How shall we buy our first house?

[UCguy]

[quote=SD Realtor]One simulation I would run would be to consider borrowing from the 401k to eliminate the PMI. The calculation is trivial, essentially add up the PMI and the differential in interest and then consider if you would be able to match that return for the amount of time it would take you to be able to remove the pmi. I know that the time period is somewhat arbitrary however (and this is personal) I cannot stand giving away money. PMI alone is 4800 a year by your calculation above so in 10 years you are close to 50k. Similarly with 20% down your origination costs will be less so you need to add that in as well. Add in the smaller amount of interest you will pay over (pick what is less, the life of the loan or the length of time before you sell the home)and it may be an eye-opener for you.

Now if you are the type of person that will walk away from the home should it depreciate or something like that, then disregard what I said and go 3.5% FHA. If not then running a simulation of what I proposed above may be useful unless you feel you will be making a substantially better return on the 401k.

Just food for thought.[/quote]

Excellent idea, SD R! Thanks. Yes, it is the risk of having to pay back 401k though within 3 months of leaving your job that kind of stops us. I also loathe the idea of paying PMI, though I understand the necessity. It seems that with my wife’s 401k (actually 403b for UCSD, same thing)loan you can keep paying even if you change jobs. I’d still keep around in cash the amount equal with whatever I borrow from my 401k, just for such cases. (we have equal amounts both in her 403b and my 401k). Not likely we will both lose jobs. If that happens, for a longer time, well, we might have to walk. But no, we are not walking away if we can make the payments, regardless of depreciation.

[UCguy]

Our rent is about $2200 for a 1800 sf home in PQ. Yes, of course the rent may vary in the next 10 years.

BTW, we like Scripps a lot. Never looked at it before for buying, thought it too far, but it’s still doable. We still feel that we’d get more bang for the buck in PQ or Rb. Can you share in which area/complex is the house you are in escrow? Just curious.

20% down eliminates the PMI – that is significant. True, PMI is only for like 7 years or so. Plus the rates and origination costs are indeed better for that amount. And PMI is not deductible.

Roughly if one has 20% down on a 520K house, the borrowed amount is about 417K.

[UCguy]

Our rent is about $2200 for a 1800 sf home in PQ. Yes, of course the rent may vary in the next 10 years.

BTW, we like Scripps a lot. Never looked at it before for buying, thought it too far, but it’s still doable. We still feel that we’d get more bang for the buck in PQ or Rb. Can you share in which area/complex is the house you are in escrow? Just curious.

20% down eliminates the PMI – that is significant. True, PMI is only for like 7 years or so. Plus the rates and origination costs are indeed better for that amount. And PMI is not deductible.

Roughly if one has 20% down on a 520K house, the borrowed amount is about 417K.

[UCguy]

Our rent is about $2200 for a 1800 sf home in PQ. Yes, of course the rent may vary in the next 10 years.

BTW, we like Scripps a lot. Never looked at it before for buying, thought it too far, but it’s still doable. We still feel that we’d get more bang for the buck in PQ or Rb. Can you share in which area/complex is the house you are in escrow? Just curious.

20% down eliminates the PMI – that is significant. True, PMI is only for like 7 years or so. Plus the rates and origination costs are indeed better for that amount. And PMI is not deductible.

Roughly if one has 20% down on a 520K house, the borrowed amount is about 417K.

[UCguy]

Our rent is about $2200 for a 1800 sf home in PQ. Yes, of course the rent may vary in the next 10 years.

BTW, we like Scripps a lot. Never looked at it before for buying, thought it too far, but it’s still doable. We still feel that we’d get more bang for the buck in PQ or Rb. Can you share in which area/complex is the house you are in escrow? Just curious.

20% down eliminates the PMI – that is significant. True, PMI is only for like 7 years or so. Plus the rates and origination costs are indeed better for that amount. And PMI is not deductible.

Roughly if one has 20% down on a 520K house, the borrowed amount is about 417K.

[UCguy]

Our rent is about $2200 for a 1800 sf home in PQ. Yes, of course the rent may vary in the next 10 years.

BTW, we like Scripps a lot. Never looked at it before for buying, thought it too far, but it’s still doable. We still feel that we’d get more bang for the buck in PQ or Rb. Can you share in which area/complex is the house you are in escrow? Just curious.

20% down eliminates the PMI – that is significant. True, PMI is only for like 7 years or so. Plus the rates and origination costs are indeed better for that amount. And PMI is not deductible.

Roughly if one has 20% down on a 520K house, the borrowed amount is about 417K.

[jstoesz]

[quote=UCguy][quote=jstoesz]
Unless people like you demand more, sit out and keep renting like you are doing. This will never get better. If you are looking for a place to have paid off in your retirement, buy a sweet cabin on Mt. Laguna or Forest Falls or even further away (I bet you can find a sweet 1930 fixer for 130k).

That is my off the wall, probably unsolicited advice. Make your cabin your family’s constant. My favorite memories of my life, and of my parents life, have been time spent at the cabin.[/quote]

“Demand” more? What planet do you live on?! Hell, we are glad to have jobs! There are VERY FEW jobs in our area of expertise. I moved to industry because I demanded more. Do you know how little a PhD earns in academia if not a tenured Professor? My wife is paid relatively well for academia, and has enviable job stability, plus benefits galore.

In case we weren’t clear, we were looking for a HOME for us and our children and our parents, close to schools and shopping center and not TOO far from our work places, not a vacation home.
Maybe when the kids go to college, and our parents pass away, we move to a chepaer place. We aren’t in love with San Diego, too expensive, but so are all the major cities on the Coasts where we can both find jobs.[/quote]

Sorry, I didn’t mean to upset you. I understand your situation, and my comments are coming from my own personally bitterness with SD. Hell, you make 3 times the median, and you are looking at how you can scrape together enough for a far flung cookie cutter home (there is something severely wrong still, even in light of “historic” affordability). I should not have said “demand more.” That was probably not exactly what I meant…how’s “going galt” on the home market. I was also not disparaging your income, I find 180k for a household to be a good chunk of change (nationally I think that is the 95th percentile), and I commend your ability to pull that together. I also find your stockpile of savings/retirement to be pretty decent by the average American’s standards. I bet 95% of your fellow citizens would trade with you in a New York Minute.

You were very clear about wanting to buy a home, but I figured what was the harm in throwing an oddball idea out. I can completely understand that feeling. I was not intending my comments to be antagonizing, in any way. My wife and I have talked about doing this on numerous occasions. And we often think we would rather rent a crappy home and own a sweet cabin. Granted the rubber has not yet met the road on this decision yet. For the record when I lived in SD, I lived on a boat. I have lived in my car, on a ranch, in a tent…and a couple houses along the way. So I am not a straightforward practical guy, and I do not want to be one.

[jstoesz]

[quote=UCguy][quote=jstoesz]
Unless people like you demand more, sit out and keep renting like you are doing. This will never get better. If you are looking for a place to have paid off in your retirement, buy a sweet cabin on Mt. Laguna or Forest Falls or even further away (I bet you can find a sweet 1930 fixer for 130k).

That is my off the wall, probably unsolicited advice. Make your cabin your family’s constant. My favorite memories of my life, and of my parents life, have been time spent at the cabin.[/quote]

“Demand” more? What planet do you live on?! Hell, we are glad to have jobs! There are VERY FEW jobs in our area of expertise. I moved to industry because I demanded more. Do you know how little a PhD earns in academia if not a tenured Professor? My wife is paid relatively well for academia, and has enviable job stability, plus benefits galore.

In case we weren’t clear, we were looking for a HOME for us and our children and our parents, close to schools and shopping center and not TOO far from our work places, not a vacation home.
Maybe when the kids go to college, and our parents pass away, we move to a chepaer place. We aren’t in love with San Diego, too expensive, but so are all the major cities on the Coasts where we can both find jobs.[/quote]

Sorry, I didn’t mean to upset you. I understand your situation, and my comments are coming from my own personally bitterness with SD. Hell, you make 3 times the median, and you are looking at how you can scrape together enough for a far flung cookie cutter home (there is something severely wrong still, even in light of “historic” affordability). I should not have said “demand more.” That was probably not exactly what I meant…how’s “going galt” on the home market. I was also not disparaging your income, I find 180k for a household to be a good chunk of change (nationally I think that is the 95th percentile), and I commend your ability to pull that together. I also find your stockpile of savings/retirement to be pretty decent by the average American’s standards. I bet 95% of your fellow citizens would trade with you in a New York Minute.

You were very clear about wanting to buy a home, but I figured what was the harm in throwing an oddball idea out. I can completely understand that feeling. I was not intending my comments to be antagonizing, in any way. My wife and I have talked about doing this on numerous occasions. And we often think we would rather rent a crappy home and own a sweet cabin. Granted the rubber has not yet met the road on this decision yet. For the record when I lived in SD, I lived on a boat. I have lived in my car, on a ranch, in a tent…and a couple houses along the way. So I am not a straightforward practical guy, and I do not want to be one.

[jstoesz]

[quote=UCguy][quote=jstoesz]
Unless people like you demand more, sit out and keep renting like you are doing. This will never get better. If you are looking for a place to have paid off in your retirement, buy a sweet cabin on Mt. Laguna or Forest Falls or even further away (I bet you can find a sweet 1930 fixer for 130k).

That is my off the wall, probably unsolicited advice. Make your cabin your family’s constant. My favorite memories of my life, and of my parents life, have been time spent at the cabin.[/quote]

“Demand” more? What planet do you live on?! Hell, we are glad to have jobs! There are VERY FEW jobs in our area of expertise. I moved to industry because I demanded more. Do you know how little a PhD earns in academia if not a tenured Professor? My wife is paid relatively well for academia, and has enviable job stability, plus benefits galore.

In case we weren’t clear, we were looking for a HOME for us and our children and our parents, close to schools and shopping center and not TOO far from our work places, not a vacation home.
Maybe when the kids go to college, and our parents pass away, we move to a chepaer place. We aren’t in love with San Diego, too expensive, but so are all the major cities on the Coasts where we can both find jobs.[/quote]

Sorry, I didn’t mean to upset you. I understand your situation, and my comments are coming from my own personally bitterness with SD. Hell, you make 3 times the median, and you are looking at how you can scrape together enough for a far flung cookie cutter home (there is something severely wrong still, even in light of “historic” affordability). I should not have said “demand more.” That was probably not exactly what I meant…how’s “going galt” on the home market. I was also not disparaging your income, I find 180k for a household to be a good chunk of change (nationally I think that is the 95th percentile), and I commend your ability to pull that together. I also find your stockpile of savings/retirement to be pretty decent by the average American’s standards. I bet 95% of your fellow citizens would trade with you in a New York Minute.

You were very clear about wanting to buy a home, but I figured what was the harm in throwing an oddball idea out. I can completely understand that feeling. I was not intending my comments to be antagonizing, in any way. My wife and I have talked about doing this on numerous occasions. And we often think we would rather rent a crappy home and own a sweet cabin. Granted the rubber has not yet met the road on this decision yet. For the record when I lived in SD, I lived on a boat. I have lived in my car, on a ranch, in a tent…and a couple houses along the way. So I am not a straightforward practical guy, and I do not want to be one.

[jstoesz]

[quote=UCguy][quote=jstoesz]
Unless people like you demand more, sit out and keep renting like you are doing. This will never get better. If you are looking for a place to have paid off in your retirement, buy a sweet cabin on Mt. Laguna or Forest Falls or even further away (I bet you can find a sweet 1930 fixer for 130k).

That is my off the wall, probably unsolicited advice. Make your cabin your family’s constant. My favorite memories of my life, and of my parents life, have been time spent at the cabin.[/quote]

“Demand” more? What planet do you live on?! Hell, we are glad to have jobs! There are VERY FEW jobs in our area of expertise. I moved to industry because I demanded more. Do you know how little a PhD earns in academia if not a tenured Professor? My wife is paid relatively well for academia, and has enviable job stability, plus benefits galore.

In case we weren’t clear, we were looking for a HOME for us and our children and our parents, close to schools and shopping center and not TOO far from our work places, not a vacation home.
Maybe when the kids go to college, and our parents pass away, we move to a chepaer place. We aren’t in love with San Diego, too expensive, but so are all the major cities on the Coasts where we can both find jobs.[/quote]

Sorry, I didn’t mean to upset you. I understand your situation, and my comments are coming from my own personally bitterness with SD. Hell, you make 3 times the median, and you are looking at how you can scrape together enough for a far flung cookie cutter home (there is something severely wrong still, even in light of “historic” affordability). I should not have said “demand more.” That was probably not exactly what I meant…how’s “going galt” on the home market. I was also not disparaging your income, I find 180k for a household to be a good chunk of change (nationally I think that is the 95th percentile), and I commend your ability to pull that together. I also find your stockpile of savings/retirement to be pretty decent by the average American’s standards. I bet 95% of your fellow citizens would trade with you in a New York Minute.

You were very clear about wanting to buy a home, but I figured what was the harm in throwing an oddball idea out. I can completely understand that feeling. I was not intending my comments to be antagonizing, in any way. My wife and I have talked about doing this on numerous occasions. And we often think we would rather rent a crappy home and own a sweet cabin. Granted the rubber has not yet met the road on this decision yet. For the record when I lived in SD, I lived on a boat. I have lived in my car, on a ranch, in a tent…and a couple houses along the way. So I am not a straightforward practical guy, and I do not want to be one.

[jstoesz]

[quote=UCguy][quote=jstoesz]
Unless people like you demand more, sit out and keep renting like you are doing. This will never get better. If you are looking for a place to have paid off in your retirement, buy a sweet cabin on Mt. Laguna or Forest Falls or even further away (I bet you can find a sweet 1930 fixer for 130k).

That is my off the wall, probably unsolicited advice. Make your cabin your family’s constant. My favorite memories of my life, and of my parents life, have been time spent at the cabin.[/quote]

“Demand” more? What planet do you live on?! Hell, we are glad to have jobs! There are VERY FEW jobs in our area of expertise. I moved to industry because I demanded more. Do you know how little a PhD earns in academia if not a tenured Professor? My wife is paid relatively well for academia, and has enviable job stability, plus benefits galore.

In case we weren’t clear, we were looking for a HOME for us and our children and our parents, close to schools and shopping center and not TOO far from our work places, not a vacation home.
Maybe when the kids go to college, and our parents pass away, we move to a chepaer place. We aren’t in love with San Diego, too expensive, but so are all the major cities on the Coasts where we can both find jobs.[/quote]

Sorry, I didn’t mean to upset you. I understand your situation, and my comments are coming from my own personally bitterness with SD. Hell, you make 3 times the median, and you are looking at how you can scrape together enough for a far flung cookie cutter home (there is something severely wrong still, even in light of “historic” affordability). I should not have said “demand more.” That was probably not exactly what I meant…how’s “going galt” on the home market. I was also not disparaging your income, I find 180k for a household to be a good chunk of change (nationally I think that is the 95th percentile), and I commend your ability to pull that together. I also find your stockpile of savings/retirement to be pretty decent by the average American’s standards. I bet 95% of your fellow citizens would trade with you in a New York Minute.

You were very clear about wanting to buy a home, but I figured what was the harm in throwing an oddball idea out. I can completely understand that feeling. I was not intending my comments to be antagonizing, in any way. My wife and I have talked about doing this on numerous occasions. And we often think we would rather rent a crappy home and own a sweet cabin. Granted the rubber has not yet met the road on this decision yet. For the record when I lived in SD, I lived on a boat. I have lived in my car, on a ranch, in a tent…and a couple houses along the way. So I am not a straightforward practical guy, and I do not want to be one.

[Scarlett]

We are in a very similar situation. My DH works at UCSD as well and I am also in biotech.

We actually talked with HLS recently and he strongly recommended to do whatever we can to escape that pesky PMI – and indeed borrowing from 401Ks is what he suggested. He doesn’t think 401Ks are such a good investment, so it’s better to have those money working for you by avoiding PMI. Now, the risk is there, but, if you keep some cash reserve just for that (repayment if you leave the job) you should be ok in most cases IMHO. You need to put at least 5% cash down, HLS said.

Unlike you, we bought unwisely a house during the bubble and (almost) got burned before unloading it. Not just a figure of speech. But we literally sold our place in RB a month before the fires went through the neighborhood in Fall 2007. Once burned, twice shy, you know what I mean? For a couple years now we’ve been looking and looking and trying to optimize different parameters. We went all over the map with our searches. We’ve settled on PUSD as well, though our criteria are slightly less than yours, so hopefully we won’t compete 🙂

Back to the OP – IF you put only 10% down, then I’d keep 5% cash and borrow the rest from 401k.

But if you can avoid PMI by borrowing from both your 403b and 401k. AND keep enough CASH reserve to cover the principal of ONE of the two 401k loans (the riskiest – yours, I presume, since your wife’s job is more stable) then I think THAT would be the optimal solution, that also minimizes the risks. If you are looking for 550K house, then you may have to wait and save for afew months up to 1 yr. Even better if you can keep the financing under 417K, like UCGal suggested. I don’t think the rates will start picking up that fast that soon, but that’s just my guess (hope???).

[Scarlett]

We are in a very similar situation. My DH works at UCSD as well and I am also in biotech.

We actually talked with HLS recently and he strongly recommended to do whatever we can to escape that pesky PMI – and indeed borrowing from 401Ks is what he suggested. He doesn’t think 401Ks are such a good investment, so it’s better to have those money working for you by avoiding PMI. Now, the risk is there, but, if you keep some cash reserve just for that (repayment if you leave the job) you should be ok in most cases IMHO. You need to put at least 5% cash down, HLS said.

Unlike you, we bought unwisely a house during the bubble and (almost) got burned before unloading it. Not just a figure of speech. But we literally sold our place in RB a month before the fires went through the neighborhood in Fall 2007. Once burned, twice shy, you know what I mean? For a couple years now we’ve been looking and looking and trying to optimize different parameters. We went all over the map with our searches. We’ve settled on PUSD as well, though our criteria are slightly less than yours, so hopefully we won’t compete 🙂

Back to the OP – IF you put only 10% down, then I’d keep 5% cash and borrow the rest from 401k.

But if you can avoid PMI by borrowing from both your 403b and 401k. AND keep enough CASH reserve to cover the principal of ONE of the two 401k loans (the riskiest – yours, I presume, since your wife’s job is more stable) then I think THAT would be the optimal solution, that also minimizes the risks. If you are looking for 550K house, then you may have to wait and save for afew months up to 1 yr. Even better if you can keep the financing under 417K, like UCGal suggested. I don’t think the rates will start picking up that fast that soon, but that’s just my guess (hope???).

[Scarlett]

We are in a very similar situation. My DH works at UCSD as well and I am also in biotech.

We actually talked with HLS recently and he strongly recommended to do whatever we can to escape that pesky PMI – and indeed borrowing from 401Ks is what he suggested. He doesn’t think 401Ks are such a good investment, so it’s better to have those money working for you by avoiding PMI. Now, the risk is there, but, if you keep some cash reserve just for that (repayment if you leave the job) you should be ok in most cases IMHO. You need to put at least 5% cash down, HLS said.

Unlike you, we bought unwisely a house during the bubble and (almost) got burned before unloading it. Not just a figure of speech. But we literally sold our place in RB a month before the fires went through the neighborhood in Fall 2007. Once burned, twice shy, you know what I mean? For a couple years now we’ve been looking and looking and trying to optimize different parameters. We went all over the map with our searches. We’ve settled on PUSD as well, though our criteria are slightly less than yours, so hopefully we won’t compete 🙂

Back to the OP – IF you put only 10% down, then I’d keep 5% cash and borrow the rest from 401k.

But if you can avoid PMI by borrowing from both your 403b and 401k. AND keep enough CASH reserve to cover the principal of ONE of the two 401k loans (the riskiest – yours, I presume, since your wife’s job is more stable) then I think THAT would be the optimal solution, that also minimizes the risks. If you are looking for 550K house, then you may have to wait and save for afew months up to 1 yr. Even better if you can keep the financing under 417K, like UCGal suggested. I don’t think the rates will start picking up that fast that soon, but that’s just my guess (hope???).

[Scarlett]

We are in a very similar situation. My DH works at UCSD as well and I am also in biotech.

We actually talked with HLS recently and he strongly recommended to do whatever we can to escape that pesky PMI – and indeed borrowing from 401Ks is what he suggested. He doesn’t think 401Ks are such a good investment, so it’s better to have those money working for you by avoiding PMI. Now, the risk is there, but, if you keep some cash reserve just for that (repayment if you leave the job) you should be ok in most cases IMHO. You need to put at least 5% cash down, HLS said.

Unlike you, we bought unwisely a house during the bubble and (almost) got burned before unloading it. Not just a figure of speech. But we literally sold our place in RB a month before the fires went through the neighborhood in Fall 2007. Once burned, twice shy, you know what I mean? For a couple years now we’ve been looking and looking and trying to optimize different parameters. We went all over the map with our searches. We’ve settled on PUSD as well, though our criteria are slightly less than yours, so hopefully we won’t compete 🙂

Back to the OP – IF you put only 10% down, then I’d keep 5% cash and borrow the rest from 401k.

But if you can avoid PMI by borrowing from both your 403b and 401k. AND keep enough CASH reserve to cover the principal of ONE of the two 401k loans (the riskiest – yours, I presume, since your wife’s job is more stable) then I think THAT would be the optimal solution, that also minimizes the risks. If you are looking for 550K house, then you may have to wait and save for afew months up to 1 yr. Even better if you can keep the financing under 417K, like UCGal suggested. I don’t think the rates will start picking up that fast that soon, but that’s just my guess (hope???).

[Author]

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