I have decided to start saving money to buy a home. Below is a little information about me:
- 37 years old
- $97,000 gross income per year (single income family)
- 401K is currently $131K - I contribute 9% and my employer contributes 7%.
- Planning to buy a modest $275-$300K home in Southern California.
Assuming that most of my consumer debt will be paid off this year except for an outstanding car loan of $17K........
- What should my strategy be for this goal?
- Should I save for the 20% down payment and avoid PMI insurance? That could take 2-3 years.
- Should I save for a smaller down payment, take on PMI, and take advantage of good deals on home prices and interest rates sooner than later?
- Should I tap into my 401K at any time to help supplement a 20% down payment?
- Should I stop contributing to my 401K (my employer will continue to contribute 7% anyway) so I can save for a 20% down payment faster?
I'm sure I haven't thought about other variables. I'm weighing the pros and cons of purchasing as soon as 2014 or wait to buy in 2016 or later.
Sat Mar 30, 2013 12:27 am
oldguy Senior Member
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quote: - Should I save for the 20% down payment and avoid PMI insurance? That could take 2-3 years.
I would not - I like to minimize locking equity into a house. Instead, use your own money for investing. Pay the PMI, it's worth it to reatin the use of the money.
quote: - Should I save for a smaller down payment, take on PMI, and take advantage of good deals on home prices and interest rates sooner than later?
Yes. The smaller DP the better, your income stream can service the whole $300k if necessary.
quote: - Should I tap into my 401K at any time to help supplement a 20% down payment?
No way, keep that money growing.
quote: - Should I stop contributing to my 401K (my employer will continue to contribute 7% anyway) so I can save for a 20% down payment faster?
Again, no way, keep funding the investments.
As you can see, my common thread is 'don't let anything disturb your investment/investing. Here's why - in 25 yrs most of your family wealth will be in your investment accounts - 401k, Taxable, Roth, etc. Your $130,000 plus the $15,000/yr at 11%/yr will be about $3,500,000 in 25 yrs. Don't let smaller things such as a DP, a car payment, etc, derail your $3.5M family wealth plan.
Sat Mar 30, 2013 2:45 am
kencute New Poster
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Sun Mar 31, 2013 9:02 am
coaster Senior Advisor
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quote:Originally posted by kencute ...I would like to reproduced your article, so that more people would see it. Thanks for this article.
I need to remind you that you are required by US Copyright Law to get permission to reproduce in full anyone's original expression, as the law is now interpreted to grant a defacto copyright regardless of whether a copyright notice is attached or not. You need to get express written permission from both the author of the words and the publisher of the words. The author is the poster, and the publisher is this forum. At present you do not have permission to reproduce, and if you are found to have done so you will be in violation of the law.
On a personal note, I would think that as a webmaster, as you claim to be in your intro, you would know this.
Sun Mar 31, 2013 7:19 pm
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Oldguy....Thank you for your recommendations.
Tue Apr 02, 2013 5:52 pm
riyanwillson New Poster
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First of all cost cutting your external goods and talk to your financial advisor and best friend, family.
Thu Jun 27, 2013 1:29 pm
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Sorry I have to disagree with Oldguy.
I think putting 20% down is always a better deal. Saving and putting 20% down will allow you to save on a wasted PMI cost for the life of the loan plus it reduces your mortgage payment some. So the money you save from not paying PMI and the mortgage reduction will help in the long run.
True you can have the PMI taken off once you get enough equity. The rules on how that is done varies from state to state and the contract agreement.
I am assuming that you are going to state in the house long term (10 years or longer)
Mon Jul 01, 2013 10:47 pm
tony gray Contributing Member
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See firstly you collect some cash that is save something so that you can buy some good good house, because buying a property requires a lot of capital and you ought to have it at the instance you make the payment.