Saving for home down payment

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Saving for home down payment

Postby jmyers » Sat Mar 23, 2013 4:29 pm

Looking for advice on saving for home down payment in the next 3 years. I have $15,000 to invest. Considering I-bonds, index funds, bond funds, and mutual funds. Open to suggestions. Thanks.
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Re: Saving for home down payment

Postby icefr » Sat Mar 23, 2013 7:57 pm

I kept my down payment fund entirely in a savings account at Ally. Principal guaranteed since it's FDIC insured. I did use some CDs as well, but I ended up cashing them out early at a small penalty. I would consider tossing the $15,000 into a CD and put future cash flow into an online savings account.

Other people said I should use bond funds for part of my down payment fund, especially considering that it was up to almost $80k by the time I finally closed on my place. But I liked how simple it was to get the money out of the savings accounts and it was great to watch it get more interest each month as I added to the account!
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Re: Saving for home down payment

Postby Occupier » Sat Mar 23, 2013 8:15 pm

The problem with I-bonds is you lose several months interest if you sell em before 5 years. Tale a look at Vanguard Short Term Investment Grade, and compare with a CD at your local Credit Union. Dave
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Re: Saving for home down payment

Postby jmyers » Sun Mar 24, 2013 9:46 am

Thanks for the advice. Why did you choose Ally for your savings account? Do they typically have better interest rates? Also, what do you know about USAA and how they compare in this aspect? I am in the military and am planning to switch to USAA as my primary bank.
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Re: Saving for home down payment

Postby icefr » Sun Mar 24, 2013 10:29 am

jmyers wrote:Thanks for the advice. Why did you choose Ally for your savings account? Do they typically have better interest rates? Also, what do you know about USAA and how they compare in this aspect? I am in the military and am planning to switch to USAA as my primary bank.


I know nothing about USAA. I was originally with ING Direct, but I jumped ship to Ally because the interest rates were better. For the amount that I saved up, I was getting quite a decent chunk in interest each month, so finding somewhere with a good interest rate wasn't a bad plan. There are other places that have better interest rates now, but I don't have that much money in cash savings anymore.

Looks like USAA's savings account rate maxes out at 0.30%: https://www.usaa.com/inet/pages/bank_sa ... nk_savings
Ally is currently 0.84%: http://www.ally.com/bank/online-savings ... tabs=rates
Looks like Barclays and EverBank have slightly higher rates (~1%) right now.
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Re: Saving for home down payment

Postby RobInCT » Sun Mar 24, 2013 10:53 am

I am in the same position and will need to save ~100k to avoid PMI. I personally decided to start with a mix of 80/20 short-term bonds/cash and every year decreasing bonds by 20 and increasing cash by 20. I chose this approach because my purchse timing is somewhat flexible, and I am willing to hold off if, e.g., the bond market crashes. If your deadline is 3-years and inflexible, I would recommend even more conservative--CDs, savings accounts, etc.
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Re: Saving for home down payment

Postby jmyers » Sun Mar 24, 2013 3:47 pm

Thanks a lot for the advice. Take care.
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Re: Saving for home down payment

Postby ivesjl » Sun Mar 24, 2013 4:01 pm

jmyers,

I highly recommend switching to USAA for a checking account. Their customer service is excellent, they are experienced with military matters (preparing for a deployment was a single phone call), they allow mobile check deposits, and their insurance rates were far cheaper than anywhere else that we could find.

However, we keep our emergency fund at Ally. The number 1 reason was to get the higher interest rate (almost 3 times higher than USAA). After moving our emergency fund to Ally, we also appreciated having the physical separation between the accounts. We have dipped into our emergency fund once or twice, and the easiest way we found to transfer money was to write a check out of Ally and deposit it with USAA's mobile depositing; the whole process took about two minutes.
"Successful investing is all about common sense." | ~ John Bogle.
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Re: Saving for home down payment

Postby jmyers » Sun Mar 24, 2013 4:52 pm

ivesjl,

Thanks for that response. I've been thinking about switching my checking account, and you just convinced me. Using Ally for the emergency fund is a great idea too.
Thanks again!
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