Dip into emergency fund to hit 20%? (appraised, PMI, condo, rent)

[Oildog]

In the process of buying in an area that is more expensive than my current area. Had not planned on moving, but getting relocated seems to be part of life. With that said, some of my stocks took a hit last year and I'm not as liquid as I would like to be. I have a separate emergency account with 6 months of savings, and am thinking of dipping into it to make a 20% down payment on the new house. This would take about 50% of the account. What do you think...put down 10-15% and pay PMI for a year or two, or go for the 20% and have a little more 'downside exposure'. I lean toward the latter...I work with a Fortune 500 company and I believe my position is stable.

[MsFancyPants]

If it were me, I would put the 20% down and put what I would've paid in PMI back into the emergency account every month.

[chet everett]

I agree with MFP -- the "hit" to your liquidity is a lot easier to cushion than flushing money into a worthless PMI firm...

In fact, I would go so far as to recommend selling some non-tax advantaged assets to avoid PMI -- the "return" on such a use of funds is pretty quick!

[HappyTexan]

Or rent in the new location until you have the 20% saved up. Just throwing another option on the table.

[formercalifornian]

If you are absolutely committed to buying, here's another vote for putting down 20%.

[Silverfall]

I give MsFancyPants plan a 4th vote.

[davey123]

I give happytexan a second vote. I had a few friends who had really high paying jobs last year. They never thought that they would lose their jobs, but when they did, they went through their 6mos emergency fund very quickly. The lesson learned from that was the old cliche: better safe than sorry.

[mrpeatie]

I'd stay as liqid as possible. If things go well you can simply pay extra every month and get re-appraised when the you have gotten down to 80% of the original purchase. And if things pick up you can re-appraise to show you current debt is less than 80% of the homes value. I did the latter in my first place.

I say this as someone who quit a job out of sheer frustration last spring and took until the start of winter to find a new one. I getting interviews and they seemed to go well but half the places had lay-offs within a month of my interview. A big life-lesson learned is that 6 months is a long time until 1/2 way through month five when it feels very shot.

[MsFancyPants]

The only problem with getting re-appraised is that most lenders (or some, I shouldn't say most, but most of the ones I've used) won't reappraise to remove PMI for two years, regardless of how much you pay down the principle or how the market appreciates. I found that out when I was trying to refi a condo I had bought 6 months earlier during the boom. I was well above the 80/20 threshold and they said nope, not for two years.

[beckycat]

Originally Posted by MsFancyPants

If it were me, I would put the 20% down and put what I would've paid in PMI back into the emergency account every month.

You just read my mind!