First Person: I Didn’t Save for a Down Payment on My Home

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I didn't save for a down payment on my first home purchase even though experts recommend putting down between 10 and 20 percent. I don't regret putting down just 3 percent. Because it was a hot real estate market, my new construction townhome appreciated in value before I moved in. According to a recent CNBC article, personal finance guru Suze Orman recently changed her advice about buying a home. Orman no longer insists on a 20 percent down payment. Instead, she says putting 10 percent down is fine as long as a person can qualify for an interest rate between 4 and 4.5 percent, their job is secure and their payment is less than rent. Meanwhile, experts Dave Ramsey says in a Fox Business article that a 20 percent down payment is ideal to avoid wasting money on private mortgage insurance or PMI. Even though I didn't save for a down payment, I was still a savvy homebuyer.

Thinking about resale value

I would not have purchased the townhome with only 3 percent down unless I felt I was making a wise investment. My rule is to never buy a home that couldn't be resold easily the next day. I told the new home sales consultant I wouldn't buy a townhome in the master-planned community unless she found me a unit on the corner with conservation and pond views. Because I had such a price piece of real estate, I actually had people knocking on my doors asking if I'd be willing to sell. When I was ready to sell, my Realtor sold my townhome after it was on the market for only one day. I had three offers.

Ignoring the PMI factor

What some experts don't mention is the fact that most lenders will remove the PMI payment when the home appreciates to the 20 percent mark. In other words, once I had 20 percent equity in my home based on a current appraisal, I no longer had to pay PMI. In my case, the PMI came off after only a year and a half. It was well worth it to pay the PMI because I sold my home at a profit.

Living in a better neighborhood

Because I had two small children, I wanted to live in a better residential community. I was concerned about which school my children would attend. I had to weigh the cost difference between paying for a private school while living in an apartment versus paying for a mortgage so I could send my children to a better public school. For me, it wasn't worth it to wait until I had a 10 to 20 percent down payment to live in a better neighborhood.

When it came time to purchase my second home, I did put 20 percent down. Most of the money for the 20 percent down payment came from the profits from selling my townhome. If I could do it again, I'd still save virtually nothing for my starter home purchase. Although it's ideal to put more down, it's not always necessary when the goal is to improve one's lifestyle as quickly as possible.

More from this contributor:

Tricks to Pay Down our Mortgage

I'm Happy in our Smaller Home

Fighting Fair About Money


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