[quote=cjdairym]UCGuy, here is another option that may not have been mentioned yet.
You may want to consider buying sooner rather than later, especially if you find a house that you like. You’ve also mentioned that stability and schools are high priorities, so finances are not the only consideration. Your income is high, expenses relatively low, and sounds like you have some job stability. Also, while prices may not be bottomed, SD is probably almost at a low in terms of monthly payments due to interest rates.
Here’s what I’m thinking.
Pay at least 10% down on the house. Take money from the Roth IRA first (since you can take that out w/o penalty or repayment on the initial money you deposited in that account). Borrow from 401k next, since that minimizes how much you need to payback in case of whatever contingency.
Once you buy the home, you get the tax deduction which will be significant due to your high income and low deductions. Yes you have to pay PMI, but I’m guessing you currently save at least $25k/year. I think you’ve already mentioned that you lowered your 401k contribution to the minimum matching. So then use as much extra net pay to pay extra on the mortgage until you get over 20% equity. I suspect that you can do this within 2 years if you find a place in the mid 500’s.
Yes, this is more risk than having 20%, but your incomes are high enough that you have more options than other people. Once you reach 20% equity, the cost of ownership will probably be the same or less than rent (somewhere around ~$2300-2500). This gives you some flexibility since you’re probably going to save the money anyways, but now you get the tax deduction too.
Thanks! Indeed, that is kind of what we were thinking – since we are saving anyway, why not live in the house we buy, and pay down theso we can eliminate PMI in half the time, instead of saving for downpayment. (At least we’d be 3-4 years already in the mortgage duration).
The cash flow will be different though if we buy with 10% down – it’s not going to be 20-25K a year since monthly payments will be close to $600-700 more – but rather, 15K or so. ( I am talking in terms of cash flow, I know that 401k payments go to back to my net worth; and the tax deduction is better).
We have looked at CMR, and though we did like the houses, we dismissed it because of little to no yards, HOA & MR. We are considering some of Sabre Springs though.
