My wife and I are looking to purchase a house in January/February. for the down payment we will be selling some if not most of our stock from our employee purchase discount.Question being is should my wife and I pull out of our IRA, 401(k, and savings input (put into the IRA account), and put that money for the next several months into a regular savings account? We have a great budget but all extra income doesn't go to savings but to our retirement accounts.It would seem with our current financial flow that we live month to month but infact have $1.5k going each month into our retirement accounts, and $600 each month going to our ESPP thats could be used for the mortgage and related.We are both 32 years old, live in Boston, looking to purchase a house for $300/325K. Make $105k combined (gross), $70k 401(k) combined, $15k stock ($20K in January)Thank you for any and all information...~Best
Boston is a b!tch of a town to rent in, so I can understand your wish to rush things along. However, hasn't the real estate market been pretty hot in Boston? There is a lot of talk lately about housing cooling off, so think hard about simply toughing out the rentals for a bit and saving up more cash. I don't know enough about the local market, but simply googling Boston real estate market 2014 comes up with some dire predictions. I come from the Boston area and still have sibs there, who have gone through some interesting ups and downs in real estate value. Boston is not immune to cycles, in fact their cycles tend to be much more volatile.Please think very hard before tapping your retirement accounts,(which I do realize you have not said you are going to do,) and realize that money you reallocate towards a down payment from monthly payments on retirement accounts are funds you will not be able to put into tax deferred status. Measure this against the tax benefits of having a home, and decide how important a home is to you, if it is your top priority. We really can't answer these questions for you. We also don't know what the stock is and can't give input as to whether it is better for you to blow off your retirement account savings to protect your company stock. Look at relative values. Look at diversification of assets, which is what you will be doing by investing in real estate.Bottom line is, what you do is dependent on your priorities. Have you been qualified yet for a mortgage on a property of that level? That will tell you a lot about what you need to do.Best of luck,IP
Question being is should my wife and I pull out of our IRA, 401(k, and savings input (put into the IRA account), and put that money for the next several months into a regular savings account? I would probably not put into the IRA each month, and instead put it into a separate savings account, and then you have until April to decide if you want to put it into IRA or not. Sure you've got a few months that it isn't invested in stocks in your IRA, but very likely that won't really matter since that IRA is going to be invested for 30 or so years.BTW - $20K of your ~$90K net worth is in company stock - that is too much company stock IMO. (Not that I'm guilt-free when it comes to having too much of my assets in employer's stock - but I *am* making sure I at least stay flat in how much company stock I have - and that's slowly bringing the percentage down toward the ~10% that I have as my target.)
Hi Anthromn,I'd strongly encourage you to take 95-97% financing (3-5% down,) rather than raiding your growth accounts. You'll benefit from the compounding growth left at work far more than you'll incur expense on the higher loan-to-value mortgage and insurance.I just got a fellow Bostonian of yours into a $530k condo, at 80% 5 yr ARM @ 2.625, and a 15% HELOC at 2.99% Can't guarantee you'd qualify for terms that sweet, but even if you took a fat & heavy FHA loan with mortgage insurance, you're better off holding back your cash.Luck!Dave DonhoffLeverage Planner
Question being is should my wife and I pull out of our IRA, 401(k, and savings input (put into the IRA account), and put that money for the next several months into a regular savings account? We have a great budget but all extra income doesn't go to savings but to our retirement accounts.It sounds like you're thinking of moving money out of retirement funds not because you want to use it as the downpayment but just because you want to show you have large reserves. I don't think you need to do this.When I was going through the pre-approval process, I had enough in my downpayment savings and efund savings, that my mortgage broker didn't even need to get confirmation of retirement fund assets. That leads me to believe that if my downpayment or efund had been lower, he would've just asked for confirmation of retirement assets - and not expected those assets be in non-retirement vehicles.If you don't have an efund, than if I were you I might lower contributions to retirement funds over the next 6 months to build up an efund. That way by January 2015 you could show that in addition to your downpayment, you have some cash reserves. And if you're looking to sell employer stock for your downpayment, I would start selling each month as a way to dollar-cost-average the earnings just in case the stock goes down in price over the next 6 months.
For my current mortgage loan (closing Monday) my cash reserves were calculated including my 401k at 70% of current value. Presumably that's to allow for taxes upon withdrawal.
Presumably that's to allow for taxes upon withdrawal.And fluctuations in the value of your 401(k) account.
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