Hit 5% down payment on a $280k house and realized I wasted 2 years saving for 20%

For two years I was putting away cash trying to hit 56k for a 20% down payment on a starter home in Columbus. My realtor finally sat me down and showed me numbers for FHA loans with just 5% down. I had enough last month and closed on a 3-bedroom bungalow. Private mortgage insurance costs me $110 a month which is way less than the extra 42k I was trying to save. Anyone else ditch the 20% rule and go with a lower down payment?

2 comments

2 Comments

vera_sanchez7d ago

You mentioned the PMI costing $110 a month, but people forget that you can cancel PMI once you hit 22% equity (something I didn't know until my lender told me). If your house appreciates even a little over a few years, you can also request an appraisal to kill it early. That $42k you saved could have sat in a HYSA earning interest while you paid down the mortgage faster, so you really came out ahead.

barbara9677d ago

My realtor told me the same thing about dropping PMI early, but I've seen too many people in my neighborhood get stuck with it for years when values stayed flat. That 5% down leaves you with ZERO cushion if anything goes wrong with the roof or furnace in the first year.