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Comment by dfxm12 | Hacker News Reader

I'm behind a paywall, so I'm sure they pick up on this, but the biggest problem I ran into when I thought I could afford a house was the down payment. You can make $100k (or less!) and quite easily afford a monthly mortgage payment, but that doesn't necessarily mean you have enough saved up for a down payment.

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I agree with you on the down payment but from a slightly different POV. There are cases where even saving up to 20% to avoid PMI doesn't also help - particularly states like NJ where you could own a "modest" $300k house but still be out $10k + per year in property taxes.

In order to get mortgage + taxes down to a reasonably "affordable" amount (approx. 40% of take home spent on housing) you need to be looking at up to 40% down to offset the tax expense.

You only need 3.5% down with an FHA loan. To put that in perspective, a $300,000 home would only require $10,500 down.

You can buy as low as 3% down and then there are the NACA loans and a slew of zero down programs.

Sort of. You'd be left paying the difference of 3.5% to 20% (16.5% or $49,500) in a FHA Mortgage Insurance Premium (MIP). This means another loan that you need a 1.75% down payment for (making your downpayment ≈ 3.8% or $11,400) that adds another payment (≈ $400) in addition to the mortgage. MIPs last the entire life of the FHA loan, too.

Yes, it's effectively a higher interest rate on the entire loan, but my point was that you don't need a massive amount of cash up front to close the deal.

And it's still a valid point. It's good to mention that a <20% down payment has caveats, too.

Down payment is only a portion of the costs to buy a loan. My 3.5% down FHA mortgage on $309K purchase price cost me about $16K. My previous 5% down conventional on $103K was around $12K.

Moving in ain't free, either.

Exactly this. Who can manage to save up 20k when they've got massive student loan bills from the education that got them that $100k+ job in the first place?

Since we have such low interest rates, asset prices have ballooned (money is cheap).

Agreed, but it's that way for a purpose no? Maybe not a whole 20%, but enough of a buffer so that you won't be underwater on a mortgage in a down housing market.

I don't mean to comment about how much a down payment should or shouldn't be, but that affording a house takes more than just money coming in (i.e. a good salary). You also need savings. This makes it hard for a lot of first time house buyers, and I think especially, young people, to buy.

Hopefully, you can save at a rate higher than the rate at which the down payment increases due to house prices generally going up.

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