Wow, the house I could buy with only 5% or 10% down. But I don’t think one should buy what a bank will “let” him or her buy. A credit card company will also “let” you run up a huge amount of debt and then watch your little teaser rate dissapper as they lock you into their “standard” high rates.
People should buy what the can buy comfortably, without worrying about appreciation and depreciation. In this market, I consider a 20% down as a break even down from an appreciation standpoint. 30% for me is ideal, which is why I am pushing my wife to buy a home at a price where we can put in 30% down from our downpayment fund. If you put 30% down, you won’t worry about the market continuing to tumble so much, particularly if you are buying a long term home and don’t look at your home as either an investment or a supply of home equity funds to fund your lifestyle.
That is why I am a buyer right now. We need a new house, plain and simple. I am keeping an eye on the market to get the best price. After I buy, well I will keep an eye on the market up here until I sell my current house, or keep it and rent it out. After that, perhaps curiousity will keep my interest, perhaps not.
We could go for 5% or 10% down and buy almost twice as much house. But the payments go up too, and even though we could “technically” afford that as far as the bank is concerned, and even though it is a long term purchase, you never know what life brings and planning for a rainy day is not a bad thing. It gets you peace of mind. There are folks I expect, who bought at the peak, and are not stressing because they put so much down, they still have positive equity.
My current home has lost 10% value in two years, but I bought 8 yrs ago with a big down. So while I wish it were worth more so I could get more $$ out of it, I am not stressed about it.
The great thing about living below your means, is that you don’t stress about money, can help those you care about when they are in financial distress, can give away a larger part of your income to charity, which adds greatly to ones happiness and sense of community, and are prepared for that rainy day or unpleasent surprise. Financial stress is a life shortning thing and interferes its enjoyment. I have been there, I remember. It was self inflicted and I realized I am not a masochist, so I stopped.
