[Coleroo]

I think it depends on your comfort level, ability to manage finances, credit history, and how well you can deal with a mortgage / high monthly payments. I also believe that the down payment is only a small part of the picture... someone may think they have tons of money "coming in", put 20% down on a 300k house, yet still not be able to afford the monthy payments because of poor financial habits, too many car payments / leases, high debt to income, etc (not saying you are like that though).

20% has been the tradition in the past.. but in today's "want it now" environment, as low as 0% down is adequate in some lenders eyes. Are you disciplined enough to save - and then put all that hard-saved money onto one house...and still have a hefty mortgage? (years of saving 60, 70k... you would still have a 200k+ mortgage, which is a lot of monthly moola even on a 30 year conventional loan). Do you want a 30 year mortgage to start at age 45? Personally, with my comfort level, I would rather have the peace of mind to know i'd be mortgage free by 45 (so I bought young).

Are 300 to 400k houses your only option? Have you considered that the 300 - 400k style houses you are aiming for now, with inflation, could very well cost double or triple that 13 years from now (unless the housing market nosedives to the bottom of the barrel!). How about considering a cheaper house to purchase sooner, spend those years building equity & inflation value, then sell and trade up? Also, have you done a thorough evaluation on how much house you truly can afford (after the downpayment)? Will your job / income level / debt level at 45 be able to handle it? Will a 200k - 300k mortgage at 45 be "doable" 15 years later when retirement hopes come creeping?


My husband (fiance at the time) and I purchased our first home on March 31, 2006. I had just turned 23 and he was 22. We spent 4 months scouring the market for appropriate houses in our price range... before we even started looking we pulled our credit, reports from all 3 bureas, figured our current annual income and subtracted our yearly savings goals, calculated our debt to income ratio, and came up with a house payment we could comfortably afford. With estimated PMI (we had nothing to put down), taxes, insurance, and mortgage we came up with a comfortable payment of no more than $750 a month. This put us in the house price range of 75k to 100k. We are right outside our state capital, which is a fast growing high tech urban area. Rent prices around here were skyrocketing at the time - one and two bedroom apartments were going for 750+ a month, and houses were more.. it made me SICK to think of wasting years and years and years on rent just to scrape a downpayment together. So we set our goal at 3 bedrooms, 2 baths, half acre of land, in a good low crime neighborhood near my parents. We spent 3 months with a realtor looking at hundreds of houses over the internet and in person - he kept telling us we wouldnt find anything.. but we perservered and found one..a perfect one owner 1150 sq. ft home from 1987 for 83k. Next step - we went to a suggested mortgage broker. We told her our terms and she found what we wanted - a 30 year fixed, no money down, NO PMI loan. We didnt want escrow withheld because we had a savings account for it. Since hubby did not have 2 years of income statements for them, we also had to ask for a no doc loan just in my name (I had a 740 credit score). She found us a great loan too - we financed 100% loan on $83,500 for 30 years fixed, 8.99% with an ending payment of $671 a month. We would have been paying $100+ MORE than that in just RENT on a smaller place if we had decided to wait. THAT made me sick to think about.

I know for some people a 0% down loan seems shocking but I think its a great tool for people who have positive credit history, and are dedicated payers. Being young, and having a personal goal of "no mortgage after 40", I am an advocate of non-conventional loans IF you can handle the cons that go with them. There are lots of other factors that if you DO go for less than a 20% there are things you have to consider:

1. How long are you going to be in the house? I do not recommend a low down payment if you plan to stay less than 10 years due to the possibility of turning "upside down" on your loan.

2. How much income did you base your payment calculation ability off of? Can your lifestyle / habits really afford a 300k to 400k house, even after down payment? Are you sure the income will stay steady enough to meet that (higher) payment that occurs because of a lower down payment?

3. Do you have adequate insurance to cover the payment should any sort of damage or emergencies happen? (disability, flood, fire, home invasion, death of other income source, job loss, etc?)


Pros of Higher 20%+ Down Payment -

Instant equity
Peace of mind if you are purchasing a house at an older age
Get the house paid off even faster
Slim chance of turning upside down on the loan
Lower payments for the same house than if the DP was lower
Great way to aquire a MORE expensive home if your monthly payment comfort level caps a price at a 300k mortgage.

Pros of a lower down payment (0% to 15%)

Enables (capable) young people to purchase houses early and get head start on owning a home
Faster home ownership and independance
No wasted money on rent
Longer lifespan to allow equity & inflation to build (buy at house at 20, pay it off by 35, keep till past retirement and the land will be worth a LOT more)
Great tool in furthering a credit portfolio & score (which helps in many business situations)
Great way to purchase a "cheaper" home


With that said, i guess I could sum it up like this... if you have a great credit history, a steady income, low debt to income ratio, and high financial management skills - and are planning to stay in the home for 10+ years, a smaller down payment is fine.

Oh and on final note, I think education on all these topics are the MOST important of all - I believe that the failure to educate oneself about home ownership / loan pros and cons are the biggest cause of foreclosures / bankruptcy.... unscrupulous lenders tell people how much "house" they can "afford" with big advertisements like 300k loan for 645 a month!! or some other unbelievable deal.. and then when that ARM adjusts in 2 years and payments go up $300 a month, people go into dumbfounded shock, not able to understand why they now can't "afford" that nice new 5 bedroom home in the brick neighborhood.