Within the next 18 months my fiance and I are going to get married, both of us finish grad school, and both of us acquire big boy/big girl jobs. We will finish school/start our marriage with no debt, no kids, and a 6-month emergency fund. We are currently handling our wedding and honeymoon, and already have the money saved and set aside. Whatever we don't use for the wedding will begin our house down payment fund.

Ideally we would like to buy a house within 2-3 years of getting married, and are currently saving accordingly. Unfortunately, without going too much into specifics, we will end up moving to an area with higher than average home prices that I don't see dropping even with a national housing market down turn.

My questions for the board are:

What would be the best way to store the money we're saving given our timeframe? HYSA, I-bond, something else I don't know about?

If you're willing to share, what percentage down payment did y'all put down for your first home? I know 20% is the "safe" bet to avoid mortgage insurance and stress, but that would mean a lot of saving for us due to the previously mentioned high prices.

Any tips or things to look out for as we move into this stage of our life?

I know this could probably go in the real estate forum, but I like the B&I board and can't wait to hear what the billionaires have to say

I think timing is everything. I put down the absolute minimum on my first house (FHA loan) in '08 right after the subprime mortgage crisis to buy a foreclosure. I got that thing for dirt cheap, and was able to sell it a few years later for a substantial profit, then rolled that into a new house, and then rolled the equity from that one into my current house.

As the above poster said, don't buy the absolute max of what you're approved for because the value will go up, thus your taxes go up. Hell, the cost of living goes up every year, and you don't want to be house poor trying to just get by. Owning a house is expensive, and sometimes time consuming, but if you're planning on being in the area for several years, it sure beats renting.

OldArmyCT said:

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A lot of people will tell you to get a 15 year mortgage instead of a 30. Don't. Get the 30 and overpay monthly like it's a 15 if you want but if your finances change you can easily lower you mortgage payment. If you're in a 15 you have that payment and may have trouble re-fi'ing into a 30.

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This. We went with a 15 when we refinanced in 2019, and if I had to do it over again, I'd go this route. The payments aren't an issue, but having the flexability to pivot if there's a loss of job or something catestrophic would be nice.

"we will end up moving to an area with higher than average home prices that I don't see dropping even with a national housing market down turn."

Don't buy this... prices are going down and will continue to go down in 2023.

If you can put down 20%, do it. Paying for mortgage insurance is throwing money away.

I'm not aware of any area immune to the downturn in price that is and will happen.

Another option is to rent in a neighorhood where you might consider buying.

That way you know you'll like the area and keep an eye on properties for sale.

Don't get in a hurry

Howdy Dammit said:

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Robinhood is currently offering 4% interest on uninvested money. Might be something to look at.

As far as the house. My wife and I purchased our first home in the 2021 craziness. We were only able to comfortably put down 15%, although I really did want 20. However, PMI is cheaper than I thought. Think we pay 118/month. A few things to note.

1. Our monthly payment was at 25% of my gross pay. This made things very tight since I fully fund my retirement.
2. I'm a couple raises down the road, so being strapped for one year wasn't the worst thing.
3. Furnishing is more expensive than I thought. Was another small down payment.
4. Our house was new, but something always breaks or is needed for the home. Seriously. Every single month we buy or fix something. Didn't anticipate that coming from an apartment.
5. A home is not the investment I thought it was. If you're buying just so you don't miss out, don't. Buy because you wanna be somewhere a minimum of 5 years.
6. Make sure you know what your wife is doing after a baby. Don't buy a house that needs both incomes. Seen several women think they will continue to work, and post baby realize they want to stay home, but can't because of the payment.

Goodluck!

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if you bought it new the warranty might cover some of those items "breaking".

Which brings up a good point, owning a home isn't just paying a mortgage (including taxes and insurance), but there's more maintenance involved that new home buyers anticipate

The area we are looking at has 100% seen prices continue to rise.

Obvious example, someone bought a house for $1.035mm in June 2022 and just listed it at $1.1mm and it was pending after one weekend with multiple offers.

"Make sure you know what your wife is doing after a baby. Don't buy a house that needs both incomes. Seen several women think they will continue to work, and post baby realize they want to stay home, but can't because of the payment."

yep, don't rely on a second income for a housing decision. My wife lost her job right after our honeymoon and we had bought a house two months earlier. A little wake up call, but that was in 1990. just aged myself

htxag09 said:

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The area we are looking at has 100% seen prices continue to rise.

Obvious example, someone bought a house for $1.035mm in June 2022 and just listed it at $1.1mm and it was pending after one weekend with multiple offers.

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price range where people have to borrow most of the value of the property will go down as mortgage rates increase.

txaggieacct85 said:

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htxag09 said:

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The area we are looking at has 100% seen prices continue to rise.

Obvious example, someone bought a house for $1.035mm in June 2022 and just listed it at $1.1mm and it was pending after one weekend with multiple offers.

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price range where people have to borrow most of the value of the property will go down as mortgage rates increase.

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Ok. But you told the OP not to buy the argument that areas are insulated from price decreases. Then stated:

Quote:

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I'm not aware of any area immune to the downturn in price that is and will happen.

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Now I'm not stating these areas are immune to downturns but it's pretty evident that many neighborhoods, especially in Texas, haven't seen prices drop. They've just slowed the rate at which they're increasing.

AustinCountyAg said:

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this is probably something you already know, but I will say it anyway because several friends and family members have made this mistake. dont over buy. Just because you get preapproved for X amount of dollars doesn't mean you can afford it. Taxes go up every year, utilities go up every year, etc. Just because you can afford it now, doesn't mean you can afford it next year.

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I definitely agree with you.

Having said that, natural gas prices have plummeted in the last few months, so heating a home with natural gas will go down. and it also means electricity prices should also go down since natural gas is a major source for power plants in Texas

My financial approach has always been live well within your means. It's worked very well for me.

I've been debt free for a long time.

OldArmyCT said:

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A lot of people will tell you to get a 15 year mortgage instead of a 30. Don't. Get the 30 and overpay monthly like it's a 15 if you want but if your finances change you can easily lower you mortgage payment. If you're in a 15 you have that payment and may have trouble re-fi'ing into a 30.

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in 1990 we bought a house and assumed a loan (cant do that now). Assuming cut a lot of closing cost.

Anyway it was an 8.5% 30 year mortgage that escalated to 9.5 then 10.5.

I refinanced a few years later to a 15 year 7% mortgage.

A few more years later to a 15% 6% mortgage.

Then sold the property in 1999 and didnt get have much gain since prices were basically flat back then.

I bought a new house in 1999 for $240,000 and I live in that house now.

I paid my mortgage off in I think 2006 and haven't owed a bank a penny since then.

Dont get in a hurry
Watch prices go down
avoid PMI if you can
if you buy a brand new house, it should come with a warranty.

I think some items warranty for one year, five years and 10 years.

The one year usually covers almost everything that break unless you cause the break.

Also you can negotiate price and allowances... Everything is negotiable

Rent in the area you want to buy so you'll know if you like the area.

If you already know, don't get in a hurry.

txaggieacct85 said:

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Howdy Dammit said:

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Robinhood is currently offering 4% interest on uninvested money. Might be something to look at.

As far as the house. My wife and I purchased our first home in the 2021 craziness. We were only able to comfortably put down 15%, although I really did want 20. However, PMI is cheaper than I thought. Think we pay 118/month. A few things to note.

1. Our monthly payment was at 25% of my gross pay. This made things very tight since I fully fund my retirement.
2. I'm a couple raises down the road, so being strapped for one year wasn't the worst thing.
3. Furnishing is more expensive than I thought. Was another small down payment.
4. Our house was new, but something always breaks or is needed for the home. Seriously. Every single month we buy or fix something. Didn't anticipate that coming from an apartment.
5. A home is not the investment I thought it was. If you're buying just so you don't miss out, don't. Buy because you wanna be somewhere a minimum of 5 years.
6. Make sure you know what your wife is doing after a baby. Don't buy a house that needs both incomes. Seen several women think they will continue to work, and post baby realize they want to stay home, but can't because of the payment.

Goodluck!

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but you get nothing for your $118 per month

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Some of your other points are sound and good, but this one I don't agree with.

Would much rather make say a $2.5k payment every month with less than 5% of that cost going into PMI than spend $2k on rent.

Plus, it's not indefinite. Can be removed later and I would never let a measly $118/month keep me from buying a house.

I can't say thank you enough for all the responses. Lots of good advice for a young couple.

"Would much rather make say a $2.5k payment every month with less than 5% of that cost going into PMI than spend $2k on rent."

It really depends on the direction of the market. If prices are dropping why would you buy now (and they are dropping)

Im helping my daughter buy a house in BCS and I'm definitely advising her not to get in a hurry.

I'm watching prices in her range drop by the day.

My son paid too much for a house in Cedar Park last summer and has watched his market value drop 12%

txaggieacct85 said:

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OldArmyCT said:

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A lot of people will tell you to get a 15 year mortgage instead of a 30. Don't. Get the 30 and overpay monthly like it's a 15 if you want but if your finances change you can easily lower you mortgage payment. If you're in a 15 you have that payment and may have trouble re-fi'ing into a 30.

---

in 1990 we bought a house and assumed a loan (cant do that now). Assuming cut a lot of closing cost.

Anyway it was an 8.5% 30 year mortgage that escalated to 9.5 then 10.5.

I refinanced a few years later to a 15 year 7% mortgage.

A few more years later to a 15% 6% mortgage.

Then sold the property in 1999 and didnt get have much gain since prices were basically flat back then.

I bought a new house in 1999 for $240,000 and I live in that house now.

I paid my mortgage off in I think 2006 and haven't owed a bank a penny since then.

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Actually, VA loans are still assumable, and you don't have to be a veteran.
I'm trying to sell my house with a 2.75% loan which is assumable, but you will have to pay difference in equity plus some VA loan fees. But I'm in ABQ, NM though.

Yes VA is assumable but they are not big players in the market. Very specialized and most importantly, most buyers have to qualify the new owners to VA underwriting. And as said the buyer has to bring the sellers equity and few have it.

FHA has some real old loans and USDA. Mortgage loans can as well. USDA is weird bird as well. Rural mostly but developers have found a way to build track subdivisions in farm fields to qualify.

txaggieacct85 said:

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"Would much rather make say a $2.5k payment every month with less than 5% of that cost going into PMI than spend $2k on rent."

It really depends on the direction of the market. If prices are dropping why would you buy now (and they are dropping)

Im helping my daughter buy a house in BCS and I'm definitely advising her not to get in a hurry.

I'm watching prices in her range drop by the day.

My son paid too much for a house in Cedar Park last summer and has watched his market value drop 12%

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I agree with HtxAg. There are several desirable neighborhoods in Houston that haven't and likely won't see a meaningful drop in value. He's not talking about production homebuilder subdivisions in the suburbs I imagine. There are certain areas with a finite amount of supply. I see transaction volume/inventory diminish significantly in a slow down but not price reduction. Most homes in those areas that are for sale are folks upgrading or memaw passed away and the house needs a significant gutting.

Obviously if 08-09 happens again all bets are off but don't see it happening in the neighborhoods that poster was likely referring to in the current economic headwinds.

Famous last words