DX–I read your statement the same way. It reads as a very strong statement of principle–
“I still stand firmly behind the principle that if you can’t afford 20%, you can’t afford the home.”
when in fact, the latter part of the statement isn’t even true. To save that much, you essentially have to make a house payment to yourself for years, while also paying rent, now demonstrating that you can afford a HIGHER payment, i.e. a bigger mortgage, than you saved 20% for.
That’s how I feel about it–I won’t really have 20% down by the time we would likely want to buy, but we’d probably be relatively close. The PMI is only about $75-100 per month, which isn’t terrible, and by the time my income jumps (as expected), it’ll be no problem.
How do you get rid of PMI? Refinance? Can you put a clause in the loan terms that say the PMI goes away after X happens?
Income relative to payment is really the most important thing to consider. Always has been and always will be. If the payments take a big bite out of your monthly then you can’t afford the house even if you have 50% down. If it’s a piece of cake to pay – who cares what your down payment is? Even the bank doesn’t care much then.
The next big question you have to ask is how long you plan to live there – if it’s a step up house where you expect to buy something else within five years rethink that strategy or plan accordingly – meaning only buy houses you expect to be able to resell fast, inexpensively. And don’t trust your own judgement on that either – ask others. Professionals and peers both. You might think it’s an awesome property – they might have a different opinion. Not saying you would be wrong but you should at least consider that possibility.