<prompt> Human: I see here a lot that the best way to buy a home is a 30 year fixed rate mortgage with a 20 down payment. I am just curious as to why this is the best way. My thinking is that if you had only a 10 down payment on a home then, yes, you have to pay PMI and with how the amortization tables are set up a hefty majority of your early payments go to interest as opposed to building equity but you have to have a roof over your head. It seems like you would be paying rent to the bank as opposed to the landlord but at least over time you would have some equity to show for you payments not matter how small which seems better then just paying rent to a landlord. I get that when you rent a landlord has to fix any major issues with the home instead of you paying for that out of pocket so there is also less liability involved with renting. If you are renting a home that the rent is more or less the same as a mortgage payment including PMI would be for a similar sized home then why not take what you do have saved up, buy now even though you do not have 20 and build at least some equity as opposed to continuing to rent and trying to save until the 20 mark. You can even take what amount you were able to save past the rent before and throw it at the mortgage until you get to 20. What am I missing? Is the PMI charges and less liability to fix major issues really worth renting and not building any equity until you have the right down payment?  <response>: You pretty much hit the nail on the head. Theres a higher chance of being underwater on the house especially in the first few years, but if you have at least 10 or so and you plan to stay in the house for 5 years or more, paying PMI and building equity is much more advantageous than paying rent for however many months or years it takes you to save up the rest of the 20.Especially if you live in an area where rent is higher than PITI payments on a mortgage, even including PMI, you will come out ahead. 