When my wife and I bought our house in 1999, we put down 5%, which we thought was a lot (back in those days it was a lot!). Well, according to Emma Johnson’s piece over on MoneyCentral, the 20% down payment and 30-year fixed mortage is coming back in style.
I think this is a good thing!
I know, it seems a bit hypocritical of me to welcome back 20% down payments when my wife and I only put down 5%. The difference is that we had a nice 401(k) balance at the time so we did have some savingseven though it was for retirement. We also bought a modest home and we have lived in it for over nine years now. Although our payments seemed high when we purchased our home, they’re a cakewalk nowadays!
If indeed 20% down payments are the new norm, how long will it take people to save up a down payment? I guess the answer depends on how much they save and how much they plan on spending. A 20% down payment on a $90,000 house (about what we paid for our home in 1999) is a lot less than 20% down on a $300,000 house.
It’s going to be tough for people to save up that kind of money. But, I think this is a good thing because we, as a nation, need to get back to prudent financial practices. We need to stop buying things we cannot afford and we need to learn what it means to sacrifice. Let’s face it, we’ve been spoiled the last fifteen years.