How to buy a house? Where do you take the money from?

[Jags4186]

I've been mulling over purchasing a house or condo but I'm not really sure where exactly you draw your funds from.

I have a taxable account and Roth IRA with about $48000 in investments plus about 10k in cash which I could draw a down payment from. I live in northern NJ and a basic 2 BR 2 bathroom condo goes for between 250k-300k in a decent neighborhood....effectively wiping out my accessible monies for a 20% down payment. Is that what people do?  Wipe out there entire cash savings to buy first home or do you take out a larger mortgage and retain cash/investments?

[4alpacas]

There is the third option to wait and save more money...

[Jags4186]

I understand I can save more money...the question is how much of your savings investments do you dig into to buy?  Do you wait until you have 100k in investments and then gut 50k to buy therefore giving up you investment gains?  At what point do you have "enough" to put down a huge amount of money?

[Weedy Acres]

Lots of "people do" wipe out their entire savings to put a down payment on a house.  I don't think that's smart.  I'd wait until I had enough to cover 6 months' expenses (including the new, anticipated mortgage) plus a 20% down payment (to avoid PMI) to take the plunge.

[read books]

I agree with the general view here. Wait until you have 20% to spend on a down payment. That is, don't take all of your available money for this. And don't forget closing costs. Good luck.

[nereo]

I have a taxable account and Roth IRA with about $48000 in investments plus about 10k in cash which I could draw a down payment from. I live in northern NJ and a basic 2 BR 2 bathroom condo goes for between 250k-300k in a decent neighborhood....effectively wiping out my accessible monies for a 20% down payment.

I would advise against draining your ROTH for the downpayment.  Even though you can use the ROTH towards a down payment penalty free, you can't easily restock that money, and you loose your greatest asset (time).
Save as much as you can as quickly as you can, but there are other pieces to the puzzle.  What rate could you get for a 15 year mortgage?  What is the cost of renting close to where you work?  For your particular area how does the "rent vs. buy" equation work out?  Are you going to live there for 5+ years?  7+? How secure is your job? Are you the sole income earner?

so many questions...

[matchewed]

That down payment should be an amount separate from your emergency fund or other financial goals, so yes people do save more than just the amount for a down payment before putting 20% down.

[Jags4186]

Ok let me restate the question:

Right now I max my 401k, Roth IRA, and after that I can save about $700/month into a taxable account.  At the end of the year I'm good for about another 8k in bonus after taxes which will also go into the taxable account.


Forgetting about income/staying put for x years/location yada yada...all of which I am aware of...how much do you dip into for your down payment?  Do I need 100k before I can pull out 50k for a down payment?  What is a "safe" % amount to use towards a down payment?

[CDP45]

Get married first and hope she has a big savings account. Or get a roommate now until you get married if you want to reduce rental costs.

[Fireman]

If home ownership is your goal then you should rearrange your finances to make that purchase.  I will agree with the posters who have suggested you leave the money currently in your Roth for an emergency or retirement.  Reducing your 401k contribution for the rest of the year to the matched amount should generate about $10k.   Add that to the $8.4k you currently save and the $8k bonus and you have $26.4k or a 10% down payment on a $264k house.  If you want to have a 20% down payment, do this for 2015 as well or look for a less expensive house.  You could also consider reducing or eliminating your IRA contribution for 2014 and 2015 or reducing costs elsewhere.  Lastly, i'd keep the $10k currently in savings right where it is.  Home ownership is expensive well beyond the actual purchase and you should have liquid assets to mitigate any incidents.