Author Topic: A bit anxious about diverting money from my 401k to a house downpayment  (Read 6632 times)

EconDiva

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This year I lowered my 401k contribution all the way down to the minimum required for a match (2%).  Previously it was ~10%.  I have about $40k in there now.  My employer matches 100% up to 5% of salary.  I'm 38 and obviously quite behind in retirement savings. 

So far this year I'm closing in on about 10K for the house fund with a goal of 15k by the end of the year.  I figured I'd do this again next year and try to get to 30k total.  I'm thinking 20k towards downpayment/closing and 10k for furnishing, unexpected expenses/maintenance/issues that might come up over the first year.  My issue is that I think I need to get a little more organized about all of this for the following reasons:

-I haven't decided what budget to use to spend on a house end of next year.  Part of me wants to go the strategy of super super cheap (100k in my area) which would definitely put me in a place that's not large enough to share with anyone/bring in any additional income.  The other part of me thinks I should go higher (as in 200k) and find a place large enough to have another person or people in supporting a large portion of the mortgage (enough so that the net amount I'd have to pay would be less than paying on a 100k place ALONE).  (Think: duplex or basement, etc.)  Which is the more mustachian route??  Going with a lower mortgage, correct?  FWIW I make just over 90k excluding an annual ~8% bonus and calculators are putting me at qualifying for just over 300k (I know, crazy).  I'm just not sure what to set as a target comfortable max mortgage amount to look under.

-I need to do the above in order to figure out how much I 'really' should be saving and thus how long I should be putting money away into a house fund.  I'm actually starting to get a little nervous about this money not going into retirement instead.  I mean, I'll be 40 by the time I buy a place. 

-Rent vs buy calculator is moderately to strongly in favor of 'buy' in my area at this time.
« Last Edit: August 29, 2017, 09:20:25 AM by EconDiva »

Cwadda

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #1 on: August 29, 2017, 09:30:56 AM »
Did you have any specific questions? You explained your situation, but I'm not sure what your questions are. From what I gather, the ones below?

Quote
Which is the more mustachian route??  Going with a lower mortgage, correct?
I recommend buying a multi family home, living in one unit and renting the others. Going with a lower mortgage payment isn't necessarily the most mustachian option. Ideally the most mustachian option is one that you can afford, is within your means, suits your needs (i.e. no need for a 3 bedroom if you're single).

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #2 on: August 29, 2017, 09:36:49 AM »
Did you have any specific questions? You explained your situation, but I'm not sure what your questions are. From what I gather, the ones below?

Quote
Which is the more mustachian route??  Going with a lower mortgage, correct?
I recommend buying a multi family home, living in one unit and renting the others. Going with a lower mortgage payment isn't necessarily the most mustachian option. Ideally the most mustachian option is one that you can afford, is within your means, suits your needs (i.e. no need for a 3 bedroom if you're single).

Yes, those are my primary questions.  And determining what max to set myself at. 

Cwadda

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #3 on: August 29, 2017, 09:41:56 AM »
Did you have any specific questions? You explained your situation, but I'm not sure what your questions are. From what I gather, the ones below?

Quote
Which is the more mustachian route??  Going with a lower mortgage, correct?
I recommend buying a multi family home, living in one unit and renting the others. Going with a lower mortgage payment isn't necessarily the most mustachian option. Ideally the most mustachian option is one that you can afford, is within your means, suits your needs (i.e. no need for a 3 bedroom if you're single).

Yes, those are my primary questions.  And determining what max to set myself at.

Further info on the multi family idea:
You can use an FHA loan to buy a multi family property with 3.5% down. You are required to live in the house for 12 months. 20-25% down helps since you won't be stuck with PMI, but a low down payment is definitely achievable. You can also owner occupy a multi family property with 5% on a conventional loan. This might make better sense for your situation. With FHA, PMI is for the life of the loan. With conventional, it goes away once you hit 20% equity.

I bought my house (4 family) for $350k and put $10k into it. I make around $44k/year, with no retirement benefits. Does this help?

mozar

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #4 on: August 30, 2017, 03:53:33 PM »
Based on your roommate struggles i think you should just buy a 1 bedroom condo. I don't think you are up for managing a duplex or finding tenants tbh.
When you are looking at condos don't forget to add in the hoa fee.
I don't understand why at 90k you can't both max out your 401k and save for a down-payment.
I bought a townhouse in 2013 for 118k (its a small one)plus 550 for hoa and taxes.  I was making like 75k at the time and it only took me a few months to save 10k for the down-payment  (no pmi).
Pro tip: when searching for a place check the warranties for the appliances. My mom was able to get her washer and dryer replaced for free because it was still under warranty when she bought. Sometimes you also negotiate for an allowance in your offer price if an appliance is very old.

SimpleCycle

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #5 on: August 30, 2017, 04:15:04 PM »
At the very least you should put enough into your 401k to get the full match, which I'm reading as 5%.

After that, I think a lot of what you choose is more about your housing preferences and if you want to live alone, with others, or in a multi-unit.

4alpacas

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #6 on: August 30, 2017, 05:22:34 PM »
At the very least you should put enough into your 401k to get the full match, which I'm reading as 5%.
I don't have any thoughts about your house/condo purchase, but you're leaving free money on the table.  At least, max out your employer matching contributions!!
« Last Edit: August 30, 2017, 05:40:33 PM by 4alpacas »

wordnerd

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #7 on: August 30, 2017, 05:33:03 PM »
I don't understand why at 90k you can't both max out your 401k and save for a down-payment.

This. Maybe post a case study if you're trying to figure out how to do both.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #8 on: August 30, 2017, 07:28:35 PM »
I wrote about my 401k match incorrectly.  Please allow me to clarify:

My employer matches 5% of my salary as long as I contribute a minimum of 2% on my own.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #9 on: August 30, 2017, 07:47:35 PM »
Oh Lord...here come the facepunches.

Current budget is below.

After taxes/insurance/401k I take home $4684.

A few notes:

1.  I'm moving in 2 weeks so rent is going up.  Some of you may have read the case study I posted about having a roommate and/or my post about getting a studio vs. a 1 bedroom.  I'm in a studio.  But it's near public transit with a nice 'coworking type' space in the lobby.  I work from home and don't own a car.

2.  I honestly have tried to get my food budget under $500.  I just checked mint today and found that for the month of August 40% of my food expenses were related to going out to eat with friends.  I had two friends come into town this month...one was for a birthday trip as they wanted to hang out with me in my city and celebrate.  Those few visits eating out really do cost a lot.  My typical day of eating lately has been a blt sandwich for 'brunch', soup for dinner and fruit/almond butter for dessert (I don't consume alcohol at home FYI).

3.  I'm not really willing to give up travel.  :(

4.  I'm not really willing to give up the gym.  I lift and go 5 days a week.

5.  The bills/utilities is an estimate.  I'm moving in 2 weeks--I estimated 300 and the leasing consultant at my new apartment said to estimate $250 as she lives in a similar unit.  So I'm being conservative here. 

6.  For those saying I need to save for the downpayment *and* max out the 401k, it seems I need to shave off ~$1300 down below........


Student loans-91

Travel (1 domestic and 1 international trip per year)-400

Emergency fund-100

Rent-   1190

Groceries and restaurants-500

Household items (has been inflated lately due to preparing for upcoming move in 2 weeks…may go down to closer to $20)-50

Personal (Fun money for going out, hair appointments and/or products, random hobbies, occasional charity, but mostly this category has been going to helping my mom with bills lately)-200

Medical (inflated recently due to recent move back to another state and have been establishing appointments with new pcp, ob/gyn, dermatologist, dentist, etc.).  May go down closer to $25 soon.-50

Bills/utilities (cable, internet, water/sewer/trash, electric, renter's insurance)-300

Cell-64

Gym-   30

House-1500

Transportation (Lyft and public transit-don't own a car)-150

Total-4625
Remaining-59 (Anything remaining goes into E-fund)


EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #10 on: August 30, 2017, 07:50:41 PM »
Based on your roommate struggles i think you should just buy a 1 bedroom condo. I don't think you are up for managing a duplex or finding tenants tbh.
When you are looking at condos don't forget to add in the hoa fee.
I don't understand why at 90k you can't both max out your 401k and save for a down-payment.
I bought a townhouse in 2013 for 118k (its a small one)plus 550 for hoa and taxes.  I was making like 75k at the time and it only took me a few months to save 10k for the down-payment  (no pmi).
Pro tip: when searching for a place check the warranties for the appliances. My mom was able to get her washer and dryer replaced for free because it was still under warranty when she bought. Sometimes you also negotiate for an allowance in your offer price if an appliance is very old.

Just because it didn't work out with my current family member roommate, you think I should avoid tenants altogether?

That seems a bit extreme.  That is one situation that didn't work out for many reasons and I think I learned a lot about establishing boundaries, the need for more space, determining what kind of lifestyles and habits of someone make a better match for me to live with, etc.  I'd be more interested in something like a duplex anyway where we're not exactly in the same space all the time together like we were where I'm at now.  Especially because of the work from home component for myself. 

Of course that's not to say I've decided that having a tenant is the best idea...part of the reason for the post is I am trying to decide if I should consider that or not when buying my first home.  If not then obviously I'll be going with a much much cheaper place, but again, I'd have no potential rental income to assist with the mortgage.


ETA:

YOUR HOA IS $550????????!!!!!!

Also, how'd you do no PMI with 10K down on a 118k property? 
« Last Edit: August 30, 2017, 08:17:34 PM by EconDiva »

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #11 on: August 30, 2017, 07:56:50 PM »
Did you have any specific questions? You explained your situation, but I'm not sure what your questions are. From what I gather, the ones below?

Quote
Which is the more mustachian route??  Going with a lower mortgage, correct?
I recommend buying a multi family home, living in one unit and renting the others. Going with a lower mortgage payment isn't necessarily the most mustachian option. Ideally the most mustachian option is one that you can afford, is within your means, suits your needs (i.e. no need for a 3 bedroom if you're single).

Yes, those are my primary questions.  And determining what max to set myself at.

Further info on the multi family idea:
You can use an FHA loan to buy a multi family property with 3.5% down. You are required to live in the house for 12 months. 20-25% down helps since you won't be stuck with PMI, but a low down payment is definitely achievable. You can also owner occupy a multi family property with 5% on a conventional loan. This might make better sense for your situation. With FHA, PMI is for the life of the loan. With conventional, it goes away once you hit 20% equity.

I bought my house (4 family) for $350k and put $10k into it. I make around $44k/year, with no retirement benefits. Does this help?

This is helpful...thank you for the info.

tralfamadorian

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #12 on: August 30, 2017, 08:01:57 PM »
Further info on the multi family idea:
You can use an FHA loan to buy a multi family property with 3.5% down. You are required to live in the house for 12 months. 20-25% down helps since you won't be stuck with PMI, but a low down payment is definitely achievable. You can also owner occupy a multi family property with 5% on a conventional loan. This might make better sense for your situation. With FHA, PMI is for the life of the loan. With conventional, it goes away once you hit 20% equity...

+1

I vote for a quadplex, 3.5% down; take the smallest unit for yourself and rent out the other three to cover all mortgage and house related expenses.  Is the possibility of taking your housing costs from $1190/mo to $0 worth the hassle of tenants to you?  At the price points you are discussing, it appears that you live in a part of the country where this is very doable.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #13 on: August 30, 2017, 08:12:02 PM »
Further info on the multi family idea:
You can use an FHA loan to buy a multi family property with 3.5% down. You are required to live in the house for 12 months. 20-25% down helps since you won't be stuck with PMI, but a low down payment is definitely achievable. You can also owner occupy a multi family property with 5% on a conventional loan. This might make better sense for your situation. With FHA, PMI is for the life of the loan. With conventional, it goes away once you hit 20% equity...

+1

I vote for a quadplex, 3.5% down; take the smallest unit for yourself and rent out the other three to cover all mortgage and house related expenses.  Is the possibility of taking your housing costs from $1190/mo to $0 worth the hassle of tenants to you?  At the price points you are discussing, it appears that you live in a part of the country where this is very doable.

As a first time homebuyer really the only thing that concerns me about a quadplex is 3 tenants to collect rent from...I was thinking a duplex or something with a basement suite (both of which may be hard to find as duplexes aren't really being built anymore and properties with a basement suite I 'think' will be much higher than 200k or WAY way further from the city). 

With that said quads may actually be easier to find...I saw one for like $130k the other day.  Of course it's not in the best neighborhood at all...more of a transitional area, but there are a few around. 

I do believe that living in a unit that's separate from the other tenant(s) is best for me though.  I don't really want to do, say, a 200k 3/2 single family home with a roommate and sharing the common area.  I could try it again but it's just not my preference.

ETA:  RE: your question, I think it's worth the hassle.  At least, I say that now as who doesn't want to live mortgage free essentially?
« Last Edit: August 30, 2017, 08:15:06 PM by EconDiva »

tralfamadorian

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #14 on: August 30, 2017, 08:17:13 PM »
As a first time homebuyer really the only thing that concerns me about a quadplex is 3 tenants to collect rent from...

If that's the only thing holding you back- there's no reason you can't use regular property management for the other three units.  A typical management fee would be 8-11%. I know someone who did this; they knew that they were big softies and wouldn't be able to be stern on rent deadlines and things. 

There's not even any reason they have to know that you are the owner. 

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #15 on: August 30, 2017, 08:19:00 PM »
As a first time homebuyer really the only thing that concerns me about a quadplex is 3 tenants to collect rent from...

If that's the only thing holding you back- there's no reason you can't use regular property management for the other three units.  A typical management fee would be 8-11%. I know someone who did this; they knew that they were big softies and wouldn't be able to be stern on rent deadlines and things. 

There's not even any reason they have to know that you are the owner.

That never even crossed my mind....

My best friend uses one for her husband's house that he had when he moved in with her when they married last year and she loves it

Good point; thanks for mentioning this.

Dicey

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #16 on: August 30, 2017, 11:39:24 PM »
Ha! An old friend used to own apartment buildings. He drove a beater truck and did a lot of work himself. Everyone thought he was just the maintenance guy. Millionaire Next Door type indeed!

mozar

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #17 on: August 31, 2017, 07:00:04 AM »
My hoa is 250, my taxes are 275. So actually 525 total. Because I bought a co-op there was some rule about the banks that work with them not charging pmi.
It's not that the roommate didn't work out exactly but that you allowed her to live with you in the first place. Even if you are renting out a separate dwelling you have to have very strong boundaries.  I get that you've learned a lot, but I'm not sure its enough. I'm speaking from a place of compassion because i used to have the same issues.
Also are you sure you want to buy in a year?. If travel, your mom's bills, restaurants and the gym are more important to you than saving money, consider holding off for a couple years. Owning has a alot of expenses that you may not be r3ady for.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #18 on: August 31, 2017, 09:12:34 AM »
My hoa is 250, my taxes are 275. So actually 525 total. Because I bought a co-op there was some rule about the banks that work with them not charging pmi.
It's not that the roommate didn't work out exactly but that you allowed her to live with you in the first place. Even if you are renting out a separate dwelling you have to have very strong boundaries.  I get that you've learned a lot, but I'm not sure its enough. I'm speaking from a place of compassion because i used to have the same issues.
Also are you sure you want to buy in a year?. If travel, your mom's bills, restaurants and the gym are more important to you than saving money, consider holding off for a couple years. Owning has a alot of expenses that you may not be r3ady for.

Ooops...sorry.  Was reading too fast and skipped the 'and taxes' part.  I know nothing about co-ops TBH.

Helping my mom and 'restaurants' vary from month to month.  I try to keep those 2 things down but sometimes I make exceptions when my parent's electricity is about to get cut or my best friend I haven't seen in a year decides to come into town.  I would say that $200 category is pretty accurate in that I try not to go over that amount for all of the things I listed there

I wasn't sure I got what you were saying about the fact I decided to let my roommate live with me.  I moved in to her place.  She wasn't my first roommate and I can only think of 1 (in college) I really enjoyed living with so my focus is on trying to figure out how I can bring in more income once I decide to buy that doesn't necessarily involve a roommate and I think the multifamily option people have been bringing up is a good option. 

Those things you mentioned (i.e. helping my mom, etc.) are just as important as savings...to me.  If they were more important than savings I would be doing those things instead of saving...right?

Why wait past another year?  Because there will always be things that are 'as' important to me as saving...even a year from now.  If I can put 1500/per month towards a house and explained in my original thread I'm accounting for savings specifically for maintenance/repairs for when I do buy (that is outside of my regular savings account), then I don't get how I wouldn't be prepared to buy, especially when I'm shooting for a mortgage less than I what I pay in rent (at least that is the goal) *and* on top of that the money I'm currently saving for a house would then all be diverted back into retirement and savings/investments. 

I appreciate your coming from a place of compassion...I do not mind my expenses (choices) being scrutinized or else I wouldn't be on this forum.  For instance I really never thought to live car free before I joined MMM.  You can see by my budget I'm obviously not hard core like some of you badasses (but maybe someday I will come much closer to being that...for now it's been a heck of a slow process in trying to make small long term sensable changes that really last for me).  If only you coulda seen where I was 5 years ago though! 

Cwadda

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #19 on: August 31, 2017, 10:37:59 AM »
As a first time homebuyer really the only thing that concerns me about a quadplex is 3 tenants to collect rent from...

If that's the only thing holding you back- there's no reason you can't use regular property management for the other three units.  A typical management fee would be 8-11%. I know someone who did this; they knew that they were big softies and wouldn't be able to be stern on rent deadlines and things. 

There's not even any reason they have to know that you are the owner.

That never even crossed my mind....

My best friend uses one for her husband's house that he had when he moved in with her when they married last year and she loves it

Good point; thanks for mentioning this.

If you factor in numbers for property management, you can definitely swing it. Then you won't have the hassle of dealing with tenants.

Honestly, property management is not that hard. It's easy because you hear all the horror stories of terrible property owners. Just do the opposite! There are countless resources on the internet for it.

mozar

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #20 on: August 31, 2017, 02:25:50 PM »
Thanks for the thorough reply.
I couldn't remember who moved in with who but I do remember your threads about your current (most recent?) roommate. I remember your threads about how difficult a person she was before you moved in with her, people on this forum telling you not to move with her, then you moving in with her. But I see you've been convinced not to live with someone in your space again (who is not a spouse/partner).

Quote
Those things you mentioned (i.e. helping my mom, etc.) are just as important as savings...to me.

I'm just acknowledging that this is a priority for you which means that you have less money available for savings.

Quote
If I can put 1500/per month towards a house and explained in my original thread I'm accounting for savings specifically for maintenance/repairs for when I do buy (that is outside of my regular savings account)

But you are only planning on 10k for maintenance etc. That's not enough for a multi unit dwelling. You could go through that in a few months if you had multiple vacancies and an appliance breakdown. I just want you to carefully consider it.

Quote
Why wait past another year?  Because there will always be things that are 'as' important to me as saving...even a year from now.
So that you have more money. A few months ago I was laid off AND I had to pay a 5k house bill for some remodeling I had done and I couldn't put it on a credit card, AND my fridge could die any minute. Fortunately I have savings so I wasn't stressed about it.
Today I had to leave work early to met a house inspector because I am renting out a room. My county just recently changed the rules so I am no longer compliant, and I got a citation for it. That's the sort of thing you have to deal with.

Quote
especially when I'm shooting for a mortgage less than I what I pay in rent (at least that is the goal)

Well say your studio is 1150.
Condo: bought for 114k, 3.92%, 30 year
Mortgage: 539
Taxes: 85
Utilities:150
=774
That seems better than the studio but remember you are on the hook for maintenance ( typical is ~ 1k a year which is 120 a month). Also remember that the downpayment is ~20,000. which is like spending an extra 333 dollars a month for the next 5 years. That total is 1107, not that different form the studio. Though I do know you want to stay for more than 5 years.

TLDR: consider waiting a little longer to buy a condo; I don't think you have enough cash flow to consider a multi-unit building.

Quote
If only you coulda seen where I was 5 years ago though!

I know! I've been reading your threads since you had bats! That's why I'm so emotionally invested :-)

Unit I got numbers from:
https://www.redfin.com/GA/Atlanta/375-Ralph-McGill-Blvd-NE-30312/unit-1704/home/24564508
« Last Edit: August 31, 2017, 02:29:59 PM by mozar »

calimom

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #21 on: August 31, 2017, 11:26:49 PM »
No face punches from here, but are you sure you have the temperament to be a landlord? Either an aboveboard one or stealth one? It's hard to imagine being in a situation with tenants who didn't know you were the property owner. Everything is up for discussion of course.

PPs had some good ideas for lowering expenses, so won't elaborate on that.

Would I limit 401k contributions and then borrow against the balance? No. Would I see where to cut corners, add income, continue retirement contributions and add to non-taxable accounts to come up with a 20% downpayment fund an a well funded emergency fund? Yes. Even if it takes a couple of years. Tough, when you have real estate fever, but there you have it.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #22 on: September 01, 2017, 08:25:25 AM »
Thanks for the thorough reply.
I couldn't remember who moved in with who but I do remember your threads about your current (most recent?) roommate. I remember your threads about how difficult a person she was before you moved in with her, people on this forum telling you not to move with her, then you moving in with her. But I see you've been convinced not to live with someone in your space again (who is not a spouse/partner).

Quote
Those things you mentioned (i.e. helping my mom, etc.) are just as important as savings...to me.

I'm just acknowledging that this is a priority for you which means that you have less money available for savings.

Quote
If I can put 1500/per month towards a house and explained in my original thread I'm accounting for savings specifically for maintenance/repairs for when I do buy (that is outside of my regular savings account)

But you are only planning on 10k for maintenance etc. That's not enough for a multi unit dwelling. You could go through that in a few months if you had multiple vacancies and an appliance breakdown. I just want you to carefully consider it.

Quote
Why wait past another year?  Because there will always be things that are 'as' important to me as saving...even a year from now.
So that you have more money. A few months ago I was laid off AND I had to pay a 5k house bill for some remodeling I had done and I couldn't put it on a credit card, AND my fridge could die any minute. Fortunately I have savings so I wasn't stressed about it.
Today I had to leave work early to met a house inspector because I am renting out a room. My county just recently changed the rules so I am no longer compliant, and I got a citation for it. That's the sort of thing you have to deal with.

Quote
especially when I'm shooting for a mortgage less than I what I pay in rent (at least that is the goal)

Well say your studio is 1150.
Condo: bought for 114k, 3.92%, 30 year
Mortgage: 539
Taxes: 85
Utilities:150
=774
That seems better than the studio but remember you are on the hook for maintenance ( typical is ~ 1k a year which is 120 a month). Also remember that the downpayment is ~20,000. which is like spending an extra 333 dollars a month for the next 5 years. That total is 1107, not that different form the studio. Though I do know you want to stay for more than 5 years.

TLDR: consider waiting a little longer to buy a condo; I don't think you have enough cash flow to consider a multi-unit building.

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If only you coulda seen where I was 5 years ago though!

I know! I've been reading your threads since you had bats! That's why I'm so emotionally invested :-)

Unit I got numbers from:
https://www.redfin.com/GA/Atlanta/375-Ralph-McGill-Blvd-NE-30312/unit-1704/home/24564508

I read this post of yours several times yesterday and you have valid points.  I am gathering you aren't in favor of the multi family dwelling because I need more money for that.  Fair enough argument.  I will ask, if you were me and buying say, a 120k condo then how much would you have on hand before buying?  20% down plus 1 year of emergency funds plus already contributing the max to retirement?  I'm basically curious to know what you would say I need to have saved up and be doing before purchasing.

I didn't quite follow your condo example above because you mentioned the cost of a downpayment as a future cost, so that 333 # you added on top of the mortgage, taxes, utilities and maintenance doesn't make sense to me.  Maybe I misunderstood something there.

(Oh, and FYI...the comment I made about seeing where I was 5 years ago...I meant not from the perspective of actually where I was physically living per se, but from a financial perspective.  Meaning--not tracking/scrutinizing any expenses, a credit score 233 points lower than it is today, tens of thousands more in debt, basically no retirement, etc. etc.)
« Last Edit: September 01, 2017, 08:29:34 AM by EconDiva »

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #23 on: September 01, 2017, 08:26:01 AM »
No facepunches yet from the budget I posted...??

Is the forum going soft??

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #24 on: September 01, 2017, 08:36:08 AM »
No face punches from here, but are you sure you have the temperament to be a landlord? Either an aboveboard one or stealth one? It's hard to imagine being in a situation with tenants who didn't know you were the property owner. Everything is up for discussion of course.

PPs had some good ideas for lowering expenses, so won't elaborate on that.

Would I limit 401k contributions and then borrow against the balance? No. Would I see where to cut corners, add income, continue retirement contributions and add to non-taxable accounts to come up with a 20% downpayment fund an a well funded emergency fund? Yes. Even if it takes a couple of years. Tough, when you have real estate fever, but there you have it.

I'm not sure I have the temperament...we're talking about buying end of next year so I have time to figure all of that out and if this is indeed a viable option or if a SFH is best. 

This thread isn't extremely long so I'm not gathering any strong consensus yet of whether the majority would say I should or should not buy (although the most recent couple of posts seem to say I should not-I need to save more money).  I had also included in my original posting that I was trying to determine what amount to set as a max not to go over but I don't think anyone has commented on that yet.

I don't plan on borrowing against the 401k.  I do know that's one of the biggest financial don'ts.  When you say you would continue retirement contributions, are you saying you would max them while saving for the 20%?  And what do you consider a well funded enough EF to have prior to buying?  3-6 months worth of expenses?  A year or two?

Raenia

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #25 on: September 01, 2017, 08:37:36 AM »
Not sure what you want to be facepunched for... Your budget isn't awful, other than the grocery/eating out, which you obviously already know is way too high.  You said you're not willing to budge on travel or gym (though could you get travel costs down by travel hacking?) so there's not much point addressing those.  Helping your mom is a priority for you, so we're not going to tell you to stop - though if at some point she doesn't need as much help, you can try to keep your fun money down.  Bills are only an estimate anyway, so it's premature to suggest ways to trim that.  Not sure what you want us to say - you're probably spending too much on your cell phone plan, so shop that around, but your main budget killer is food and you already know that.

Cwadda

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #26 on: September 01, 2017, 08:41:30 AM »
EconDiva, I'd recommend getting in touch with a mortgage broker and explain your financial situation. Interview a few of them and find one you trust. They will be able to help you with the housing aspect.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #27 on: September 01, 2017, 08:54:00 AM »
Not sure what you want to be facepunched for... Your budget isn't awful, other than the grocery/eating out, which you obviously already know is way too high.  You said you're not willing to budge on travel or gym (though could you get travel costs down by travel hacking?) so there's not much point addressing those.  Helping your mom is a priority for you, so we're not going to tell you to stop - though if at some point she doesn't need as much help, you can try to keep your fun money down.  Bills are only an estimate anyway, so it's premature to suggest ways to trim that.  Not sure what you want us to say - you're probably spending too much on your cell phone plan, so shop that around, but your main budget killer is food and you already know that.

I could put more time and effort into the travel hacking.  I only just started that and I'm not optimizing things as I should.  I'm planning my two trips for next year soon and 'if' they do happen I want to ensure I fully fund them with points this time around.  This year so far it looks like something like 90% of my flight costs will be covered with points but only around half of my accommodations are being covered which means I wasn't fully prepared with enough points as these two things should not be costing me.  I think that with better planning I could cut the travel category way way down actually. 

I can't comment much on the mom-ish category...I've written posts about it before.  She needs way more help than I can reasonably give her financially as the only bills of hers that are getting paid right now are those I choose to help out with when I do choose to help which is kinda infrequent.  If I was really prioritizing her situation I guess I'd divert all travel funds to her.  Anyways, I digress...don't really have the energy to get into that much further.  :/

Fun/food costs:  I can keep that personal category down by not going anywhere that costs me and by doing 'female stuff' myself (think dyeing hair, nails, waxing, etc., which I pretty much do already).  To be honest I've had conversations with friends recently who are 'concerned' they don't see me because I stay at home so much (everything with everyone involves spending money, usually eating out).  I am trying to find better ways to address this since I don't have a car.  Maybe I will have friends over once a month or something in my new place for a potluck so at least I'm seeing them and not spending money out.  As mentioned earlier 40% of August's food related costs went to eating out due to 2 friends visiting...that's a lot and I was kinda bummed I didn't reign that in as I would have met my goal for August's food costs had I not taken control over what we were doing during those visits.

mozar

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #28 on: September 01, 2017, 06:14:49 PM »
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I read this post of yours several times yesterday and you have valid points.  I am gathering you aren't in favor of the multi family dwelling because I need more money for that.  Fair enough argument.  I will ask, if you were me and buying say, a 120k condo then how much would you have on hand before buying?  20% down plus 1 year of emergency funds plus already contributing the max to retirement?  I'm basically curious to know what you would say I need to have saved up and be doing before purchasing.

Exactly how much you have on hand isn't exactly my point. It's your savings rate and cash flow. You should definitely put  down enough to not get pmi and have money for maintenance but you shouldn't divert money from your 401k to get there. Even if it takes you longer. You should at least be getting the match.
Not only that but with your income level you should be able to max out your 401k AND save for a house.

Yes, I am saying that you should put 1500 in your 401k every month to max out at 18k (which will also save you 5k a year). If saving for a house takes you longer so be it. Having only 40k in your 401k and being almost 40 is a pants on fire emergency. Think of it as paying yourself first. After that 1500 is in your 401k each month you can spend the rest on whatever you want and not beat yourself up about it.
If that makes you sweat, good! It's time to push yourself to the next level.

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I didn't quite follow your condo example above because you mentioned the cost of a down payment as a future cost, so that 333 # you added on top of the mortgage, taxes, utilities and maintenance doesn't make sense to me.  Maybe I misunderstood something there.

Before you make the downpayment you have 20k in your possession. After you pay the down payment of 20k you no longer have it. So you have to factor it in somehow. You can amortize it over 5 years, or 10 or 30, but it is still a cost. If say your rent is 1200 and your mortgage is 1200 it's not an apples to apples comparison because for the mortgage there was a down-payment.

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(Oh, and FYI...the comment I made about seeing where I was 5 years ago...I meant not from the perspective of actually where I was physically living per se, but from a financial perspective.  Meaning--not tracking/scrutinizing any expenses, a credit score 233 points lower than it is today, tens of thousands more in debt, basically no retirement, etc. etc.)
I was just saying that I have been reading your threads for awhile.

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Maybe I will have friends over once a month or something in my new place for a potluck so at least I'm seeing them and not spending money out.
There are lots of options here: going over to a friends house for Game of Thrones night (or whatever), only ordering water and an appetizer when you go to a restaurant. There have been lots of threads on this forum on how to hang out with friends more cheaply.

EconDiva

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #29 on: September 06, 2017, 07:16:21 AM »
^^^mozar, I did read your final post above.  Thanks for the continued food for thought...

It makes me a bit nervous trying to figure out 'if I'm ready' or not, but more importantly, if this decision fits my lifestyle and is the right financial decision at this time.  One thing you have me thinking about is the order in which I'm doing things - I know if I take the money in my downpayment fund and just put it together with the little bit in my current EF fund, end of this year I'll have over a 6 month emergency fund (7 or 8 months probably).  This is something I've never had before actually.

If I buy a home essentially what 'could' be EF reserves would be for a downpayment instead.  At first I was thinking homeownership would put me in a better position to save an adequate EF, but that may not necessarily be the case.  Just seems like common sense to just fully establish the EF reserves first.  I sure wish I had found this forum a decade ago...

Anyways, if I use the downpayment fund as an EF instead, come end of this December I could consider my EF fund 'complete' (for now at least) and then turn my attention back fully to my 401k and ROTH IRA.  I did a lot of playing around with numbers over the weekend and determined I could max my 401k and ROTH IRA without 'too' much sacrifice on my end.  However I did estimate doing this would leave me $300-$600/month to start a separate house downpayment account from scratch outside the EF fund (compared to the $1500/month I'd started saving this year by not contributing to retirement).  Keeping my original goal of 30k (20%) for a house downpayment, that means an additional 4-8 years of saving for a house.

No clue if I'll still have 'house fever' in a couple of more years in my 40s.  Probably worth another new full-on case study at the end of this year after I've had a few months in the new place and will have probably just started fully contributing to retirement accounts.

mozar

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Re: A bit anxious about diverting money from my 401k to a house downpayment
« Reply #30 on: September 06, 2017, 04:29:24 PM »
You're welcome! Glad I could help.