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How To Save For A House?
Old 01-11-2017, 11:50 AM   #1
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How To Save For A House?

I've spent most of my life in apartments. I enjoyed the flexibility and ease of relocating on a whim, back when I could live like the nomad I wanted to be. New states, new cities, new adventures.

But medical crap changed all that in a severe way, and with the inability to travel and even really get out much, I've become a lot more interested in buying a little house somewhere and enjoying somewhat more privacy.

I have no idea what the best way to save for a down payment on a house is, or even if it's worth doing since I would qualify for a VA Home Loan. Articles read vary from vague to contradictory. I haven't had much luck finding old threads here on the subject.

If I can save $10-15k this year out of a fixed income, maybe next year too, where should I park that? If I'm going to buy a house within the shortage period possible, whether as a 0%, 3.5%, or up to 20% down payment, what makes sense?

As far as home ownership itself goes, I'm being very mindful of the size of the house, the lot, and what would need to go into upkeep for both. For the foreseeable future I'm on fixed income, so either a home and its costs, or rising rent rates are something I'll have to contend with.
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Old 01-11-2017, 12:04 PM   #2
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For a short term time frame of 1-2 years, you should stay away from principle risk. Perhaps a money market account at Ally Bank, or something equivalent.
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Old 01-11-2017, 12:06 PM   #3
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IMO, with the VA loan available to you, if you can afford a house without a down-payment, then I'd get it with the VA loan and nothing down. We can't predict interest rates or inflation rates, but historical data suggests that inflation will devalue your money unless you put it into higher risk investments while saving it, meaning it's going to either probably going to lose buying power while you wait to purchase a home or you'll risk losing the money your saving to investment risk over a short period of time. Historical data also suggests that loan interest rates are unlikely to go lower in the short term, but there is a significant chance that interest rates will continue to climb higher, meaning waiting will also result in any given loan costing you more in the future than it would today.

With those assumptions/risk factors in play, if you can afford the home payment comfortably now then I'd be looking to purchase sooner rather than later and trade the higher monthly payment for the opportunity cost of getting into the home/loan now vs saving up and trying to buy later.
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Old 01-11-2017, 04:57 PM   #4
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Originally Posted by exnavynuke View Post
IMO, with the VA loan available to you, if you can afford a house without a down-payment, then I'd get it with the VA loan and nothing down. We can't predict interest rates or inflation rates, but historical data suggests that inflation will devalue your money unless you put it into higher risk investments while saving it, meaning it's going to either probably going to lose buying power while you wait to purchase a home or you'll risk losing the money your saving to investment risk over a short period of time. Historical data also suggests that loan interest rates are unlikely to go lower in the short term, but there is a significant chance that interest rates will continue to climb higher, meaning waiting will also result in any given loan costing you more in the future than it would today.

With those assumptions/risk factors in play, if you can afford the home payment comfortably now then I'd be looking to purchase sooner rather than later and trade the higher monthly payment for the opportunity cost of getting into the home/loan now vs saving up and trying to buy later.
Before being interrupted with another surgery, we were looking at a house without the down payment with the VA. We're going to be buying in another state, so unfortunately buy now isn't in the cards until I'm fit to travel again.

I had kind of figured the VA loan was the best deal, but also figured I didn't know enough to know what I didn't know enough to ask about.
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Old 01-11-2017, 11:47 PM   #5
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I was expecting this thread to be from a 20 yr old, asking how to save for a house.

I would think anyone who contemplates saving 10K - 15K a yr for a down payment, already has over the past decade saved 50K - 100K.

If you don't already have the $$ saved in an account, how can you realistically expect to suddenly be able to save even 10K in 1 year
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Old 01-12-2017, 02:44 AM   #6
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Quote:
Originally Posted by Sunset View Post
I was expecting this thread to be from a 20 yr old, asking how to save for a house.

I would think anyone who contemplates saving 10K - 15K a yr for a down payment, already has over the past decade saved 50K - 100K.

If you don't already have the $$ saved in an account, how can you realistically expect to suddenly be able to save even 10K in 1 year
These are good points to consider.
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Old 01-12-2017, 06:37 AM   #7
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Quote:
Originally Posted by Sunset View Post
I was expecting this thread to be from a 20 yr old, asking how to save for a house.

I would think anyone who contemplates saving 10K - 15K a yr for a down payment, already has over the past decade saved 50K - 100K.

If you don't already have the $$ saved in an account, how can you realistically expect to suddenly be able to save even 10K in 1 year
I do already have $100k invested. Half in a retirement account. The other half, I'm hoping not to touch, and to keep investing into. Losing 1-2 years of investment opportunity because of saving for a house where that amount of savings can earn potentially negative returns wounds the gods of compound interest. A small price to pay for losing noisy neighbors and thin walls.

Off the top of my head, it seems better to keep $100k invested and save an additional $10-30k for a down payment, than to sell stock and leave me with $70k, and to invest back up to that $100k again.
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Old 01-12-2017, 07:00 AM   #8
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Originally Posted by RetiredGypsy View Post
I do already have $100k invested. Half in a retirement account. The other half, I'm hoping not to touch, and to keep investing into. Losing 1-2 years of investment opportunity because of saving for a house where that amount of savings can earn potentially negative returns wounds the gods of compound interest. A small price to pay for losing noisy neighbors and thin walls.

Off the top of my head, it seems better to keep $100k invested and save an additional $10-30k for a down payment, than to sell stock and leave me with $70k, and to invest back up to that $100k again.
A VA loan is a good deal for people in your position (one man's opinion). (Check a couple of lenders to compare fees). If your payment is anywhere near what you spend on rent, it could be a very good deal. Sure, you will need to make home repairs that come up, but the privacy you desire should make that worthwhile.

My opinion on putting down large down-payments or having a paid off home in RE has changed. I prefer having the money in the bank and borrowing for a mortgage at near all time lows. Besides, if you believe CD's may get to 6 or 7% in the future, you would look very smart. If rates don't rise, you can always refinance.

We have purchased over a dozen homes in 40 years-many with large down payments. However, our "retirement home" was purchased with minimum down payment, and a 30 year, 3.5% mortgage. The total monthly payment is a joke compared to similar homes for rent in our area-actually 50% less!

Conventional wisdom can evolve due to changes in the economy. With today's low interest rates, having having a paid off home is not necessarily the best option. Of course, if one feels better/more secure, having it paid off in retirement, that is a different consideration.
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Old 01-12-2017, 12:14 PM   #9
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Houses have benefits and I have owned 7 since I bought my first one at age 25. I am 53 now, but they do come at a cost.
They need: new roofs, paint, carpet, insurance, property taxes, maybe HOA. Moving expenses, maybe new furniture, lots of little things go wrong (that's why Home Depot loves homeowners), foundations leak, dishwashers leak, pipes break, lawns grow, toilets break, critters eat holes in things, gutters clog, sump pumps won't pump, water heaters never last as long as you'd like and furnaces break on cold days in the middle of the night.

If you are OK with most, if not all of these things happening, then buy a house.
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Old 01-12-2017, 12:53 PM   #10
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I realize this is a slightly off-topic comment...but I'm a home inspector and you should be aware that VA is much more particular about certain findings in a home based on the home inspection. If you buy a house with septic or well, they will require additional inspections and water testing (which are usually a good idea anyway). Also, if the house has any "additional structures", even something as simple as a porch awning or room addition, they may ask for a signed document from the inspector or a structural engineer stating these things are in good condition. They will also be concerned if any mold/mildew is found and may require testing and/or mitigation of the mold before approving the loan. (Keep in mind most times I find mold, the homeowner does not know it's there...it's in attics and crawlspaces usually) I've had to do this several times for people with VA or FHA loans, and I do charge a bit extra for the work I have to do.


As far as where to save, I agree to avoid principal loss and stick with something that's guaranteed and either very liquid or has a maturity date matching when you will need funds. I'm also pretty in line with the Dave Ramsey philosophy...if you can't afford it on a 15 year loan, buy a cheaper house.


Good luck in your search!
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Old 01-12-2017, 01:09 PM   #11
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The most important thing is to get a house you really like. It doesn't have to be the most you can afford, but it should be something you like as to layout and location.

It's a big investment and one that you should be able to enjoy for a long time.

If you can go VA zero down why not?
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Old 01-12-2017, 01:23 PM   #12
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So you mentioned ill health, is any of it a possible service connected issue. If you have a service connected rating you are exempt from VA mortgage fees...if you are not sure check with DAV to see if you might be eligible for a rating, hearing is a very common one.

Be aware that you will pay more fees with VA and a smaller down payment, they can roll the fees into your payment, but you will pay more.
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