How common is it to put 5% down on a house?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It is incredibly stupid to only put 5 pct down on a house.

My net worth is approximately $400,000 higher than it would be if I had put 20% down on my previous two residences. Using FHA loans is literally the best financial decision I have ever made.

It is complete bullshit that the federal government subsidizes home ownership. If you can't afford to put down 20 percent (or enough to satisfy a private lender) you have absolutely no business buying a home. The government subsidizing mortgages just makes them more expensive. But you don't care about that, of course, because YOU GOT YOURS!

How could you conceivably know that someone has "absolutely no business buying a home" based solely on their down payment? That is asinine.

Suppose two people each make $200,000 and have no recurring debt.

Person #1 buys a house worth $1.2 million and puts 20% down.

Person #2 buys a condo worth $300,000 and puts 3.5% down.

Is it your belief that Person #1 is less likely to default? Because a bank will approve Person #1 for a conventional loan but Person #2 can get only an FHA loan.

OK, how about this one?

Suppose two people each want to buy a home that costs $500,000.

Person #1 makes $100,000 with no recurring debt and will put 20% down.

Person #2 makes $1,00,000 with no recurring debt and will put 3.5% down.

Again, do you think Person #1 is less likely to default? Because she is eligible for a conventional loan and Person #2 is stuck with an FHA loan.

Also, you seem to think that the fact that most private lenders require 20% is somehow based on some rational market assessment of buyers' ability to not default. Do you actually believe that? That a properly functioning market, free from government interference, would conclude that the most sensible way to price home loans is to offer 30 year terms with fixed interest for the life of the loan and that the perfect down payment amount happens to conveniently be 1/5th of the value of the home, regardless of the price of the home and the buyer's income and credit score? And why is the U.S. the only country that uses that system? Because we have god-bless-us the most free markets? Isn't it infinitely more likely that the 20% downpayment is itself the consequence of 80 years of regulation of home sales and credit and has very little to do with an accurate assessment of risk in the abstract?