Post # 46
Our first home we put around 3% down, and we did an FHA loan and paid PMI. A few years later we refinanced, paid down our PMI to get rid of it. We were 23 & 26, and live in a pretty high COL area – and didn’t have $66k to be able to put 20% down on our first house.
I really just think it depends on your area and home prices. In years past 20% was definitely the norm, but most people were in a different financial situation back then. These days people are saddled with student loan debt and high housing prices that make it pretty darn hard to save up 20% for a down payment, unless of course you live in a super low cost of living area.
In a perfect world I’d suggest people to save up and not pay PMI, but I definitely recognize that for many people (like us) it’s just something they have to do. We were concious of making an effort to put bonuses and other money aside so that we could refinance to a better rate and get rid of our PMI. We used it to our advantage, and along with some smart renovations, when we sold the house 9 years later we were in a good financial position to upgrade with a traditional loan at a good rate.
Post # 47
I say we because we made the decisions together but really my husband put down 18% on our house which cost $500K (conventional 30 year loan); I had just graduated college the year before so most of my money was going towards are car & student loans. We could’ve paid the full 20% but we decided to have some wiggle room for closing cost and had some repairs done to the house. The PMI didn’t change the mortage payment drastically and it worked out well for us.
Post # 48
butterflybee43 : “I would think that you would decide your budget based off available funds for a down payment, but it seems to be the opposite.”
Just another comment, some have already said this. The best way to decide your budget is monthly, not necessarily based on cash. The final monthly payment (principal, interest, taxes, insurance, PMI and an HOA if you have one) is the number to look at. Add that up with your other expenses (understanding that utilities are usually higher), and use your monthly take home income to make a budget. You want to be flexible when it comes to how much to put down, based on the houses you find, if they need work (maybe at the last minute you save 5K to paint), etc.
Then you work backwards for a home purchase price. What mortgage can you take on that gets you that monthly budget? How much cash can you add to it as a down payment and where does that bring you in terms of final house price? We told our Realtor we wanted to keep 30K from the sale of our first home and put the rest as a down payment, regardless of what percent that ended up being, and we wanted our payment to be below 3000 a month. We looked at houses with prices ranging from 500K to 650K (we qualified for this but would have never maxed out as the monthly payment was insane).
Post # 49
I agree, and I think that ever-increasing rent plays into it as well. In every place I’ve lived, a mortgage on a modest house with PMI is still $100+ cheaper per month than a smaller apartment. If I’m going to be “throwing away” money, I’d rather it be a small amount on PMI than the whole hog on rent.
Post # 50
We put down about 18%. The bank pushed for us to put down the 20% because we had the funds, but we also needed to build a fence around the property and weren’t sure what the final cost would be so we opted to keep some extra cash aside and put just below 20% and just pay the CMHC. (Canadian equivalent of PMI I guess?)
Post # 51
We put down 40% but we were older (35) when buying our first home so had time to save up.
Post # 52
My husband and I just bought our first home a few months ago and we put 10% down. We live in a HCOL area and 20% would’ve been a pretty unimaginable amount of money to have saved in cash. We probably could’ve put closer to 15% down, but we wanted to keep the cash in hand for things like furnishing the house and just to maintain a good cushion of savings. We are hoping to make extra payments on our mortgage to get it paid down faster, and planning to make that first extra payment probably this month.