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Old     (wakemitch)      Join Date: Jun 2005       09-19-2016, 9:12 AM Reply   
My wife and I are currently saving to buy a house and hope to buy in a year. With the crazy price for homes in the Bay Area the 20% down is a lot of cash. It's looking like $120k-$160k .

As we save, where should we put our money so that it is relatively safe, but actually does something for us? It's a lot of money to just sit there and do nothing.

We have a money market account that gets us 1%, but I'm greedy and want more. I'm thinking we could put 20% of our savings each month into a mutual fund and 80% into the money market account. Is that too risky?

We are totally new to this, and would love some advice.
Old     (iShredSAN)      Join Date: Apr 2012       09-19-2016, 10:09 AM Reply   
Why not go FHA and only put down 3.5%?
Old     (wakemitch)      Join Date: Jun 2005       09-19-2016, 10:22 AM Reply   
Quote:
Originally Posted by iShredSAN View Post
Why not go FHA and only put down 3.5%?
We don't want to pay PMI and we want to have a higher chance of the seller taking our offer.
Old     (fouroheight68)      Join Date: May 2006       09-19-2016, 11:02 AM Reply   
Im a realtor, I'm from the Bay Area, were close to the same age, and I've bought 3 houses and sold 2 so I think I should maybe weigh in here. Any reason you are set on the Bay? Why not look outside (Tracy, Mountain House, or even up to Sacramento)? I moved the the South Bay area to Sacramento area 12 years ago and I'm so glad I did - I own a nice house on a 1/3 acre walking distance to the lake. I can have my boat in the water in 10 minutes. The quality of life is just so much better in my opinion. I only say this because I never would have afforded this in the Bay Area.

3.5% down is the way to go. There isnt much of a difference in the sellers mind (some more hoops for the buyer to jump through), so the whole FHA vs Conventional thing is largely a myth when it comes to odds of getting your offer accepted.
Old     (Michael)      Join Date: Mar 2010       09-19-2016, 11:06 AM Reply   
What about a 5 percent conventional? Thats what I picked up at 3.875%
Old     (wakemitch)      Join Date: Jun 2005       09-19-2016, 11:13 AM Reply   
Quote:
Originally Posted by fouroheight68 View Post
Im a realtor, I'm from the Bay Area, were close to the same age, and I've bought 3 houses and sold 2 so I think I should maybe weigh in here. Any reason you are set on the Bay? Why not look outside (Tracy, Mountain House, or even up to Sacramento)? I moved the the South Bay area to Sacramento area 12 years ago and I'm so glad I did - I own a nice house on a 1/3 acre walking distance to the lake. I can have my boat in the water in 10 minutes. The quality of life is just so much better in my opinion. I only say this because I never would have afforded this in the Bay Area.

3.5% down is the way to go. There isnt much of a difference in the sellers mind (some more hoops for the buyer to jump through), so the whole FHA vs Conventional thing is largely a myth when it comes to odds of getting your offer accepted.
We are going to be looking in Livermore. My wife works at the Lab and doesnt want a commute. All our family is in the bay area and I just love the bay area. I can be in Santa Cruz and on the delta in the same day.

So far everything we have ready and people close to us have told us that 20% down is a must, so that's what we have been going with. Again, we are new to this.
Old     (migs)      Join Date: Aug 2006 Location: SF Bay Area       09-19-2016, 11:34 AM Reply   
My neighbors house is going up for sale this weekend in Millbrae - right in the heart of the peninsula.
10 minutes to SF, 15 minutes to Palo Alto/ Cupertino, 3 minutes to SFO. 2 minutes to Burlingame Ave.
2bedroom, 2 bath, 1200 sq ft, 1 car garage. = Asking 1.2 million.
You Gotta love it.
Old     (psudy)      Join Date: Dec 2003       09-19-2016, 11:37 AM Reply   
The only downfall with the mutual fund is if the market falls and you lose your money. There are good ones out there that are safer than others, but the returns are smaller. You just have to weigh your appetite for risk. The more money you can put down the better but it seems that isn't the rule of thumb anymore. The downside to an FHA is it can be a PITA for sellers IF there is something not compliant with their rules on the home and they have to get it up to par. You could go conventional with 5% down and avoid the hassle. The seller won't care or know how much you are putting down so that wouldn't be an issue getting an acceptance, but there would be PMI. Rates seem to be a little better going conv. over FHA. Depends on who you go through though.
Old     (migs)      Join Date: Aug 2006 Location: SF Bay Area       09-19-2016, 11:38 AM Reply   
Mitch - to answer your question - when i was saving for my down, I was putting the $$ in 6 month CD's. Back then I was getting something like 3-4% if I can remember correctly. Not sure if those CD's are still available. I remember I just needed to be ontop of when that 6 month expired so I would roll it into a new one.
Old     (fouroheight68)      Join Date: May 2006       09-19-2016, 11:42 AM Reply   
Quote:
Originally Posted by wakemitch View Post
We are going to be looking in Livermore. My wife works at the Lab and doesnt want a commute. All our family is in the bay area and I just love the bay area. I can be in Santa Cruz and on the delta in the same day.

So far everything we have ready and people close to us have told us that 20% down is a must, so that's what we have been going with. Again, we are new to this.
Fair enough! I would just continue to save rather than make risky investments that have potential for a quick return. Do you have any assets you can sell to help you towards your goal (boat, motorcycle, extra car)? I sold some of my toys to help me move up to where I am, which had a much greater return when the house appreciated. Do you have any family who can help you with a downpayment? Getting into a house as a first time buyer is daunting, trust me I've been there - I scraped and saved for my first down payment of 8k. Are you working with a Realtor? I can refer you to one in your area if thats helpful.
Old     (sidekicknicholas)      Join Date: Mar 2007       09-19-2016, 12:45 PM Reply   
Quote:
What about a 5 percent conventional? Thats what I picked up at 3.875%
This would be my suggestion too. Avoid FHA at all costs, but at least with the 5% conventional you can dump your PMI when you hit that 20% equity mark ... and if the housing market gets better and better a re-fi will help get you a free boost.

We did this with our first condo, paid at the principle like crazy and then just had the lender drop the PMI as soon as we hit our mark.

Another option, maybe more rare, but some local lenders will be much more flexible. Our current house was foreclosure appraised 300k, but needed a fair amount of work ... I had enough money to do the work that was needed or put 20% down, but not both. We got the house for $220k and the lender counted that $80k between our purchase price and appraisal as equity ... so we had a "free" 25% down payment which kept the cash I had open to take care of the repairs that were needed.

Last edited by sidekicknicholas; 09-19-2016 at 12:48 PM.
Old     (wakemitch)      Join Date: Jun 2005       09-19-2016, 12:45 PM Reply   
Quote:
Originally Posted by fouroheight68 View Post
Do you have any family who can help you with a downpayment? Getting into a house as a first time buyer is daunting, trust me I've been there - I scraped and saved for my first down payment of 8k. Are you working with a Realtor? I can refer you to one in your area if thats helpful.
My in-laws are helping a ton by letting us stay at their Discovery Bay summer home for free while we save. We are very grateful for it. So our expenses right now are super low.

We arent working with anyone yet. We are just asking a ton of questions and researching as much as we can. We can hit our goal in a year, but we just want to be sure we arent missing anything that could help us. We want to do it right.
Old     (jonblarc7)      Join Date: Jul 2006       09-19-2016, 4:50 PM Reply   
Shoe Box
Old     (DenverRider)      Join Date: Feb 2013       09-19-2016, 8:54 PM Reply   
The market is overpriced and unstable right now. After a 6 year long bull it has been flat for over 6 months. If you want that money to earn over the short term I would go with the CD, Treasury Bills, or maybe a government bond fund.
Old     (DenverRider)      Join Date: Feb 2013       09-19-2016, 8:55 PM Reply   
The shoe box won't protect you from potential inflation but at least you didn't say gold.
Old     (wakeworld)      Join Date: Jan 1997       09-19-2016, 10:13 PM Reply   
Keep it safe earning the 1%. Unfortunately, with interest rates artificially low, there aren't many safe options that pay anything available to savers. Our economy is encouraging us to borrow. Although this administration has kept interest rates low for the sake of covering their incredibly poor economic performance, I have to think the next admin has to raise rates. That will help with your savings, but will hurt on your interest rate. I'd do everything I can to take advantage of the current low interest rates because they have nowhere to go but up. Get into something quick!
Old     (BrettLee3232)      Join Date: Feb 2015       09-19-2016, 10:33 PM Reply   
Yeah try 5% conventional. My loan officer said he could do 5% & NO PMI. Do you have a loan officer? If not I would talk to one and see your best options. 20% down is nice and cuts your payment down a little but in reality it's not a huge savings. Especially when you could use that extra 15% you saved towards home improvements that will help raise property value or towards an investment opportunity.

I'd much rather pay a few hundred more a month with a low interest rate & have the rest of my savings earning more ROI.
Old     (psudy)      Join Date: Dec 2003       09-20-2016, 6:25 AM Reply   
Yeah at 5% he is making a HUGE Yield spread and just prepaying your PMI.
Old     (buffalow)      Join Date: Apr 2002       09-20-2016, 7:28 AM Reply   
I agree with the team - Take your safe 1% and be happy. I am expecting next year to be very rocky for our economy regardless of who is in the office. I have moved most of my stuff to be very conservative for the next 12-18 months. I believe the world economy+terrorists attacks+new president will make everybody hold there money and see what happens. I do believe we ill have a housing market turndown as it has been about 10 years, which is the typical cycle. Two schools of thought here - get in now as interest rates are very low, but housing is very high or wait until the new crash which housing costs will be down, but interest rates may be up.

I would say either way, save everything you can and really decide what you want in a house, than start looking and being very picky. When you find the right deal, you will know for sure and than you pounce. I would also agree to avoid putting that much down - that money could be used for other things or just saved in case of emergency.

We lived in Livermore for 12 years and really enjoyed it. I found it to chaotic and busy now, but maybe I am just getting old (47) and set in my ways. I used to love going into OSH or any restaraunt there and knowing the owners and chatting it up with them. I used to enjoy hanging with al the neighbors and meeting for different functions. As that economy has grown, it lost a lot of the small town feel. That is not a bad thing, just a bad thing for me.
Old     (Redheadd)      Join Date: Apr 2014       10-03-2016, 7:18 PM Reply   
If I was in your position this is what I would do, depending on your skills. I know you're a teacher and looks like you're looking in the 600k range for homes. I'd start looking at fixer uppers in the 500k range,if they are there I'm not familiar with the market in Livermore,but this would hold true here in disco. I'd buy a fixer upper and put 50k in materials which in my opinion I could get a lot done for that amount and I remodel the house over the summer while you're off work. Then Refi get that pmi off and gain 50-75k in equity on top of my 50k. But then again I really know homes and am capable of doing 100% of the labor myself to a high quality.
Old     (Redheadd)      Join Date: Apr 2014       10-03-2016, 7:19 PM Reply   
Oh my bad I'd use the fha loan to achieve this. Pomo is only .85% I believe so really not that bad for a few months considering the equity gain.

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