Money Market Investing and New Home Purchasing

[BCClone]

I'm in a similar situation to the OP and looking to buy first home. My loan officer actually encouraged me to put $0 down. I am buying a fixer upper and said it would make better sense financially to put my savings toward the renovations. My interest rate wasn't effected and my monthly payment barely would be.

Government backed loan? If you can get by with that that is an option. One thing to remember is if you sell it in 3-5 years, the broker commission is 6-7%. So I make sure you have that taken care of so you don’t owe more when you leave then what you get.

 

[IowaRealEstate]

You def do not "have to" have 20% on a home. If you do an FHA loan, you need 3.5% and most conventional loans can be done with a 5% down payment. 20% is a nice goal to be able to avoid having to pay extra each month, but if you are gonna rent for 2-3 years to get that 20%, you will throw that away on rent anyway during that time so there will not be that much difference in the end.
You got good advice above in factoring in agent commission when you sell it down the road. If you hire an agent you will need to pay, but the days of having to pay 6 or 7% are over. First commissions are negotiable and second, firms like mine exist. We charge sellers $2495 + 3%, so on a 200k home you will save $3500 hiring us vs a 6% firm and you will still get full service.
Be a savvy shopper and look around.
On the buy side, get yourself an agent with lots of experience. They are great advocates to have and the seller pays their fee.

 

[Jacktronic]

I was still in vet school during the recession, so financially I've never had to endure one as the primary source of household income. Currently most of our funds are in total stock market indexes, so I'll really need to steady myself when they drop. I know it's wrong but my knee-jerk reaction is gonna be to sell at a loss.

 

[capitalcityguy]

I was still in vet school during the recession, so financially I've never had to endure one as the primary source of household income. Currently most of our funds are in total stock market indexes, so I'll really need to steady myself when they drop. I know it's wrong but my knee-jerk reaction is gonna be to sell at a loss.

Just remember, it is only a loss on paper when the market dips. You don't lock in the loss unless you actually sell when down. If you are investing long term, hang tight!

 

[NateTheBoss]

I'm in a similar situation to the OP and looking to buy first home. My bank actually encouraged me to put $0 down. I am buying a fixer upper and said it would make better sense financially to put my savings toward the renovations. My interest rate wasn't effected and my monthly payment barely would be.

Was the $0 down loan an ARM loan? My bank tried to get me on that.

 

[SCNCY]

My wife and I are saved for a home too. We are putting our savings into a bond fund (FTBFX). I think the yield on it is 3-3.5%. What ever your investing platform is, I'm sure they have a free bond fund to choose from.

 

[dualthreat]

Was the $0 down loan an ARM loan? My bank tried to get me on that.

I'm new at this but I've met with him twice. Neither time was an ARM loan or a government backed loan @BCClone mentioned.

 

[Sigmapolis]

I was still in vet school during the recession, so financially I've never had to endure one as the primary source of household income. Currently most of our funds are in total stock market indexes, so I'll really need to steady myself when they drop. I know it's wrong but my knee-jerk reaction is gonna be to sell at a loss.

@capitalcityguy nailed it.

You are only truly gaining or losing when you sell.

If you were in vet school circa 2009, then that should be a long time from now.

 

[Gunnerclone]

Do you really need to put down 20%, as in a requirement? Thought that was something that was ideal, but negotiable.

In this world it’s an anomaly.

 

[cyfan21]

Do you really need to put down 20%, as in a requirement? Thought that was something that was ideal, but negotiable.

Only if you don't want PMI

 

[Gunnerclone]

Only if you don't want PMI

Mortgage companies will wrap your PMI in to your loan at like .15% higher interest rate. Probably works out roughly the same but you don’t have to “pay PMI” which is cool to have in your pocket when bragging to your friends.

 

[SpokaneCY]

I was still in vet school during the recession, so financially I've never had to endure one as the primary source of household income. Currently most of our funds are in total stock market indexes, so I'll really need to steady myself when they drop. I know it's wrong but my knee-jerk reaction is gonna be to sell at a loss.

2 rules for your investments:

1. Watch all day every day and understand what each and every blip looks like, look at the NIKEI, kiwi futures, orange juice concentrate and count trucks moving on major interstates.

2. Forget about it for 30 years while making small, continuous contributions.

Follow either rule so long as you don't do anything, and you'll have the same amount of money but less stress!

Time is your friend but time will also make you fat and lazy. So actually a great analogy for some of my friends.

 

[UNI1ISU2]

We've riding a record long bull market at the moment...how much longer can that last??? . I would be weary of trying to do much more than what you've already discussed doing to hold cash short term.

Overall, nice work at this point in your life!

I bet you are fun at party’s. The sky falling yet?

 

[UNI1ISU2]

Best advice. Call Dave Ramsey show. He will give you the best advice

 

[DeereClone]

You def do not "have to" have 20% on a home. If you do an FHA loan, you need 3.5% and most conventional loans can be done with a 5% down payment. 20% is a nice goal to be able to avoid having to pay extra each month, but if you are gonna rent for 2-3 years to get that 20%, you will throw that away on rent anyway during that time so there will not be that much difference in the end.
You got good advice above in factoring in agent commission when you sell it down the road. If you hire an agent you will need to pay, but the days of having to pay 6 or 7% are over. First commissions are negotiable and second, firms like mine exist. We charge sellers $2495 + 3%, so on a 200k home you will save $3500 hiring us vs a 6% firm and you will still get full service.
Be a savvy shopper and look around.
On the buy side, get yourself an agent with lots of experience. They are great advocates to have and the seller pays their fee.

How are most of the deals you do financed? Meaning what % are 3.5% down FHA loans, less than 20% down conventional loans, 20% down conventional loans, and cash deals?

Just curious what the market as a whole looks like. It feels like the industry got more conservative from about 2010-2014, and now for the last 5 or so years they are pushing things further with smaller down payments.

 

[Gunnerclone]

How are most of the deals you do financed? Meaning what % are 3.5% down FHA loans, less than 20% down conventional loans, 20% down conventional loans, and cash deals?

Just curious what the market as a whole looks like. It feels like the industry got more conservative from about 2010-2014, and now for the last 5 or so years they are pushing things further with smaller down payments.

I think FHA loans and options that require smaller down payments have been around for a long time. I don’t even know where the “you have to have 20% down to buy a home” myth came from.

 

[capitalcityguy]

I bet you are fun at party’s. The sky falling yet?

The OP is asking about short term investments. Not overall long term investing.

I stated a fact (historically record long bull market) and asked a prudent question (how much longer can it last?).

Also reiterated pretty common investment related advice in that you don't generally want to be too creative with short term investments.

I can easily point out your strawman if you like me to. In the meantime, please indulge me and point out where my "sky is falling" comment is? That, my friend, has me stumped. I can only assume you misread my comment.

 

[Sigmapolis]

OP asked a boring question because OP is actually playing this well.

So we should proceed to bicker about something unrelated.

 

[Gunnerclone]

The OP is asking about short term investments. Not overall long term investing.

I stated a fact (historically record long bull market) and asked a prudent question (how much longer can it last?).

Also reiterated pretty common investment related advice in that you don't generally want to be too creative with short term investments.

I can easily point out your strawman if you like me to. In the meantime, please indulge me and point out where is "sky is falling" comment is? That, my friend, has me stumped.

If you aren’t planning for the next downturn then you aren’t investing in reality. I don’t like the stigma that “timing the market” has gained after the last crisis. I always tell my people to “find THEIR top, and find THEIR bottom”.

Just had a guy the other day that came across my desk, worried about when the downturn was coming, but he didn’t want to try to “time the market”. My comments were that if he found his top right now, after producing 30% returns over the past five years, he wasn’t “timing the market”. He was selling high. Was he selling at the “highest”? No one knows, but I felt like he had found his top and it was time to start another journey that he felt comfortable with, which was moving in to a nice selection of fixed and bond investments with a sprinkle of LC and MC Index funds for something he could stay engaged with and every day he could pull up his five year chart and look at the 250k in free money he made over the past five years.

Then I wrote down that when he “finds his bottom” the next time things turn down to call us back and we’ll start another journey.

Now everyone come at me.

 

[Sigmapolis]

If you aren’t planning for the next downturn then you aren’t investing in reality. I don’t like the stigma that “timing the market” has gained after the last crisis. I always tell my people to “find THEIR top, and find THEIR bottom”.

Just had a guy the other day that came across my desk, worried about when the downturn was coming, but he didn’t want to try to “time the market”. My comments were that if he found his top right now, after producing 30% returns over the past five years, he wasn’t “timing the market”. He was selling high. Was he selling at the “highest”? No one knows, but I felt like he had found his top and it was time to start another journey that he felt comfortable with, which was moving in to a nice selection of fixed and bond investments with a sprinkle of LC and MC Index funds for something he could stay engaged with and every day he could pull up his five year chart and look at the 250k in free money he made over the past five years.

Then I wrote down that when he “finds his bottom” the next time things turn down to call us back and we’ll start another journey.

Now everyone come at me.