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I hear about help getting down payments and people buying with <20% down payments etc all the time.. but as a non-trustafarian, financially literate person with

I hear about help getting down payments and people buying with <20% down payments etc all the time.. but as a non-trustafarian, financially literate person with a normal non-tech job.. the down payment seems to be the easiest part. The monthly payment and interest expense is the hardest one (especially since it means committing to maintaining your career or better for the next 30 years, or otherwise hoping there isn't a housing downturn). Can anyone explain the perspective I'm missing?

dasil003 3y ago
You’re likely an exceptional saver by American standards.
- hammock 3y ago
  10% of pre-tax income, not including retirement savings is exceptional?
  - justsocrateasin 3y ago
    ... yes, that's exceptional. The majority of Americans do not save much at all - https://www.cnbc.com/2023/02/10/average-amount-of-money-americans-saved-in-2022.html#:~:text=Here's%20how%20much%20money%20Americans%20saved%20at%20every%20age%20in%202022,-Published%20Fri%2C%20Feb&text=In%202022%2C%20Americans%20reported%20saving,by%20New%20York%20Life%20found https://www.cnbc.com/2023/02/10/average-amount-of-money-amer....
  - mminer237 3y ago
    The average rate is 3.9%: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
eunos 3y ago
> the down payment seems to be the easiest part Assume you will spend 20 years to pay off the debt with 20% Down Payment. That means each month you will spend 80%/240 -> 0.3% of the house value each month. Including interest rate that's 0.4 - 0.5%. So w/ down payment helps you can save up to 40-50 monthly payment.
eddtries 3y ago
That surprises me! I can happily pay the mortgage but saving the downpayment is a pain, even as a married couple. It's not impossible, just a slow grind. Of course by the time we finish I assume the prices will have gone up, so there will be a bit more grinding there, but we're hopefully not trapped in some Achilles and the Tortoise predicament.
gedy 3y ago
What I’ve seen in HCOL areas of California is either of a couple's parents flat out gifting them a few hundred thousand dollars for a house, it’s not a loan
pandaman 3y ago
Most people already pay rent for housing, going from rent payments to mortgage payments is not a huge change for them. Down payment is harder as most people usually don't accumulate large quantities of cash.
mrsilencedogood 3y ago
There's certainly different types of people who struggle to afford a home. For people living in an expensive apartment, they might be barely making rent. Whereas they could obviously afford a mortgage for a similar monthly amount - but since they're living paycheck-to-paycheck they can't save the prodigious 20%. So they're stuck. Of course perhaps some people have a nest-egg from a windfall or inheritance but then couldn't handle the monthly payment. The main barrier these days to putting less down is twofold - one, you need to pay PMI which is just compounding the monthly payment problem. Two, good fricking luck getting your offer accepted with <20% down in these times. Sellers read into offers more than just "is this financed y/n" and there's IMMENSE preference for buyers who can put 20% down, because it signals that a) if necessary they could pay PMI and drop down the up-front % in order to close on a contract, and b) they probably have more cash than just that 20% and are only stopping at 20% because it is customary and they could weather unforeseen issues more easily. To put it in anecdote form: I sold my house in 2020. We had 8 offers presented to us after 1 day on the market. All were for 20% down because my agent didn't even hear offers from people with less down, since we had so many at 20%. In mid-2023, my brother bought a house in a similar sort of area (metro area of a major-for-the-midwest city). 2 days on the market, he was one of 3 offers, all for 20% down and about 50k over asking (the house was priced somewhat low as a marketing strategy, but I'm guessing based on comps they still had to go in about 10k over a non-meme version of the list price). He wouldn't have even been in the running if he didn't have 20% down. And he also had to waive all contingencies which almost made his financing fall through/be late due to something stupid a random inspector said. It's tough out there. Even if you can nominally "afford" a house, it can be hard to actually close on one in the open market without someone more financially established who is able to backstop you in various ways.
rm_-rf_slash 3y ago
I think my down payment was 5% for a 3-3 in MCOL…mortgage is only a few hundred more than our friends who rent an old 2-1, although we live in a small low income village 30 minutes from the more prosperous city they live in. We would not have been able to afford a mortgage there because the only available housing stock requires too much work and $$$ to be worth it. We only bought this house because it was a fair price and all the HVAC was new. Nothing else in our market was acceptable at the time. So basically, down payment is easy, monthly mortgage is ok, but any contracting work is a painful hemorrhage.

dasil003 3y ago

You’re likely an exceptional saver by American standards.

hammock 3y ago
10% of pre-tax income, not including retirement savings is exceptional?
- justsocrateasin 3y ago
  ... yes, that's exceptional. The majority of Americans do not save much at all - https://www.cnbc.com/2023/02/10/average-amount-of-money-americans-saved-in-2022.html#:~:text=Here's%20how%20much%20money%20Americans%20saved%20at%20every%20age%20in%202022,-Published%20Fri%2C%20Feb&text=In%202022%2C%20Americans%20reported%20saving,by%20New%20York%20Life%20found https://www.cnbc.com/2023/02/10/average-amount-of-money-amer....
- mminer237 3y ago
  The average rate is 3.9%: https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT

eunos 3y ago

> the down payment seems to be the easiest part Assume you will spend 20 years to pay off the debt with 20% Down Payment. That means each month you will spend 80%/240 -> 0.3% of the house value each month. Including interest rate that's 0.4 - 0.5%. So w/ down payment helps you can save up to 40-50 monthly payment.

eddtries 3y ago

That surprises me! I can happily pay the mortgage but saving the downpayment is a pain, even as a married couple. It's not impossible, just a slow grind. Of course by the time we finish I assume the prices will have gone up, so there will be a bit more grinding there, but we're hopefully not trapped in some Achilles and the Tortoise predicament.

gedy 3y ago

What I’ve seen in HCOL areas of California is either of a couple's parents flat out gifting them a few hundred thousand dollars for a house, it’s not a loan

pandaman 3y ago

Most people already pay rent for housing, going from rent payments to mortgage payments is not a huge change for them. Down payment is harder as most people usually don't accumulate large quantities of cash.

mrsilencedogood 3y ago

There's certainly different types of people who struggle to afford a home. For people living in an expensive apartment, they might be barely making rent. Whereas they could obviously afford a mortgage for a similar monthly amount - but since they're living paycheck-to-paycheck they can't save the prodigious 20%. So they're stuck. Of course perhaps some people have a nest-egg from a windfall or inheritance but then couldn't handle the monthly payment. The main barrier these days to putting less down is twofold - one, you need to pay PMI which is just compounding the monthly payment problem. Two, good fricking luck getting your offer accepted with <20% down in these times. Sellers read into offers more than just "is this financed y/n" and there's IMMENSE preference for buyers who can put 20% down, because it signals that a) if necessary they could pay PMI and drop down the up-front % in order to close on a contract, and b) they probably have more cash than just that 20% and are only stopping at 20% because it is customary and they could weather unforeseen issues more easily. To put it in anecdote form: I sold my house in 2020. We had 8 offers presented to us after 1 day on the market. All were for 20% down because my agent didn't even hear offers from people with less down, since we had so many at 20%. In mid-2023, my brother bought a house in a similar sort of area (metro area of a major-for-the-midwest city). 2 days on the market, he was one of 3 offers, all for 20% down and about 50k over asking (the house was priced somewhat low as a marketing strategy, but I'm guessing based on comps they still had to go in about 10k over a non-meme version of the list price). He wouldn't have even been in the running if he didn't have 20% down. And he also had to waive all contingencies which almost made his financing fall through/be late due to something stupid a random inspector said. It's tough out there. Even if you can nominally "afford" a house, it can be hard to actually close on one in the open market without someone more financially established who is able to backstop you in various ways.

rm_-rf_slash 3y ago

I think my down payment was 5% for a 3-3 in MCOL…mortgage is only a few hundred more than our friends who rent an old 2-1, although we live in a small low income village 30 minutes from the more prosperous city they live in. We would not have been able to afford a mortgage there because the only available housing stock requires too much work and $$$ to be worth it. We only bought this house because it was a fair price and all the HVAC was new. Nothing else in our market was acceptable at the time. So basically, down payment is easy, monthly mortgage is ok, but any contracting work is a painful hemorrhage.