What Comes First: FI or a house?

[nexus]

Hey everyone, thanks for taking a moment to provide your insight on my questions.

I guess the general question is: If I have a 50%+ savings rate, how much should be put into VTSAX versus into a savings account for the down payment on a home?

This is more of a "What should I work towards in the next five years?" kind of question.

I'm treating this whole "save for financial independence" thing like a video game. Collect enough monies and unlock a new level! The level is called "The No More Cubicle Zone!"

> Should I just invest it all and then sell a portion off when I'm ready to fork over a down payment? This is the way that I'm leaning, yet I bet it will be hard to watch the portfolio shrink.

Let me know your thoughts & thanks again!

[frugaliknowit]

I will try to answer your question via two questions:

1.  How long are you willing to committ to living in whatever property you would buy?  If less than ten years, skip it and rent.
2.  How much square footage do you want?  If 1000 Square feet or less, I would do a rent versus buy analysis.

[boarder42]

if you're on a 5 year time line i'd invest and just be ok with the fact that they could go down and you may rent a few extra years while they recover.  or housing will be so low you wouldnt care about the minor losses.

[slugsworth]

The nyt rent vs buy calculator is a good exercise to see if buying makes sense at all.

Also what are your Post FI plans, do they include living in this house? Don't forget houses come with unexpected (and expected) maintenance and upgrade costs.

[undercover]

Just depends on how close you are to meeting the down payment. If you're already set on buying a house, then you probably already have a general idea of how much you want to spend. Set a hard number, accounting slightly for inflation, and aim for that at least. Based on how long it will take to get to that number is whether or not you should invest elsewhere in the meantime.

Everyone's different, but I'd rather have my money working for me at all times rather than not. I'm willing to ride out bad times and delay my goals rather than taking the risk of NOT having my money invested. If your timeline is > 2 years to reach the down payment amount, definitely invest.

But if you know you're going to have enough in 2 years, and again are dead set on buying, it's probably not worth putting that money into the market and dealing with the psychological woes you may experience when it may drop in value.

[Bracken_Joy]

I found this calculator incredibly helpful: http://www.mtgprofessor.com/calculators/Calculator6a.html
It helps you analyze if it's better to buy now with a smaller down payment, or wait and save more first.

[Mother Fussbudget]

If you're set on purchasing, the biggest trick is to AVOID PMI (mortgage insurance).
IMHO, paying PMI payments - especially for someone who sets up regular on-line payments - is a complete waste of money.

To avoid PMI, you have to put down at least a 20% down payment.  If you're financially in a place to do that, then go for it.
As a general rule, I think of my home mortgage (@3.75%) as a 'bond' that pays back the inflation rate + 3.75% interest over time.

Food for thought:  You might also read the threads regarding questions of "Invest or Pre-pay mortgage principal", and the answer is up to the individual.  Many want to have no mortgage once they enter FI, and so plan their pre-payment of principal so they're paid off by their FIRE date.  Others argue not to put more money in your mortgage than you must because houses are non-liquid, whereas stock market investments are.    In any case, all the best, and good luck.

[nereo]

The nyt rent vs buy calculator is a good exercise to see if buying makes sense at all.

Here is the calculator slugsworth mentioned.
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0
I second the idea of plugging in the numbers for your area and circumstances to see what makes the most sense for you.  Then, report back with the results if you are still on the fence or need further advice.

[Bicycle_B]

Consider the house hacking strategy of whether buying a duplex (or triplex, or fourplex) would give you more freedom faster. 

There are articles discussing how much wealth you can gain that way compared to a plain old single family home.

Search "house hacking", prowl the real estate threads, run numbers for the city you live in.

Good luck!

[Prairie Stash]

A house can be an investment. With roommates they were paying the mortgage and taxes, I covered house repairs. Now my housing costs are half what my rent would be (after 10 years) if I was still renting, but that's the area I live in. My down payment was in the $15K range, it wasn't a big amount to save or worry about. 5% down is acceptable here for an owner occupied house.

I also planned on staying put for 5+ years, a house is a long term commitment if you want to see money from it. A house ties you down quite a bit, its harder to travel (house sitter or a neighbor to check in), you have regular yard work and maintenance and its a lifestyle change.

Its impossible to run the math without more details. Its also not possible to recommend a house or not without knowing your life better, please consider the lifestyle change in your decision.