Last month a couple rang me about a two-bed near the Rio Vista trolley stop, asking around $600,000. They'd saved for six years. Every bit of it was going into the deposit, because someone had told them twenty percent down was the only sensible way to buy.
I hear this from first-time buyers more than almost anything else. I think it's the wrong goal.
Before I sold homes, I was a financial planner, and my first question to any client was how many months they could manage if the income stopped. I didn't ask about net worth. I asked how much cash they could actually reach. A house turns cash you can reach into equity you can't, at least not quickly or cheaply.
In Mission Valley that matters more than people realise. Many of the condo buildings along Camino de la Reina and Friars Road have a few decades on them now. Older buildings bring roof replacements, plumbing work and the occasional special assessment, and a letter asking each owner for a few thousand pounds' worth of dollars doesn't wait for a convenient moment. Some properties closer to the river also sit inside a FEMA flood zone. If your lender requires flood cover, that's a bill nobody put in the spreadsheet.
So here's where I disagree with a fair few parents and the odd lender. On a $600,000 flat, the difference between 20 percent and 10 percent down is $60,000. Putting down less means paying mortgage insurance, which from what I've seen quoted this year runs a couple of hundred a month for a buyer with decent credit. That's a real cost. It's also one you can get rid of once your equity builds.
The $60,000 you didn't hand over is different. It sits in your account. It covers the water heater that gives out in the first winter, the assessment, the gap between jobs if one comes. Once it's in the deposit, getting it back means refinancing or selling, and neither happens on your schedule.
I'm not saying never put twenty percent down. If you've got that and a proper cushion left over, brilliant, do it. What I'm saying is that the cushion comes first.
So before we write an offer, I'll ask you what I used to ask my planning clients. The morning after you get the keys, what's left in the bank? If the answer makes you wince, let's look at the deposit again.