Save for house down payment or max 401k

[heisking]

@brownie44 I’m not known for logical decisions and I do best when it’s guy reaction so I’d buy.

If you’re already at $100k and only 27, you can afford five years of “minimum 401k while maxing employer match” while saving.

If you buy at 7 or 8% mortgage and rates drop again, refinance but when you buy, that monthly cost is fixed for 30 years while the market and economy do who knows what.

With housing costs set and fixed, max out the 401k.

The people clutching their pearls over 8% didn’t live through 17% and it shows.

Plus, at 27, the odds you’ll live there for 30+ years are low. Meanwhile you’re building equity. Ten years from purchase, when you move, you’ll be able to upgrade housing while still maxing retirement.

 

[heisking]

@burlingaaron Most of the times, I feel like most first-time-home-buyers head into the process with the misguided belief that the all-in mortgage payment will be like 20-30% less than their current rent payment and that’s simply not true out of the gate.

It takes a good 5 to 10 years of equity-building / market changes to get back to that place where the mortgage is less than a rental payment.

So many first time buyers are skittish about the overall monthly payment that they freak out over the total cost, the monthly “nut” and then really freak the F out when presented with the full 30 year mortgage showing how much they’re paying in interest that they start thinking “yeah, maybe renting isn’t so bad.”

Outside of 2007-2008, most mortgage lenders won’t let you get in over your head so if they say “you can afford X per month” believe them. It can be tight for the first three years but in ten years, that monthly mortgage amount will be smaller than the rent amount for the current size/type of rental in that area.

 

[burlingaaron]

@heisking We’ll see if they are being more conservative with salary/mortgage payments this time around. I have my doubts. We got approved for a crazy amount because they said we could cash out retirement accounts if needed. One loan officer told us we could get mortgage with 90% of take home salary because we could live off RSUs (which we definitely can’t with family of 4). I routinely know people getting mortgages for 50% of income, which is crazy high in my opinion.

 

[heisking]

@burlingaaron What kind of shady-ass shyster lenders are you talking to?! The standard is no more than 28% of your gross monthly income. Sheezus.

When I was posting, that’s the comfort zone ookiness I was talking about. If rent is 20% of gross, then thinking about increasing to 28% of gross for a mortgage feels too expensive. Not 90% of net. THAT’S GOTTA BE ILLEGAL. Like seriously illegal.

 

[burlingaaron]

@heisking A mix of some big banks and local banks. Using lending practices like that in Seattle has been the norm for a while. When it first became prevalent to use RSUs as lending qualifications, you could see a huge jump in home prices. Anytime stocks do a big increase, you routinely see homes getting bid $100 -$200k over ask; it’s just bonkers.

 

[frdpwr427]

@brownie44 You're not crazy. It's better to rent than own financially.
This means perfect sense.

 

[jesstheblessed]

@frdpwr427 What? Maybe for this person's situation it's better, but I disagree with that generally. I have 200k in equity and a 2.5% interest rate and lower monthly payments than anyone I know who rents.

 

[maney23]

@jesstheblessed The rates are no longer 2.5% they are talking about current times when rates are around 6-8%