Hello everyone, my fiance and I are considering purchasing a home in a high-cost living area close to our families, less than 15 minutes from both. We’ve accumulated about 500k in savings. We’re questioning whether it’s a smart move to use half of our savings for the down payment. We’re both 27, employed in stable jobs with prospects for advancement. Here are some financial details:
Home price: 700k
Combined Income: 175k
Debt: none
Savings: 500k
We’re eager to hear your opinions as we decide. We don’t have children yet but are planning for 2-3, God willing. Thanks for your input!
To the person who posted this, don’t be swayed by the extremely risk-averse members of this forum. It’s perfectly manageable. If you’re not earmarking that half-million for immediate expenses, why not use a bit more for the down payment? Just remember to account for future costs like daycare, which won’t be forever.
It’s surprising to see the conservative stance here. The key is your income versus expenses… Are you looking at a mortgage around $3700/month? With a quarter million still in savings, you could cover years of mortgage payments if necessary. The cost ratio of your debt to income is quite manageable. Moreover, property values tend to increase over time.
Ripley said: @Fife
It’s shocking how cautious some people in this forum can be. ‘I earn 500k a year but wouldn’t be comfortable with a 500k mortgage.’ Really?
And then they boast about buying a 300k house with a vast land lol
Leith said:
How did you manage to save 500k so early in life?
We lived with our parents without significant expenses and have been employed for 5 years!
Were you living on just $800 each per month including transportation, food, travel, and everything else? If you’ve been this thrifty, you won’t face issues, though a higher down payment could save you a lot in interest over time.
Leith said:
How did you manage to save 500k so early in life?
They must have received money from family. It seems impossible to save that much on those salaries in just five years, unless they’re not being completely honest to boost their story.
@Greer
We didn’t get any financial help; we started working right out of high school and invested wisely before shifting our investments to high-yield savings for our home purchase.
Clove said: @Greer
We didn’t get any financial help; we started working right out of high school and invested wisely before shifting our investments to high-yield savings for our home purchase.
@Greer
Or like many young people, they might have profited from market investments. I know a few who made a fortune during the pandemic by investing wisely, but to say it’s all from a 9-5 is unlikely.
Is it foolish to spend half your savings on a down? Not at all. For comparison:
House price: $405,000
Down payment: $5,000
Combined income: $150,000
Debt: none
Savings: $25,000
We made a similar decision a year ago. Opting to maintain our financial security, we chose not to use all our savings. You’re in a much stronger position than many.
We’re in a nearly identical situation. Household income around 180k, put 20% down on a 700k house. Our total monthly expenses including utilities and saving 15% for retirement are manageable. With two kids, we still manage to save about 1k monthly. It’s completely doable if you’re cautious with spending.
Are you worried about foreclosure? It seems unlikely with your stability. Just make sure to put your budget on paper, consider future costs like childcare, and ensure you have savings for emergencies. Discuss everything thoroughly and take advantage of first-time homebuyer classes. You’re asking the right questions at a young age, which bodes well for your financial health.