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Hi All,

My wife and I are currently exploring house and mortgage options in the Boston area (oh the sticker shock!) and wanted to tap into the info here with regards to structuring our financial decisions. To give some background, we recently sold our condo bought at the peak in 2005 for a small loss. Our saving/investing philosophy has been to shelter as much money as possible in either Roth IRAs to both grow tax free and serve as an emergency source of funds or in our 401ks. Happily we've never had to tap the Roths and as our incomes grew we were able also build some funds in a savings account.

We have a child entering school in 2014, and to get into the town/school systems we want, we'll have to look for homes in the $500k-650k range, meaning at the high end we'd have to get a jumbo mortgage with 20% down. I'd really prefer to get "only" a 500k house, where we could put 10% easily, but so far the ones we've seen in that price range have unacceptable defects (and no, we're not looking to move out of the state, as if anything, my industry is consolidating in this area). Our mortgage broker says we'll have no problem getting pre-approved for up to 750k, which is more than we're willing to actually spend (based on back of the envelope calcs, the actual application for pre-approval went in this morning). Before selling our condo, we were putting away the equivalent of $3500 PITI between savings contributions and mortgage payments, so I'm comfortable that we can support that level of mortgage.

The question I'm currently pondering is where to pull the up to 130k downpayment from.

These are the numbers I'm currently playing with:

Savings Acct 82000 Currently earning a pittance
Stock Acct 14500 After tax estimate
Roth Contributions 71000 Tax and penalty free if withdrawn
Company stock award 13000 After tax estimate, vests 7/22
Rest of Retirement Port 366500 Combined 401ks, rollover IRAs, etc.


Options I see if we have to go up to 650k:

1. Combine the savings and two stock accounts to get most of the way there, then tap the Roth contributions for the rest. This would leave us with only 50k of liquid funds in the Roths to tap in case of emergency, plus the contributions can never be remade. We'd have to rebuild our savings outside of the Roths since we can only put 10k in a year (assuming we don't hit the income max soon).

2. My 401k offers the option to take a loan of up to $50k at 4.25% that our mortgage broker says can be used for part of the 20%. If we chose to do that, we could cover the whole downpayment out of the loan plus liquid savings. Downside is that the withdrawn funds aren't available to appreciate for a while and the loan is due if I lose my job. Failure to repay leads to both penalties and taxes. However, we would conserve the Roth monies and could liquidate the stock funds into savings, providing both an initial savings cushion and maintaining the Roth "true emergency" funds. I guess if I ever did lose my job, the play would then be to scrounge up money however possible including tapping the Roths to pay off the 401k loan.

So, I expect a chorus of "retirement funds are for retirement!" I understand the sentiment, but at the end of the day, money is fungible, and I'm trying to figure out the best and safest way to use the assets we have to get the house we want. Any advice?
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