Drop and Give Me 20.

Last week, I felt like pretty much every online calculator seemed to suggest that I bankrupt myself in buying my first home.  Thanks again, Internet!

One of my readers, though, felt differently.

Rich Rosa says:

April 5, 2011 at 10:41 am

Very few first-time home buyers put down 20 percent at closing. In fact, FHA loans can be had for as little at 3.5 percent down. MassHousing, which is a great alternative to FHA financing, will allow a 3 percent down payment by someone with a very good credit score. Mortgage insurance, which is required when you don’t put down 20 percent, is less expensive with MassHousing.

I had no idea!  Of course, why would I have any idea, when everything I know about buying a home comes from my parents’ homebuying — and they always had the 20% — and reality television — where they often gloss over the money parts.

I knew I’d heard some bits and pieces on the news lately about the 20% down being a hot issue, especially in light of the housing crisis over the past few years.  A quick google told me I wasn’t imagining it:  20% down is a point of contention in Congress.

At least three agencies—the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency—back a proposal to require home buyers to put down at least 20% of the sales price in order to obtain one of these “qualified residential mortgages.” One proposal would also require borrowers to maintain a 75% loan-to-value ratio for refinances, and a 70% loan-to-value for cash-out refinances in which the borrower refinances into a larger loan, according to people familiar with the matter. (Source.)

If that goes through, that’ll make a big difference in what I can buy, essentially bringing me back to my original plan of coming up with the 20% before I make a move on finding a place.

Any experts in the field want to educate me?  Do I need 20% down?  If this proposal passes, will it change what I need?