re: First time homebuyer

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The VAST majority of first time home buyers that are getting conventional financing are not putting 20% down like you alleged. You can be a first time home buyer and get conventional financing for as little as 3% down. You just have to pay the PMI.

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If you get a USDA loan, you don't have to put anything down, but not every area qualifies for USDA. You are probably good unless you are buying a house in the downtown of a big city or in a flood zone.

I got a $140,000 house for $120,000 on a USDA loan with closing costs and a 1 year $500 home warranty paid for by the seller.

I did have to spend about $8,000 in renovations though. I could probably flip the house right now and make at least a $20,000 profit.

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Yeah in that time that you are trying to save to 20%, you're spending a lot more on rent. So where would you rather waste the money? On rent or in PMI/interest?

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He just tried to make a typical post of "millennials are ruining the world by being spoiled" post

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I paid 175k, and I was making a better living than most. It wasn't an amazing house. It wasn't the best neighborhood in town. But it wasn't dangerous and a little hard work had me selling it for 190k three years later

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So you made no money? If you used a realtor you paid them when you bought and sold and you had closing costs on both ends. You obviously have no idea what you're talking about.

didn't use a realtor. Nor does it really make any difference as those are sunk costs that have nothing to do with putting 20% down or not. Even if I did have to pay a realtor, buying less house than I needed and fixing it up still took a huge chunk out of what I owed them.

I'm just pointing out that people think you have to live in 200k homes right out of college. Which is just not true.

And the point of the other statement is that if a majority of people felt the need to save 20%, then housing prices would be lower. That is factual. There would not be enough money out there to support the higher prices without so much financing. Has nothing to do with whether PMI is still less than paying rent.

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My post specifically refers to paying PMI.

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This is his specific post that you responded to:

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As the title says, I am looking to buy my own house and would love some insight.... google really hasn't been my friend on this one as there is lots of conflicting stuff.

We are in our 20's and each have about $10,000 in savings. My main concern is with the downpayment/closing costs, as the note would likely be less than we pay in rent.

I have heard I should expect to pay 20-30% down, but have also seen I could pay as little as 3%. What is the norm? Are there pitfalls to a low down payment other than a higher note? What the hell am I doing?

TIA

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This was your reply. I copied and pasted.

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You usually need 20% down for a conventional home loan. Less than that, you will probably have to get an FHA loan which carries PMI. The PMI premiums are tax deductible though, and if you get the loan, you can get it removed by paying more each month towards the principal. Once the loan is at 80% of appraised value, you can request it be removed, at 78% it is automatically taken off.

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That's just patently not true. He can still get conventional financing with less than 20% down, and can pay PMI on the conventional loan. If you believe, reading back your post, that you were simply telling the guy to keep PMI insurance in mind, I'll just say that it was confusing and misleading in the way you did it.

It's not about verbiage. It's about this guy getting accurate information. Had you simply told him to be aware of added PMI cost on any loan he chose if putting less than 20% down, I wouldn't have responded.

But I apologize for the way I came off.

Yeah but you still needed an attorney and a title company involved, in addition to paying the closing (if you did that) - and paying off property taxes for the year, etc. All the little things that you have to do when selling a home.

It's not like you sit down at a table with a piece of looseleaf paper and handwrite a bill of sale to sell your house.

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Yeah in that time that you are trying to save to 20%, you're spending a lot more on rent. So where would you rather waste the money? On rent or in PMI/interest?

ETA: I do get the idea of 20%, though. But it's more to the tune of not living above your means. That's the biggest problem many have.

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Agreed. I think both of those guys are actually correct.

Yes, people are getting too much house with too much leverage (ie: we collectively didn’t learn squat 10 years ago)....but, people need to evaluate their own financial situations and make the right choice for themselves. That might mean grabbing that FHA loan and putting down 3.5% today as opposed to waiting years, particularly in this interest rate and housing environment.

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I have heard I should expect to pay 20-30% down, but have also seen I could pay as little as 3%. What is the norm? Are there pitfalls to a low down payment other than a higher note? What the hell am I doing?

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Unless you put down 20% you'll be paying P&I insurance, basically default insurance for your bank incase you stop paying for the house.

That sucks, but so does having 100% of your money go down the drain with regards to paying rent.

There are government programs, like the Rural Development Program, which allows people in certain income brackets (region specific) to purchase certain value houses (also region specific) with little to no down payment.