 10y ago
  Just remember - state matters heavily in that decision! If I had lived in a non-recourse state, I would have gladly performed a strategic default a couple of years ago and left the bank to pay the loss in value of my place.
AnimalMuppet 10y ago
Then you can't sell (without taking a financial bath). But you can still live in the condo, and the payments don't go up. Or you can try to walk away in some fashion and leave the bank with the problem. As you say, that contributes to instability.
hx87 10y ago
People walking away from houses wasn't the problem. People walking away from houses they were underwater on was the problem. Besides, if you were underwater and could still afford the payments there is no reason to walk away. I am currently underwater on my car, but I can still, you know, drive it.
- codegeek 10y ago
  yes, but you make the assumption that you don't have to sell the house due to factors such as sudden job loss, unplanned events such as accident/injury causing disability etc. The point of 20% down is that you have enough equity even for a turbulent market and if you do need to sell quickly due to possible factors above, you still should be ok. Otherwise, you are assuming that nothing bad will happen and you can continue paying the mortgage.

overcast 10y ago

Same position as I was in 2006. My decision was either waste money renting a one bedroom, or just buy a house for a mortgage of about the same. Twenty houses, and two week later, I moved into a house, with zero money down. Granted 20% was in a HELOC, and the other was a 30 year. Five year later, refinanced to 15 year loan, and now I'm racking up $1000 equity every two months. 20% down is great if you can, but early on, I don't see how that's possible unless you're SERIOUSLY making bank. Also side note, just got done watching The Big Short, as well as reading the book. So depressing what happened to all these people.