<prompt> Human: Hey guys. A friend of mine recently bought her first house with her fiancee. They purchased a home for 130k and only ended up with a monthly payment of around 800, and only had to pay closing fees of around 5k to get into her home. In addition, her intrest rate isnt horrible 4.25 The traditional wisdom I see is to have 30-40 down; 20-30 for the initial closing costs, etc and 10 in a new home emergency fund for all the weird stuff you find wrong in the first year or so. Im in my mid 20s, and I dont have a great job, but its OK. I make 34kyear base, but we work a ton of overtime, and make around 50-60k in reality. Why would it be better to go the traditional route rather than the FHA route with maybe 10 budgeted for that same emergency fund? The only reason I could think of would be that you could have a lower down payment because more money went toward principal. In reality, though, wouldnt you be better buying a home sooner with a comparable mortgage to your rent my rent on a tiny 1 bedroom is 600, which is competitive in my area? In my mind, wouldnt it be better to get into a home now, build principal toward my home, and maybe put a few hundredmonth into a decent mutual fund? I realize youre paying an insurance fee for FHA which is essentially wasted, but isnt not wasting money on rent worth more than amount youre losing on the FHA insurance? Am I thinking wrong here? If so, could someone explain? If it matters, I live in west Michigan.  <response>: 20 down is to avoid PMI.Closing costs dont count toward your 20 down payment so thats the additional 3-6. Thats essentially an extra fee. It does not count toward your equity.Home repairs dont count toward your 20 down payment so thats an additional 1-2. Thats essentially insurance. It does not count toward your equity.You can always use a rent vs. buy calculator like the New York Times one to make the determination regarding whether or not its better to buy with a lower down payment.You should still have money to cover major emergencies. If you have a major incident in your home think HVAC system breaking, not dishwasher and you live in Michigan, your house is essentially unlivable. 