I don't think that necessarily is a a bad thing. Just because someone can theoretically afford a mortgage payment now its pretty difficult to predict say 5+ years out whether or not that steady job will hold, especially if they're young and have a short credit history. The down payment adds a cushion for that risk. There's less inherent risk to renting, you're looking at a commitment of 6 months to a max of maybe 2 years for most least terms.
Being too risky with handing out mortgages is partly what lead to the housing bubble in 2008 afterall.
If they're really certain their job will be stable long term PMIs shouldn't really be a deterrent, most PMI can be terminated after meeting 20% in equity.
> Being too risky with handing out mortgages is partly what lead to the housing bubble in 2008 afterall.
Being aggressively risky with little downside was a bigger root.
I worked in a mortgage comp for a bit before the big crash. "You want a 150% loan-to-value loan, no money down, no intention of proving income or ability to repay... sure, that'll be 7% instead of 5%. Sign on the dotted line..."
I was blown away when I learned about 'no down, no doc' loans, which... yes, it's another variation, but... the interest rate was all of ~2% higher, which seemed in no way to cover the risk. But no one cared, because everything was just sold to someone else, and packaged up in to CDOs, and resold again.
Someone who has 'only' 18% of a purchase price down, good credit, and steady income... to be charged extra PMI - possibly for years, because "we need to re-valuate the property 3 more times".... seems to be just more price gouging, not actually addressing real risk.
My rent for a 1 bed, 1 bath apartment is higher than the mortgage on a family member's 4 bed, 3 bath. _That's_ the issue: homeowners are putting less money into an investment vehicle while renters are burning even more money.
If rent actually reflected the value received versus owning a home I'd be less opposed to it.
You don't need 20% down. This is a lie that keeps getting perpetuated.
I put 3.5% down on my first house and even with PMI the mortgage payment is less than rent.
To add insult to injury, the massive housing inflation of the past 2 years got the LTV well above 20% which then allowed me to remove PMI lowering my payments even further.
The real risk with renting to a person is if they refuse to pay and refuse to leave. Most places you still have to let them live there for several months while you go through the eviction process. And in retaliation they can destroy your house.
Being too risky with handing out mortgages is partly what lead to the housing bubble in 2008 afterall.
If they're really certain their job will be stable long term PMIs shouldn't really be a deterrent, most PMI can be terminated after meeting 20% in equity.