If you can’t get a 20% down payment together, then you should probably be renting. I know that’s not what people want to hear, but buying a house with the absolute minimum down payment just because the bank says you CAN is a pretty good way to end up house poor. Put down less than 20% and you’ll have a higher monthly payment because you’re borrowing more money. And then you get to add Private Mortgage Insurance (PMI) to the bill. FUN FACT: PMI is insurance for the bank, NOT you!
The bank is basically saying, “HMM…we’re a little nervous about how much money we just lent you. So we’d like YOU to pay for an insurance policy that protects US if YOU stop paying.”
So now you have less money saved, a larger mortgage, a higher monthly payment, and an additional insurance expense. You’ve put yourself in a position where the bank itself decided it needs extra protection from the risk of lending you the money.
Because being approved for a mortgage is not the same thing as being able to afford a mortgage. If you need to stretch to buy the house, drain your savings to get the down payment together, and then spend every month praying nothing breaks, maybe you don’t need a house yet.
Homeownership is not a requirement for adulthood. The goal is to build wealth, not win a race to see who can get a mortgage first.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy & Jenn
#mortgage #personalfinance #downpayment #buyvsrent #livebelowyourmeans
The bank is basically saying, “HMM…we’re a little nervous about how much money we just lent you. So we’d like YOU to pay for an insurance policy that protects US if YOU stop paying.”
So now you have less money saved, a larger mortgage, a higher monthly payment, and an additional insurance expense. You’ve put yourself in a position where the bank itself decided it needs extra protection from the risk of lending you the money.
Because being approved for a mortgage is not the same thing as being able to afford a mortgage. If you need to stretch to buy the house, drain your savings to get the down payment together, and then spend every month praying nothing breaks, maybe you don’t need a house yet.
Homeownership is not a requirement for adulthood. The goal is to build wealth, not win a race to see who can get a mortgage first.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy & Jenn
#mortgage #personalfinance #downpayment #buyvsrent #livebelowyourmeans
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