Saving for a home!

Real Estate
#1

Ok, so I recently paid off $203K in 27 months. Now, we want to buy a home and I’m stuck because not sure if I should put 20% down or 10% and invest the rest. I’m new to investing and have big goals for my money. :slight_smile:

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#2

First off, congratulations on paying that off! That’s excellent!

Putting 10% or 20% down is a personal choice, but there are a few things to consider:

  1. Depending on the type of loan, the majority of loans have Private Mortgage Insurance (PMI) for anything less than 20% down. This is worth looking into.

  2. While it is nice to have the extra cash to invest, the monthly payment will be higher with 10% down vs 20% down, so it’s also worth taking that into consideration for long-term budget planning.

  3. The interest rate might be slightly higher with 20% vs 10% down depending on the type of loan.

If you haven’t already, I think a good next step might be to speak with a few mortgage lenders to see what type of mortgages would apply to your situation depending on if you put 10 or 20% down! I’m a big fan of talking with multiple lenders at different companies to try and learn from them and go with who you get along with best and who offers you the most competitive loan.

I’m excited for you!! :smiley:

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#3

Thanks for the great response.

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#4

Thank you for this answer @ShaneSideris. I’m new to investing and the PFC Community. Do you have any recommendations as far as investing for a down payment on a house? My money is currently in a savings account and would like to maximize it.

#5

Hi @navhal! Thank you for the question!

It can depend on how long until you think you will be purchasing the house. If the purchase could take place within the next year or so, I think your money in a high yield savings account is the best place.

The stock market is a great place to build wealth over long periods of time. The problem is in the short term (less than a few years), anything could happen. The market could go way up or way down. So, if you put your savings in the stock market and the market was way down when the time came to purchase your home you will have to sell out of the stock market at a loss to get the money for the down payment. And that would not be ideal!

If you think the home purchase is more than a few years away, then you can consider allocating some or all of the down payment savings to the stock market.

I hope this helps!! Let us know what other questions you have!