House buying

[Hoser]

I've got some questions about buying a house and investments.

How much should I put down on a house? The main reason I ask is that I need to be able to itemize deductions next year for taxes. I know that both the interest and property taxes are tax deductable.

If I put too much down on the house, there may be too little interest paid. The average property tax would be around $2000. I guess I would have to have more than the standard deduction ($4750) to itemize.

[dbax791]

Originally posted by Hoser
I've got some questions about buying a house and investments.

How much should I put down on a house? The main reason I ask is that I need to be able to itemize deductions next year for taxes. I know that both the interest and property taxes are tax deductable.

If I put too much down on the house, there may be too little interest paid. The average property tax would be around $2000. I guess I would have to have more than the standard deduction ($4750) to itemize.

Well there are a couple of options. I believe all houses should be bought in January, that way you start the clock on the interest and can deduct the closing costs in the 1st year. You're right, otherwise you might not clear the std deduction.

The second thing to consider is mortgage insurance (PMI). If you can afford to put 20% down on the house, thats the way to go - you can avoid PMI payments.

[Hoser]

Thanks for the inputs.

I'm looking at possibly putting 30%-40% down. I'm debating on only putting 20% down and investing the rest.

I could wait until January of next year so that I could claim the whole year. If I did that I could put 50% down. It's a little confusing now, so I'm doing research on line to crunch numbers.

[WhiskeyPapa]

Don't worry so much about how much interest is deductable. Here's why: You are willing to pay the bank *more*, so you can send the government *less*. The problem is, you're still paying somebody more. It's not like you get to keep the money either way. It either goes out in interest, or in taxes. But less goes out in taxes.

So put as much down on the house as you can.

I'd say at least 20% to avoid paying PMI. If you want to invest the rest, that's fine. After all, with the market down, everything is "on sale"!

Be sure to get no more than a 15 year mortgage, not a 30 year. You'll never build any equity with a 30 year mortgage (that's why the banks push them!)

BTW, kudos to you for having that much money to put down on a house. Most people are looking for the "no money down" deals!

[Cubsfan]

Just to throw my $0.02 in, I wouldn't stretch yourself really thin on the down payment. Make sure you have a few grand put away for emergencies (new water heater, new furnace in the middle of winter, etc...)

[mcs328]

Originally posted by Cubsfan
Just to throw my $0.02 in, I wouldn't stretch yourself really thin on the down payment. Make sure you have a few grand put away for emergencies (new water heater, new furnace in the middle of winter, etc...)

I agree...god forbid your lose your job or something catastrophic. Save up enough for emergencies and stuff.

[Pinkgirl36]

you can also use this Mortgage Calculator (http://www.jeacle.ie/mortgage/) and just mess around w/ it and it can show you the difference and how much you would save between the different mortgage products out there.

[Kevster]

I just refinanced and got rid of my second thanks to the incredibly low interest rates we had and continue to have. Contrary to what Kb0wwp mentioned earlier, I have a 30-year loan - but it's at 5.75%. I am on a bi-weekly payment plan where I pay the same amount I would normally pay at the end of the month but in two equal installments. I pay a little more on top of that and with what I'm doing I'll have the house paid off in slightly less than 20 years.

I'm not knocking Kb0wwp's advice - a 15 year loan is definitely a better way to go equity-wise. The only problem with that is I live in a rather expensive part of the Los Angeles South Bay and a 15-year loan would easily put my payments (including Property Tax impounds) above $3000 per month.

[Kevster]

Originally posted by Cubsfan
Just to throw my $0.02 in, I wouldn't stretch yourself really thin on the down payment. Make sure you have a few grand put away for emergencies (new water heater, new furnace in the middle of winter, etc...)

If you're a first-time buyer, banks will want to see at least two-months' payments in your checking/savings when they are looking to approve you for a loan. You should also be ready to have additional money ready for the intrest pre-payment on your loan that is due at the signing of the paperwork. That can be an unexpected ding on your reserves.

[Hoser]

I won't be stretching myself thin. I'll actually have twice the down payment amount. Half of that will go to the house and the other half will be split up (investments, some savings, etc.).