To buy or not???

Question

I am ready to buy a home, Hubby wants to but doesn't want to touch money in savings to do this. I think he is crazy. We have aprox $50,000 in savings and investments and he want's it for a rainy day. I say that isn't a good plan since we are paying out rent each month and have nothing to show for it. I feel a home is an investment and the current market is out chance to get a great deal as folks are dropping prices to avoid foreclosures. Am I wrong should the money just stay out there and never be used while we keep renting or should I try to get hubby to see that the money will do us more good if we put down a large down payment on a home? Not sure what to do, but would like to resolve this and move before winter (if that is what we do). Thanks!

I guess to answer a few things-we have a toddler and my husband has 2 girls from his first marriage. He was laid off from his job about 2 years ago and it took a bit to find a new one, doesn't pay the same as the other but still pays well-and I think this is the reason he is now nervous on money matters. We are looking at 3 bdrm homes in the $180,000 range that are now going 20% below asking price right off the bat due to the market. I think he sees that as home=bad investment now, I see it as time to get a good deal that I will still be in 10-15 years from now. Thanks for the info.

Oh-I work full time too, make about 2/3 of his salary so to me the amount in the nest egg does seem high for a 2 income home.

Answer 1

You should absolutely buy a house. This is the time since there are so many deals. However, do not use any more of your savings than you have to.

Interest paid on a mortgage is 100% tax deductible, it is the only interest that is still deductible. The house will appreciate over the years thereby building its own equity. If you put too much money down and have immediate equity then the only way to get it out is to sell your house. You can take a second mortgage to get the equity out but only if you have a job.

So leave as much of your saving intact for that rainy day that your husband is talking about. That way should you lose a job you have a safety net until you find a new one.

Good Luck.

Answer 2

First off you should figure out how much your husband NEEDs to feel that you guys have a comfortable cushion. You should leave that much alone, and use the rest to save for a down payment.

You should figure out what you think your housing payment would be. In most cases this amount will be higher than rent. Automatically put the difference into your account for the down payment. It also gives you a chance to make sure your budget can handle buying.

If you find an irresitable deal that would deplete your reserves, come up with a plan to build them back up to a point where your husband will be comfortable.

Answer 3

I agree with you. Although the argument is not that you have nothing to show for it. When you rent, you are basically paying interest, just not your own. Owning a home let's you take advantage of an asset that appreicates in value. It is a way to build real wealth in the long-term - especially now whenthe market is so low.

A rainy day fund is important, but 50k is one hell of a rainy day fund depending on your income. If he still wants access to cash in the event of an emergency, establish a home equity line of credit after closing. This will allow you to use the equity in your home as a last resort if something bad happens.

Answer 4

you are correct - $50k is more than a rainy day it is a rainy year. Even if you keep half of the funds in the bank you still have a good down payment

Answer 5

i think you are correct in your assessment , use maybe 30,000 of the saved monies to get your payments down. It will save alot of money if you can keep from paying pmi , which is just like rent (dead end) , but insures the lender ! usually a 10% downpayment will eliminate or greatly reduce the lenders need for pmi.