Saving Up For A House

[clifford4970]

My wife and I are saving up to purchase our first home.
Our budget is in order.  Our emergency fund in place.
We both contribute to our 401k's.

So for our Emergency Fund, I have $4,000 in a savings account.  I also have $3,000+ in a Betterment "Safety Net" account that we contribute $75 a week to (60% Bonds 40% Stocks).

I am wondering if I should do the something similar in saving up for a 20% DP?
On Betterment, the "House" Goal is a 45% Stocks and 55% Bonds Allocation.  We are looking to save up about $45,000 for the DP.  At our current income levels and current expenses it is looking like this will take around 3 years.  Though this could speed up as we are both expecting to be making more soon.  I graduated in December and have received raises and have a few job interviews upcoming (fingers crossed).  My wife will graduate this December and her wage will increase by 25-50%.

I realize unexpected things happen in life, and our budget (and emergency fund) has that taken into account (my wife and I are paying down quite a bit of hospital bills where a surgeon made a slight mistake on a "routine" surgery and led to multiple surgeries). 

I better just close this thing up before i keep rambling on haha.

What are your thoughts on saving up for a house?  Invest in the Betterment "House" account, or just place it away in a low interest savings account?

[GrowingTheGreen]

For me, a three-year goal timeline is a little close for investing in the stock/bond market. I would be in a savings or CDs.

[clifford4970]

For me, a three-year goal timeline is a little close for investing in the stock/bond market. I would be in a savings or CDs.

That is kinda where my wife and I were leaning, but wanted the boards opinion.

Do you feel the same way about the Safety Net as well?  I go back and forth in my mind.

[GrowingTheGreen]

It depends! Physically healthy with stable income? Sure. If you will be working in a field that is more prone to layoffs, bump up the e-fund. I prefer 3-months living expenses, minimum, in a savings account. Personally, my wife and I do 6 months.

Others use a Roth as an emergency fund since you can withdraw your contributions without penalty. I prefer the savings account.

[neo von retorch]

I put some of my money in Betterment while saving up for a house, and I ended up buying the house just a little sooner than expected, but the markets don't care when you buy the house, and I lost a few hundred dollars overall. Could've been a lot worse, but throw it in a 1% online savings account and it could be a lot better.

[Axecleaver]

Depends on your income, but if you have the ability to contribute to Roth IRA's, you could do $5500 a year each for the house fund, and withdraw penalty-free when the time comes. That would be 33k in contributions, plus whatever the investment makes. If you're not making use of the Roth IRA's today, that would be a good way to use it. Then save another 9k in taxable accounts and you're there.

In terms of the investments to use, the problem with stocks is that they can be volatile, so the market could be down when you want to pull the dollars out. Bonds less so, but they can still be subject to some volatility. If that happened, would you be wiling to wait a year or two before buying a house for the investment to recover? Most folks would say no. If not, invest in less volatile investments like TIPS or CD's, with lower returns (much lower, given our current interest rates). Saving for a down payment is something you'd like to be predictable over a short run of 2-3 years, which is really tough for market investments.

[Sibley]

My down payment savings go into an Ally online savings account, 1% interest. It was the best rate I could find, and I didn't want to put the money into investments (variability, and shorter time frame).

[clarkfan1979]

I don't want to be the fart in your soup, but if you just graduated and hope to get many raises and/or promotions in the future, you need to be flexible and nimble. If you "must" buy a house, but something that will be easy to rent out. Owning a house might cost you money if you are not willing to move an hour away for a 50% raise.

[chemistk]

Our down payment fund is also in a 1% Ally account, along with our emergency fund and college tuition to cover my wife's last few classes. I toyed with a money market or CD but in the end, having everything in a high interest savings account was the best situation.

Our plan is to be ready to buy in 3 years, so it's very easy to forecast how much well have available when the time comes.