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In general, no, buying a house is not a good reason to deplete an emergency fund; what about buying a house qualifies as an emergency? Do you have other assets you can tap into instead?
You don't have to put 20% down. Put 15% or whatever you can afford without tapping your emergency fund down and pay PMI for a couple of years; PMI will drop off when your equity gets to 20%.
Pmi does no automatically drop off even in scenarios with 20% equity, you either have to pay for an appraisal(regardless of outcome) or refi typically and in some FHA loans it may never go away no matter the equity. With no market movement it could take some time to get to 20% or with a market decline it may never happen. Interest rates are often tiered to LTV as well
Since the forum always talks about the importance of emergency funds, I am curious to see if anybody here will leave only $10K on balance (less than 2 months of expenses) to make a 20% downpayment and some closing costs for a house? Assuming it takes a family of four 2 yrs to build up the fund again.
We are in the process of budgeting how much of a house we can afford
How set are you and the spouse at your jobs?
If something happens can you or your spouses income still support the household?
How fast can you/spouse get another job if laid off?
Are your jobs marketable in your area or is it a have gun will travel mercenary job?
Are you planning setting roots on staying 5-6 or more years?
Do you freak if house values drop?
Your fund right now is at how many months?
What is the rent you are paying now vs new house payment?
Car payments?
What debt do you have that you can get rid of?
I personally would like at least 3-4 months emergency fund and the house payment coming out of another fund. Depending on what current debt you can settle or get rid of quick depending on your answers you may want to buy.
Quote:
Originally Posted by aus1ander
I think it depends on how quickly you can restore your savings and how comfortable you are with job security. If it takes two years to build up again, I wouldn't do it.
We saved for our downpayment completely separate from our emergency fund. I would recommend not buying until you have enought for your downpayment without having to dip into your emergency cash. Remember, there is more to just paying a downpayment when you buy a house. There are moving costs, furniture, repairs/maintainence, taxes, insurance. We spent quite a bit of money in the first 3 months getting settled in.
I usually calculate moving costs as 1% of purchase price as a rule of thumb
I am curious to see if anybody here will leave only $10K on balance
(less than 2 months of expenses) to make a 20% downpayment and some closing costs for a house? Assuming it takes a family of four 2 yrs to build up the fund again.
I wouldn't recommend it.
The EF should be in addition to and separate from savings to buy a house.
It needs to be even bigger if/when you also have a house
Since the forum always talks about the importance of emergency funds, I am curious to see if anybody here will leave only $10K on balance (less than 2 months of expenses) to make a 20% downpayment and some closing costs for a house? Assuming it takes a family of four 2 yrs to build up the fund again.
We are in the process of budgeting how much of a house we can afford
No, no and H*** no. I haven't run into a single situation of my buying a home or doing a major move where there hasn't been an immediate unexpected expense that by itself required dipping into reserves.
Does buying a house reduce your monthly expenses? If it does, and you are in a secure job, i personally would have no problem doing it. But for most people, buying doesn't reduce monthly expenses and it adds some somewhat substantial expenses especially in the first year or 2.
depends...wager your incomes in and do run some numbers. Emergency funds can be rebuilt, the key factor here is are you going to have a stable cash flow coming in to support the mortgage (only a single income). Don't take the high way, by getting higher interest rate, you will have HIGH payment monthly and next thing you know, things could hit the fan.
No, no and H*** no. I haven't run into a single situation of my buying a home or doing a major move where there hasn't been an immediate unexpected expense that by itself required dipping into reserves.
I would consider it if you could build the fund back up in 6 months or less, but if it is going to take 2 years, then I wouldn't.
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