Final answer:
The question about the percentage over the approval amount in a progressive lease seems erroneously mixed with home buying practices involving down payments and mortgage insurance. The 20% rule typically refers to real estate transactions where a higher down payment can negate the need for mortgage insurance.
Step-by-step explanation:
When creating a progressive lease, you cannot arbitrarily decide the additional percentage to charge over the approval amount on a guest's first purchase. There are often specified rules and regulations governing such financial agreements. However, based on the context given, there seems to be a misunderstanding as the details provided relate more to homebuying and mortgage insurance than to leasing. Progressive leasing might involve a different set of rules including but not limited to credit checks, interest rates, and leasing terms.
In connection with homebuying, the 20% rule is a benchmark for a down payment to avoid paying for mortgage insurance. Lower down payments are indeed possible, such as 0-3.5%, but as you pointed out, they can lead to higher overall costs due to the requirement of mortgage insurance. This insurance protects the lender in case the borrower defaults on the loan, and it results in an increase in the monthly mortgage amount paid over time.