I Don't Have 20% Down

John in Florida has landed a position in the military and will be in Florida for 6–8 years. However, he doesn’t have 20% down. Should he buy a home?

QUESTION: John in Florida has landed a position in the military and will be in Florida for 6–8 years. However, he doesn’t have 20% down. Should he buy a home? Dave says he should go ahead and buy the house if he has a down payment.

ANSWER: I’d buy a house. You need to get your down payment above your emergency fund, but you can cheat your emergency fund down a little. It’s supposed to be 3–6 months, so you could use a little of that.

I don’t mind you buying a house without 20% down. You’re just going to be paying PMI—Private Mortgage Insurance—until you get the house paid down by 20%. If you take out a VA loan, you can avoid PMI, but you’re going to pay extra fees that will look a lot like PMI. By the time you’re done, the VA loan is actually more expensive than the conventional loan with the funding fees and all of the other stuff they stick you with. It was originally designed to be a big benefit to the veteran, but sadly, it’s not.

I’d recommend a traditional 15-year fixed mortgage with 5% down on a Fannie Mae loan—or more. I’d put down as much as you could, but you’ll have to have at least 5%.

You need to really do your research and find a steal. Really, really, really get a good deal because there are some serious bargains in Florida right now. I think Florida may be one of the best places to invest in the U.S. right now. I think it’s just ridiculously low for no real reason. I think when the market comes back, it’s going to come back with a vengeance. Some people who own real estate there are going to be happy they do.