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.
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.
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.
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.
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