Financial Advice

[paleshadow]

I was wondering if there are any financial whizzes out there who could give me some advice. I have a little bit of money that I want to put aside toward eventually using for a downpayment on a house. I want to put it into an account that will have the biggest growth potential, but I'm not sure what kind. I don't know much about the types of accounts, but a friend mentioned a CD. If anyone has any advice or experience they can share that would be great. Thanks! :D

[chiliD]

Roulette wheel, Red #5. :D

[littlecricket2]

If you don't want any risk (i.e. investing in stocks), and it is probably a good idea to avoid risk since you are counting on being able to use that money in the future, then I would recommend a CD, like your friend.

The one drawback to a CD is that if you have to draw out of it for an emergency, you get penalized, as in, the CD doesn't earn as much interest as it otherwise would. So make sure you know you will not need any of that money before the CD matures. Then shop around at different banks to see who has the best rates (actually, they should be fairly comparable).

I'm not a financial whiz, but I'm also saving for a down payment on a house so I've been there! Good luck! :D

[sara1998]

It really depends on how long you want to wait for your investment to grow. I have a couple of CD's, a 6 month, 1 year, 2 year, and 3 year. Obviously, the less time it takes to mature, the less interest you will earn. My 3 year CD has been in for 2 years now, and is doing beautifully. I personally would try to go with a CD, because I don't know of any other short-term investment you could go with.

[HomerMcvie]

When you do get ready to buy a house, FHA loans are often the easiest for first time buyers to get. And I believe you can buy a house with as little as 3% down. If you go with an adjustable rate loan, you'll usually get into your house for the smallest monthly payment possible, BUT, adjustable rate loans seem to always go up, so you'll need to probably figure on refinancing the house after a couple of years. And refinancing usually runs $1000-2000, so if you can get a fixed rate loan that you can afford initially, I'd recommend that.

Sorry if I put your cart in front of your horse.

[littlecricket2]

When you do get ready to buy a house, FHA loans are often the easiest for first time buyers to get. And I believe you can buy a house with as little as 3% down. If you go with an adjustable rate loan, you'll usually get into your house for the smallest monthly payment possible, BUT, adjustable rate loans seem to always go up, so you'll need to probably figure on refinancing the house after a couple of years. And refinancing usually runs $1000-2000, so if you can get a fixed rate loan that you can afford initially, I'd recommend that.

Sorry if I put your cart in front of your horse.

Actually, I think nowadays you can even put no money down, but I wouldn't want to go that route. I want to pay as big a down payment as possible to see if I can avoid having to pay mortgage insurance. But, I have heard of people these days buying houses with no money down.

[HomerMcvie]

Actually, I think nowadays you can even put no money down, but I wouldn't want to go that route. I want to pay as big a down payment as possible to see if I can avoid having to pay mortgage insurance. But, I have heard of people these days buying houses with no money down.
Well, no mortgage insurance requires 20% down, which, obviously, can amount to a big chunk of money. That's a great way to go if you can afford it.
Good luck.

[macfan 57]

I was wondering if there are any financial whizzes out there who could give me some advice. I have a little bit of money that I want to put aside toward eventually using for a downpayment on a house. I want to put it into an account that will have the biggest growth potential, but I'm not sure what kind. I don't know much about the types of accounts, but a friend mentioned a CD. If anyone has any advice or experience they can share that would be great. Thanks! :D

It all depends how soon you're going to need the money for a down payment. If you're going to need it within 5 years or even a little more, then a bank CD would be the way to go. If you're not going to need it for more than 5 years or even 10 years, a stock mutual fund might be something to think about. Stocks are your only chance for growth, but they are definitely more risky than something that is backed by the government like CDs or U.S. treasuries. It just depends on your time frame. If you're going to go with a CD, check out the internet. You can sometimes get better rates online than going to your local bank.

[irishgrl]

Ive had CD's and Ive had T-bills. You get a better interest rate with a T-bill, but I think you have to leave it alone for a bit longer. If you've got 5 years, then I'd go with a T-bill. if less, go with a CD and shop around for the best interest rate you can find.

btw: maybe the time frame for a T-bill is less. You would need to look up US Treasury savings Bonds and see what their guidelines are.
here is the link (http://www.publicdebt.treas.gov/sav/sav.htm)

[skcin]

I just got a 15 month CD at 4% from HSBC, minimum $1000. I've no idea if that's good or not, of course. :shrug:

[littlecricket2]

Well, no mortgage insurance requires 20% down, which, obviously, can amount to a big chunk of money. That's a great way to go if you can afford it.
Good luck.

Yeah, I know it's huge for a first-time buyer, and I used to think it was strictly 20%, but recently I've heard of lenders going a bit lower than 20%, if the buyer's credit is good and it's still a big chunk of money, or if you make a deal not to sell for a certain number of years, etc. So I'm holding out hope. And, if I can manage to find something for around $120-$140,000, I might be able to manage the 20% anyway, but that's very iffy.

[paleshadow]

Yeah, I know it's huge for a first-time buyer, and I used to think it was strictly 20%, but recently I've heard of lenders going a bit lower than 20%, if the buyer's credit is good and it's still a big chunk of money, or if you make a deal not to sell for a certain number of years, etc. So I'm holding out hope. And, if I can manage to find something for around $120-$140,000, I might be able to manage the 20% anyway, but that's very iffy.

Thanks everyone for the advice. My father has been telling me that they usually look for a 20% down payment as well. That's scary for me because in my area of NY you can't really get a house for less than $200,000 now a days. Anything in that price range also comes with phrases like "needs some tlc". I was thinking that I'd like to be ready to buy in no more than 3 years. My rent keeps going up and it's almost as much as a mortgage payment would be at this point!

[gldstwmn]

When you do get ready to buy a house, FHA loans are often the easiest for first time buyers to get. And I believe you can buy a house with as little as 3% down.

Actually, if she uses a gift program and the seller pays 3% of the closing costs, she may actually get some money back at closing. :) The debt ratios have to be low, like a 39% back end ratio and any recent consumer or mortgage lates will kill it.

[gldstwmn]

Well, no mortgage insurance requires 20% down, which, obviously, can amount to a big chunk of money. That's a great way to go if you can afford it.
Good luck.

Not necessarily. There are programs over 80% CLTV that don't require MI. She can also go TAMI, but it adds an additional 1.5% to the rate. There is no mortgage insurance then. She could also do a conventional 80/20 and avoid MI. I'd stay away from the HELOCS right now and go with a closed end second unless the rate on the HELOC is fixed.

[gldstwmn]

Actually, I think nowadays you can even put no money down, but I wouldn't want to go that route. I want to pay as big a down payment as possible to see if I can avoid having to pay mortgage insurance. But, I have heard of people these days buying houses with no money down.

You can put no money down and still avoid MI.

[gldstwmn]

Thanks everyone for the advice. My father has been telling me that they usually look for a 20% down payment as well. That's scary for me because in my area of NY you can't really get a house for less than $200,000 now a days. Anything in that price range also comes with phrases like "needs some tlc". I was thinking that I'd like to be ready to buy in no more than 3 years. My rent keeps going up and it's almost as much as a mortgage payment would be at this point!

You need to find a good mortgage broker and work with them. Ask your realtor to reccommend someone. You shouldn't have to put any money down if you don't want to. In fact, it's looked at favorably if you keep that money in reserve.
It's not as hard as most people think. :wavey:

[littlecricket2]

You can put no money down and still avoid MI.

...without them adding a percentage or two to your interest rate?

[gldstwmn]

...without them adding a percentage or two to your interest rate?

It's hard for me to say without specific scenarios. The interest is all a tax write off anyway and homes have been increasing in value at a record pace so...

[littlecricket2]

It's hard for me to say without specific scenarios. The interest is all a tax write off anyway and homes have been increasing in value at a record pace so...

Well, that is good to know! I am getting really excited about buying a place! :blob2: This realtor set me up to get sent notices about properties for sale, and I almost wish I had the funds now to buy a place, because I am salivating over some of the properties! But alas, much of my money is tied up, and I haven't accumulated quite enough in savings yet. By next summer I should have at least 20K for a down payment, w/ some left over for taxes, closing costs, etc. I need to stop reading all those e-mails and tell him to just start sending them to me in April, LOL.