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Can you put down 20 percent?

By Marcie Geffner · Bankrate.com
Thursday, March 17, 2011
Posted: 2 pm ET

Should homebuyers be required to make a down payment of at least 20 percent of a home's purchase price to qualify for a mortgage?

That's a question some Bankrate readers tackled when presented with the prospect of such a requirement on certain loans to be known as "qualified residential mortgages," or QRMs.

Here's what the readers had to say:

I have no problem with a 20 percent down payment. My wife and I, making only $50,000 per year, were able to save it in 2 years, living in an apartment of our own with a disabled child. It was tough, but we did it, and I don't regret it one bit. It's called 'living within your means' instead of 'keeping up with the Joneses.'

-- C. Burke

I also saved up to make my down payment, and it helped (me) plan out my income/expenses to accommodate this additional house expense. In addition, (the QRM proposal) doesn't affect FHA (Federal Housing Administration) loans. Thus, if you feel you are living below your means while paying less than 20 percent down, then go for an FHA loan.

I know others will cry foul, but I see the options between a.) cheaper loan, but larger down payment or b.) more expensive loan, but cheaper down payment as a simple set of choices to give consumers and much easier to navigate than some of the more exotic financing options we have nowadays.

-- Brandon

I, too, have no problem with a down payment, 25 percent in my case, on the median-priced single family home (SFH). But in Honolulu, on a median salary, I wouldn't be able afford the monthly repayment, plus taxes, etc. on the $450,000 balance. How long does it take to save 20 percent down payment on a $600,000 (median price) SFH or half-decent condo here? That down payment alone would buy a house for cash in most of the U.S.

-- Paul

To get the prevailing lowest interest rate, a 20 percent down payment should be required. Mortgages can be had with lesser down payments of five to twenty percent, but (mortgage insurance) will be tacked onto the mortgage, until the buyer achieves at least twenty percent equity in the property. This is the way it was before the mortgage industry started being 'creative.' This is the way it should be now.

-- Tim

I have great credit (780-plus) and my only monthly debt is a student loan, but there is no way I can come up with (a) 20 percent down payment. I could wipe out my savings and do 10 percent, but 5 percent is more realistic for me. (I like to have money for a rainy day.) I live outside D.C., so house prices are crazy. The amount I pay for rent is the same as a $400,000-plus mortgage! I know my means, so I am not high-risk, and in fact, I have been pre-approved above my means. Just don't require me to have 20 percent, because that won't happen for a while.

-- James V.

Follow me on Twitter: @marciegeff

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16 Comments
Dave
May 02, 2011 at 12:41 pm

Are you guys kidding me, real Americans cant afford twenty percent down without saving for the next 5 - 10 years.

beinghuman
April 30, 2011 at 8:57 pm

That is silly.
in Texas you have can only take cash out up to 20% of the equity. Who is this good for? the banks of course. You can tell Phil Gramm helped make the laws then he went to work for a bank.
I bought a fixer upper and only put 5% down. Three months later refinanced and got out of the MI.
So its silly to put so much money down.

Bert
April 26, 2011 at 11:59 am

I'm totally in favor of 20% down! One of the factors in the foreclosure mess is that many people had very little "skin" in the game, making it much easier to simply walk away when the perceived value of the house became less than the mortgage amount. It wasn't all about unemployed homeowners or tricky mortgages. Forget about "median home prices" or "median salaries" If YOUR salary doesn't allow you to save up 20% for the home YOU want... then you need to either scale back your house, ramp up the salary or move somewhere where you can afford to live. And quit talking about everything being "out of your control". If you can predict it, you can take steps to mitigate it..

haldol
April 26, 2011 at 2:37 am

Mary there is insurance against being disabled and not being able to pay your mortgage.

As for James V., how about waiting until your loans are paid off before saddling yourself with new multiple six figure ones? Mmmm?

mary
March 24, 2011 at 3:50 pm

There is no guarantee whether you put down 20 percent down or if you have an excellent credit score. The days of 25+years working at the same company are gone. Nothing is guaranteed or low risk. All of you did not mention other factors. For example even though a person may put down 20 percent, what if the person lost their job? Even worse, become disabled. Medical bills pile up quickly. If you are out of work how can you afford the medical insurance especially through Cobra which is doubled the amount of when you were with your employer? You'd have to be completely down and out before the government will help you. I mean you inome has to be less than $900 a month, etc. You had better hope your unemployment is enough to cover your mortgage. But like I said becoming disabled is a disaster. So my point is things happen beyond your control whether you put 20 percent down and your credit is 800.