re: Is there any excuse for not having 20% dp on 2nd home purchase?

We bought our first house for $190. Put 5K down.

FAst forward 4.5 years and we are currently under contract to sell for $260 and buying. New house but only putting 5% down. My wife is a teacher and was able to get a loan that essentially had hardly PMI.

We are using our equity from our old house to pay off some student loans/ car payment/ our lone credit card.

I don’t know anyone my age that has our 10 or 20 percent down on a house.
Everyone I know does 3.5 (FHA) or 5 max.

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Maybe. I get that not everyone can fork out 20% but 3% is awfully low. You ain't even tryin.

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How is this not trying? I plan on putting 5-7% down on a home this week purely for the reason of having an extra 20-25k or so to continue building a side business along with a few smaller upgrades to the new house. Just because people aren't putting 20 percent down, doesn't mean they can't. Sometimes it's more fiscally responsible to not throw a ton of money at a house. And as someone else said, having the extra cash is peace of mind in case things happen to the house or unknown expenses come up.

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Especially with rates this low.

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This is the key. We are under 5%. That's a great rate. If we were in the 6-8 range then I can understand people would be overextending themselves more than they should with lower down payments.

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Just have the house reappraised when the market is up to have the PMI removed.

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you should make sure to talk to your loan officer about this, cause this doesn't always work - see FHA loans for instance.

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Agreed. Why would anyone want to tie-up more of their money then required? If I have an option to put less down on a house, assuming I can afford the note, I am likely to take it. Especially with rates this low. Strategically, it likely makes sense to deploy those funds for longer term growth and flexibility in mind. OP was a rigid analysis of a down payment scenario with countless explanations for not having 20% down.

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You could do all of that and more if you bought a less expensive property in which your 3% was actually 20%. So you are essentially admitting to overextending yourself to buy a better house.

As a real estate investor I don't really care either way as failed mortgages are opportunities for me.

But the fact is most people are not responsible with money, putting 3.5-5% down requires a good real estate market to sell. The market everywhere is pretty good, it could easily take a 5-10% dip. Now that guy that bought with 3.5% down 2 years ago has a house worth less than he owes plus he has to pay 6-8% to sell the property. Now all of a sudden he gets relocated for his job and has to come up with $10k to pay to sell his house or rent it out long distance.

My point is simply that with less than 10% down there is substantial risk. If your house doesn't increase in value it takes 5+ years to get any decent equity. So while some use th low down payment to maximize their investments, the reality is that most people use that ability to buy more house than they can afford.

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Was talking with my brother this weekend and he mentioned looking for a new house to accommodate a his growing family (2 kids with one more on the way, 2 dogs). He has been in his current house about 4 years and purchased that with an FHA loan and 3.5% down. He and his wife are both public school teachers. He said he will have about 10% to put down on this house purchase (includes cash on hand and equity in current house based on recent appraisal). It's crazy to me that someone would want to get into a new home and not have adequate funding to get away from PMI or to have your current house well with no real proceeds from the sale after realtor commissions. Is this a normal practice?

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sounds like he's buying a bigger, nicer, more expensive home and putting down 6.5% more $ from his initial purchase with only 3.5 % down 48 months ago and also growing his family.

TL/DR Worry about yourself

I just bought my first place a few months ago. I only put 10% down but after closing costs that ended up being like 30k.

My PMI is $40/m. So consider it this way, if I had another 20-25k to make it 20% I could theoretically invest that and most likely make more than the $40/m PMI. Maybe it's just me, or maybe there's a stigma attached with putting less than 20% down... but it seems smarter to put 10% if you can guarantee a low PMI

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You've changed the discussion once you are talking about a different property. Hell, just live on the street and you can really fully invest, you just have to live on the street.

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I have no issues with sub 10% downpayments, but what I do think is that if you put 5% or less down you shouldn't be able to get out of the mortgage. The entire Great Recession was because of 3% or lower downpayments allowed all kinds of inflation and purchases that should have never happened. Then, tons of people got out of the debts by foreclosures and short sales and the banks writing them off. A huge pile of Bs for people that didn't GAF while people that could still afford their mortgage and were honest were stuck under water and footing the bills.

Yes you are correct it involves a different house. The vast majority of people that only put 3% down do it because they don't have 20% or even 10%. Therefore if they needed more they would be forced to look into different properties.

Again, almost any argument for putting down less money can be used to argue you should buy less house. Not only will your mortgage be less, but your utilities, taxes, etc. would be with a less expensive house which gives you more ability to invest elsewhere like you wanted additionally. The real argument isn't the percentage down, it's that you simply didn't want to invest more than $X in your house.

Where the Bs comes in is government backed loans. Try getting a private mortgage with under 10% down. It's extremely difficult to get one with under 20% down. Yet our govnerment decides under 5% makes sense.

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growing family (2 kids with one more on the way

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He and his wife are both public school teachers.

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been in his current house about 4 years and purchased that with an FHA loan and 3.5% down

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Where are likely very young public school teachers with 2, about to be 3 kids going to get 20% downpayment money from in 4 years?