4 ms·

It might sound a little sarcastic, but i think in the vast majority of cases, if you have a deposit < 20% the right answer is to rent.

by verelo 11y ago

riot504 11y ago
One area where this might not apply is on VA loans; which applied to me. Currently in PhD program and was able to buy a house with a significantly lower mortgage (22% cheaper per month) than renting. Which eases the pain for wife and children during this time.
- desigooner 11y ago
  Doctor loans are similar - they don't need PMI but I'm not sure if the interest rates are higher than the regular mortgage loans
- matwood 11y ago
  VA loans are great. No PMI, no down payment, and listed mostly fixed fees for origination.
southphillyman 11y ago
Mostly agree, but I think the vast majority of primary home buyers don't put down 20%
ryandrake 11y ago
I don't agree this is true for the vast majority of situations. If you have the income to support the higher monthly payments, it's a viable option. I put down less than 10% and am willing to live with the higher rate and Mortgage Insurance in order to Not Be Renting. And if you can eventually pay the loan down a bit such that you end up with 20% equity, the MI goes away. Median home price in Bay Area is what, $900K or so? 20% of that is $180K in cash. I don't know many people who have this, yet there are plenty of home owners here, and I wouldn't be willing to say that the majority of them made a bad decision.
- verelo 11y ago
  There are certainly exceptions. When my partner and I purchased our place we only put enough down to avoid the extra insurance for down payments below 20%. With a 2.9% interest rate on our place, most indexes should perform better. Having said that, the cause for my initial comment was just expressing my worry that if everyone was only able to put down a small amount of the total purchase price, then we're likely financing a lot of people who probably cant afford the place they're living in as soon as something small goes wrong. Do we know how people defaulting correlates with their initial down payment size? I'm sure someone has studied this, but I have not been able to find any stats.
  - ryandrake 11y ago
    That would be interesting. My guess is that size of down payment (percent) does correlate with probability of default.
pessimizer 11y ago
The median down payment for the middle 50% of homes is 8.8%. http://www.thetruthaboutmortgage.com/median-down-payments-have-surged-for-entry-level-homes/ http://www.thetruthaboutmortgage.com/median-down-payments-ha...

It might sound a little sarcastic, but i think in the vast majority of cases, if you have a deposit < 20% the right answer is to rent.

by verelo 11y ago

It might sound a little sarcastic, but i think in the vast majority of cases, if you have a deposit < 20% the right answer is to rent.

riot504 11y ago

One area where this might not apply is on VA loans; which applied to me. Currently in PhD program and was able to buy a house with a significantly lower mortgage (22% cheaper per month) than renting. Which eases the pain for wife and children during this time.

desigooner 11y ago
Doctor loans are similar - they don't need PMI but I'm not sure if the interest rates are higher than the regular mortgage loans
matwood 11y ago
VA loans are great. No PMI, no down payment, and listed mostly fixed fees for origination.

southphillyman 11y ago

Mostly agree, but I think the vast majority of primary home buyers don't put down 20%

ryandrake 11y ago

I don't agree this is true for the vast majority of situations. If you have the income to support the higher monthly payments, it's a viable option. I put down less than 10% and am willing to live with the higher rate and Mortgage Insurance in order to Not Be Renting. And if you can eventually pay the loan down a bit such that you end up with 20% equity, the MI goes away. Median home price in Bay Area is what, $900K or so? 20% of that is $180K in cash. I don't know many people who have this, yet there are plenty of home owners here, and I wouldn't be willing to say that the majority of them made a bad decision.

verelo 11y ago
There are certainly exceptions. When my partner and I purchased our place we only put enough down to avoid the extra insurance for down payments below 20%. With a 2.9% interest rate on our place, most indexes should perform better. Having said that, the cause for my initial comment was just expressing my worry that if everyone was only able to put down a small amount of the total purchase price, then we're likely financing a lot of people who probably cant afford the place they're living in as soon as something small goes wrong. Do we know how people defaulting correlates with their initial down payment size? I'm sure someone has studied this, but I have not been able to find any stats.
- ryandrake 11y ago
  That would be interesting. My guess is that size of down payment (percent) does correlate with probability of default.

pessimizer 11y ago

The median down payment for the middle 50% of homes is 8.8%. http://www.thetruthaboutmortgage.com/median-down-payments-have-surged-for-entry-level-homes/ http://www.thetruthaboutmortgage.com/median-down-payments-ha...