25k saved... How to use it?

[Anonymous]

Hello all! My wife and I have saved 25 (possibly 27k by the time we get a mortgage loan) with the intention of using this money for a down payment (17k), closing costs(4500) and reserve(3500). This would be for, at the most, a 200k dollar home. If we ended up with 27k, should we add that to our down payment? Or to buying points and lowering our interest rate (we should qualify for the lowest interest rate, we're thinking it will be about 4.2%) Or should we save it and throw it at our student loans once we get the mortgage?

For reference we have no credit card debt, about 14k (interest rates from 3.4-6.8%) in student loans combined and a car loan worth 10k(2.49%).

Thank you in advance for your ideas and opinions!

[Anonymous]

---

wrote:
Hello all! My wife and I have saved 25 (possibly 27k by the time we get a mortgage loan) with the intention of using this money for a down payment (17k), closing costs(4500) and reserve(3500). This would be for, at the most, a 200k dollar home. If we ended up with 27k, should we add that to our down payment? Or to buying points and lowering our interest rate (we should qualify for the lowest interest rate, we're thinking it will be about 4.2%) Or should we save it and throw it at our student loans once we get the mortgage?

For reference we have no credit card debt, about 14k (interest rates from 3.4-6.8%) in student loans combined and a car loan worth 10k(2.49%).

Thank you in advance for your ideas and opinions!

---

How much savings do you have besides this $25-$27k?

Whatever the amount may be, you absolutely do not want to spend all of your savings getting into a house. See lots of stories here from folks that do and then the house either needs $ (or they just want to spend $ buying stuff for it) and they end up racking up the credit cards and looking for advice to get out of debt. 

Make sure you have an emergency fund of at least 3 month's worth of expenses in addition to the new house fund.

[Anonymous]

Thank you for your reply!

I posted that 3500 is our reserve (so it's not going anywhere) which is about 3 months of mortgage payments. While I completely understand that some people get into trouble and are house poor, I don't think we'd have any issues. All of our furniture is taken care of for the house. We won't be buying anything new until we fully settle in and reassess our financial goals in a few months. We can almost completely live off of my wife's income and we always put 1500 per month away into savings. More when I make overtime.

Just trying to see where the extra 2k would be best used. I get that you think it would be best to just hold onto it and up our reserve amount.

[Kree]

IF student loan interest is below %5, you can "usually" put the money in an index fund and make more on interest than you pay on interest. (mathmatical observation not investment advice.)

3 months mortgage payments is great, but will you also have enough for 3 months car payments, and 3 months groceries, and 3 months etc?

Emergency funds should cover all potential spending. I would even say 3 months gross instead of net, because the extra money could be eaten up by cobra costs, hospital fees, hotel stays, or any other out of the ordinary expenses resulting from an emergency.

[jlitnns]

---

wrote:
Hello all! My wife and I have saved 25 (possibly 27k by the time we get a mortgage loan) with the intention of using this money for a down payment (17k), closing costs(4500) and reserve(3500). This would be for, at the most, a 200k dollar home. If we ended up with 27k, should we add that to our down payment? Or to buying points and lowering our interest rate (we should qualify for the lowest interest rate, we're thinking it will be about 4.2%) Or should we save it and throw it at our student loans once we get the mortgage?

For reference we have no credit card debt, about 14k (interest rates from 3.4-6.8%) in student loans combined and a car loan worth 10k(2.49%).

Thank you in advance for your ideas and opinions!

---

If 3500 is what you have and will only cover 3 months mortgage payments I would throw the $2k into emergency fund to cover utility, car, inx, food as well. Build up that reserve again and pay off the student loans and car in the next 12-18 months. It sounds like you guys are doing well, keep up the good work!

[Anonymous]

---

wrote:
Thank you for your reply!

I posted that 3500 is our reserve (so it's not going anywhere) which is about 3 months of mortgage payments. While I completely understand that some people get into trouble and are house poor, I don't think we'd have any issues. All of our furniture is taken care of for the house. We won't be buying anything new until we fully settle in and reassess our financial goals in a few months. We can almost completely live off of my wife's income and we always put 1500 per month away into savings. More when I make overtime.

Just trying to see where the extra 2k would be best used. I get that you think it would be best to just hold onto it and up our reserve amount.

---

Of course nobody plans on it happening, but houses are full of potentially costly repairs. Oh, HVAC system all of a sudden needs replaced? Foundation issue? Electrical woes? $3500 doesn't go far.

I'm just saying that you seem in a great position and really on top of things. Emergency savings is your safeguard to keep it that way.

[Anonymous]

You all are right! It won't hurt to keep the extra in our savings account. We'll still have that 1000 a month after we get a mortgage to throw at the student loans (on top of their minimum payments!). I just need to be more patient lol

[jlitnns]

---

wrote:
You all are right! It won't hurt to keep the extra in our savings account. We'll still have that 1000 a month after we get a mortgage to throw at the student loans (on top of their minimum payments!). I just need to be more patient lol

---

#winning

[Anonymous]

Is there a casino near you?

[Anonymous]

I have a couple thoughts.

If your credit is good, I recommend a minimal down payment product. Get the loan for 1-3% down if possible, but then a month or two after it closes THEN pay the 10-20% you wanted to pay towards the principal.

Why? Because it makes the loan look more seasoned, which helps your credit. It also gives you a better ratio of unpaid balance which positively affects your FICO a bit and in any manual review of your credit it shows you've just been paying early/extra on your loan. All positive things.

I personally would go with a 6 month emergency fund. 3 months is probably fine but 6 gives you more time for any major career transitions or should life deal you a few bad cards at once. 

Now, if you have a fund set up after your 6 months emergency, research or pick an investment. Lot's of people think there is a market correction coming soon (and I agree theres a lot of bubbles ready to pop) but impossible to predict exactly when so if you're investing for the long term it accounts for the ups and downs of the market. I'm not licensed to give financial advice but one thing I've learned is try to find a low tax low fee environment for your money to grow in. If you are looking for some short-term ROI you can fund one of my real estate investments in St Louis and get all principal plus 7% back in 6 months

-Glenn