Want to save for a house downpayment, don't know how

[tropolis]

I have an extra 500 a month I can set aside towards putting a down payment on a house. My problem is, I see that money and I want to spend it. I want to get it away from my primary bank account into an account where I won't see it. I'll have the money sent bi-weekly to that account so I don't ever see it.

My question is what kind of account would you recommend. This is short terms savings, I'm getting out in 4 years. With the tax returns and the savings, that'll get me 30k.

Is a add on CD the best bet? A high yields savings? Any ideas? Thanks.

[creditcardfree]

I would say that since you are adding to it biweekly, it would be best to find the best rate savings account for the initial deposits. Rates are going to be low. After 6 months, you could then buy a CD with a better rate, but keep adding to the savings account biweekly until you have another $3K to buy another CD. Keep your desired end date in mind when purchasing CD's so that in they might all come due at a particular time.

Good luck!

[Kris Jarczyk]

If you are saving for a downpayment on a house, I would consult with a few loan officers in your area and see what you currently qualify for and come up with a 'game plan'. FHA Loans only need 3.5% down and you can ask for Seller's to pay closing costs. With historically low rates, you may be better off buying now. Just a thought.

[littleroc02us]

An idea would be to open up an Orange Money Market account with ING and have money from your checking account deposited into this account through a automated transfer twice a month. It will only grow at 1.1% but it's better than losing it in the stock market. Speaking as a home owner if I could do it all over again I would save for at least a 40% down payment and get a 15 year loan. What you'll find as a home owner is that the less you have to fork over for a mortgage payment the more disposable income you'll have and the less interest you pay the bank. Believe me a tax break from the Gov't isn't worth it.

[bjl584]

If you are saving for a downpayment on a house, I would consult with a few loan officers in your area and see what you currently qualify for and come up with a 'game plan'. FHA Loans only need 3.5% down and you can ask for Seller's to pay closing costs. With historically low rates, you may be better off buying now. Just a thought.

I would advise against buying now due to historically low interest rates. OP should buy only when they are ready no matter what the interest rates are. By ready, I mean at least 20% down and the ability to lock in a 15 year fixed mortgage. My experience with loan officers is that they paint a rosy picture for you and will only consider gross income and the actual mortgage on the house. They don't consider maintance and upkeep, taxes, or anything else. Someone that needs to go through FHA for a 3.5% downpayment probably shouldn't be buying a house in the first place.

On to the topic at hand:

OP, you have an extra $500 a month. Set up an account that the money is drawn out of automatically each month, week, or whatever. Make it a sort of "bill" that you know is coming and will need to budget for. Keep your money safe. Keep it in cash or in laddered CD's until you are ready to buy your house.