Ray I think I see where our disconnect is. Whereas I am using the word risk, I should probably use the words personal peace of mind. Never would I advocate putting your entire savings into a downpayment. Of course one should always have cash reserves for emergencies. Let’s say I have 400k stashed in the house fund… Assume I have other monies stashed for emergencies, 401ks etc… So I see a home I want to buy for 800k. By your model you would say put down 10% maybe 20% rather then the 400k correct? As you said, reduce the debt by making an extra payment or whatever correct? With all the leftover invest that money or something of that nature. Putting the minimum amount of money down indeed reduces your risk because if something goes wrong, you walk away from the home with minimal loss.
I assume this is your point about minimizing risk.
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I understand that and agree to it. Per my first sentence here, it is about personal peace of mind. We are all wired different. Personally I don’t ever see myself walking away from a home. No matter what I do I will buy but it will be within my means. I have gauranteed it will be within my means because of the downpayment I will put down on it. Thus market up or market down I will always be able to afford my payment because I don’t want to ever move out until the kids are out of school OR I move because of personal choice not because of financial problems I BROUGHT UPON MYSELF buy purchasing something I cannot afford. The bottom line in my opinion is if home ownership were harder to obtain, and more personal responsibility was mandated, then we would not have the problems we have.
Your method of risk reduction indeed works because lenders are stupid enough to have ridiculous non recourse loans of which I have gone on record many a time should be banished.
What you say does make alot of sense and I agree with you in that respect. As I said, many of the wealthy people I know, indeed the majority of them think I am crazy for having as much of a downpayment as I will put down. They have made alot of money with alot less then what I will put down… I guess I play it to close to the vest. We are all wired differently.
