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Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 3:28 pm
by ashagru
Hi All: I am 6-12 months away from buying a house in a HCOL (Bay area). I currently have > $100k sitting in a savings account and would like to make it work for this time while taking "low to moderate" risk.

In a prior post, someone mentioned a combination of VWIUX & VCADX -- seems like a good choice. Does the group have other suggestions? Am I taking too much risk by parking the money here?

Thanks in advance.

Re: Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 4:51 pm
by retiredjg
I don't know the funds you listed (please include fund names), but money for a down payment should be saved, not invested. The exception is if you are willing and able to put the house off if the market does not go your way.

I would not park money in anything risker than a short term bond fund and that would only be part of my downpayment. The rest would be in money market and maybe CDs.

Re: Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 5:32 pm
by EHEngineer
retiredjg wrote: Tue Aug 22, 2017 4:51 pm I don't know the funds you listed (please include fund names), but money for a down payment should be saved, not invested. The exception is if you are willing and able to put the house off if the market does not go your way.

I would not park money in anything risker than a short term bond fund and that would only be part of my downpayment. The rest would be in money market and maybe CDs.
100%

Ashagru - Look at the 10 year chart of those funds. both of them have 3 downturns of roughly 8% in the last 10 years. Would you really risk an 8% downturn for the chance to make 1-2.5%? I would much prefer a 1% high yield savings account with FDIC insurance and zero chance of downturns.

Re: Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 6:06 pm
by runner23
I am in a similar boat and have $75k sitting in 3 separate $25k 11 month no EWP CDs at Ally yielding 1.5%. I have looked at ST bonds too but the incremental return, if any, isn't worth the risk to me. In the grand sceem of things, a small increase will not allow me to purchase the house faster and I'm not getting killed on inflation.

Re: Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 6:11 pm
by bligh
ashagru wrote: Tue Aug 22, 2017 3:28 pm Hi All: I am 6-12 months away from buying a house in a HCOL (Bay area). I currently have > $100k sitting in a savings account and would like to make it work for this time while taking "low to moderate" risk.

In a prior post, someone mentioned a combination of VWIUX & VCADX -- seems like a good choice. Does the group have other suggestions? Am I taking too much risk by parking the money here?

Thanks in advance.
6 months is too short a time frame for those funds. If you must, at the very least go with a limited term or short term tax exempt fund. Or stick with a savings account.

Having said that, a lot of people have flexible time frames for the purchase of their house. Ie. A house purchase can easily be delayed by a year or several years if the market takes a dive. In such a case, you could get away with an intermediate term fund.

Re: Park money for house down payment in HCOL area

Posted: Tue Aug 22, 2017 7:07 pm
by Engineer250
I agree you should not invest the money. CDs and online savings accounts are fine.

Something important to consider- in the 2007 financial crisis stocks and home prices both dropped. If such a thing occurs again you want your down payment money to stay flat so you can buy a home "on sale" and not have to wait.