My wife and I got married last year and have started saving for a house. However, we don't know when or where we actually want to buy a house. We currently live in Washington, DC, which we feel is overpriced, and we want to move to a place that can offer things like mountains and - god forbid - yards. That said, we currently have a very affordable rental and I am making a very healthy wage at my job. Here's my basic profile:
Savings Rate: about 39% of take-home pay, plus 7% deferment into a pretax 401k with very low fees.
Savings Amount: About $25k a year in cash, plus the amount that goes into the 401k which I keep about 90% S&P, 5% TIPS, 5% Bonds (AGG)
Last year was the first year that I was able to just start saving like crazy - in previous years my salary was much lower, and I was paying off a lot of high interest student debt. I still have a lot of student debt but it will be forgiven in another few years if I stay in public sector or non-profit work.
Here's the situation:
Current Savings for House: $40k in a cash savings account bearing 1.05%
Current non-401k investments: $0
Estimated time that we will buy a house: 1-3 years, possibly longer if the market keeps skyrocketing.
When we will start investing: either now or when we hit $50k, so we have at least a 10% downpayment for a no-PMI mortgage with SOFI.
Question: Should we just keep the house money safe in a savings account until we buy, or should I not be so cautious and invest part of it? One year from now I expect to have at least $10-15k in index funds, but I guess I'm getting a little antsy with all this cash that is just sitting there, and not having a lot of certainty as to when we will actually buy a house. We do, however, want to be ready to pounce when the right opportunity arises.
I've never owned a house, I've never had money before, my parents were constantly broke and never learned to invest, so I have no experience here! Any advice or experiences would be greatly appreciated!
-bmc