Felix Salmon recently revisited an argument (Stern v. Salmon) he had with Linda Stern 3 years ago about buying a house with little money down. Without attempting to address every point in dispute I believe Stern is largely correct. If it makes sense for you to buy a house, but you haven't saved a large down payment, but you can get a mortgage on reasonable terms anyway, then it generally makes sense to buy a house now with little money down rather than waiting to save a large down payment.
Salmon's biggest mistake is a complete failure to understand that the main effect of a larger down payment is to protect the lender (and society at large) not the borrower. It does so by reducing the value of the "homeowners put" (the option to walk away from an underwater mortgage, which contrary to Salmon you don't have to be broke to exercise (at least in no recourse states)), which like any put is more valuable when the market price is close to the strike price. This means low down payment mortgages should be very expensive or unobtainable. They aren't because they are subsidized by the government. Salmon ignores this subsidy which obviously affects the analysis when he claims that banks are not charitable institutions.
This doesn't mean everyone who can obtain a mortgage should buy a house, transaction costs are extremely high so you should be confident that you won't need or want to move soon. But if buying a house with 20% down would make sense then I expect it will usually still make sense with a lower down payment.
6 hours ago