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Originally Posted by MediaArtist
Oh really. Then what's the truth behind FHA delinquencies increasing 27%?
That makes no sense. PMI doesn't exist to "offset the lack of equity", it's a premium charged to cover the risk of a borrower defaulting on a high LTV loan which is guaranteed by FHA, and IMO, it isn't enough because FHA is still failing and severely insolvent. Paying 3% on a home and financing the rest simply doesn't work, it's as dangerous as the 0% loans that wiped out the sub-prime market. If 3% down worked, FHA would be solvent, and wouldn't be at risk of failing. There's a reason why the private lending industry won't do 3% down payments, it's because they know it doesn't work. If you can't afford 20% down, and reserve funds, then you should be looking at a smaller, or less expensive house. Your advice is absolutely horrible.
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Yes it does. The less you put down, the higher risk you are to a lender. 20% is a sizeable amount to put into a home that's worth $300k. That's called EQUITY! That's less of the lender's money they have to risk on your ass if you die, default or otherwise on your newly acquired home. A PMI covers them.
Regarding your FHA comments: the increase in FHA delinquencies is on par with the rate of increase in delinquencies with conventional loans. Lol. and???
Income/debt ratio is the biggest determining factor on affordability of a home, and not a big down payment is which does little to
Affect your monthly expenses. Cash-on-hand is what most Americans don't have. Throwing $60k away on a liability like a home when that money can secure your mortgage for a few years alone is just plan stupid. Pay yourself first. You have 30 years to worry about your mortgage, then your lifetime to pay taxes.