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From: mcb@styx.UUCP (Michael C. Berch)
Newsgroups: net.invest
Subject: Re: A Question
Message-ID: <20519@styx.UUCP>
Date: Mon, 24-Mar-86 00:38:05 EST
Article-I.D.: styx.20519
Posted: Mon Mar 24 00:38:05 1986
Date-Received: Tue, 25-Mar-86 04:38:38 EST
References: <882@sfmag.UUCP>
Reply-To: mcb@styx.UUCP (Michael C. Berch)
Distribution: net
Organization: Lawrence Livermore Laboratory, Livermore CA
Lines: 37
Keywords: savings, real estate
Summary: Best to buy sooner

In article <882@sfmag.UUCP> mom@sfmag.UUCP writes:
> A question.  I am a fairly young man (25).  My wife and I both work.
> We are in a fairly high tax bracket.  We are starting to save up for
> a house.  By cutting out a lot of frills (not so many nights out,
> brown bagging it, being careful on major purchases) we are trying to
> save $1000 per month towards the house. . . .
> We estimate it will take about two years or so to save up enough for 
> a good-sized downpayment. . . 
> 
> The question comes in when we consider what to do with the money
> now.  . . .

The advice I've been hearing lately is that you should try to go ahead
and buy the house as soon as you can, as real estate prices tend to
rise faster than your ability to purchase. Prices will not get lower,
and the mortgage interest rate should be at bottom in the next month
or two or three. 

I don't know what prices are like in your area, but assume a $90,000
house/condo with a 90% loan ($81K) and 10% down ($9K). Add $2,000
misc. costs, and you should be able to save this $11K in 10 or 11
months, if your estimates are correct. It's probably the best use of
the money; you get tax benefits from interest deductions sooner.
If you are looking in a higher price range than this, all the better.

You'll have higher a monthly payment because of the higher loan, as well
as having to pay PMI (private mortgage insurance). Some builders of
new projects are providing financing in the 90 to 95% range out here
in California. 

These suggestions may not be appropriate to your particular situation,
but the general advice of trying to buy as soon as feasible should be.

_____
Michael C. Berch
ARPA: mcb@lll-tis-b.ARPA
UUCP: {akgua,allegra,cbosgd,decwrl,dual,ihnp4,sun}!idi!styx!mcb