Take Investments Out to Buy a House?

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Take Investments Out to Buy a House?

Post by Tayskiing » Mon Aug 15, 2016 1:22 am

Hello Bogleheads!
Need some financial advice.
Just got married and looking to buy a house together. We each already own a house that are both being rented out consistently. We are both military so we can utilize VA loans. My wife is a disable vet that qualify for no funding fee VA loan but the cap for her is $273,000 (her first house is a VA loan as well). I am active duty military that qualify for the full VA amount necessary for the house we are looking at, but will probably have to pay the funding fee. We are pretty set on a house that'll cost $345,000. We will need to take out about $50,000 from investment - Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (the $50k is about 10% of our total investments). The $275,000-$300,000 loan monthly payment on a 15 year fixed is what we are looking at and could afford.

My questions are:
Should we take the investments out to put on a down payment on the house?
At what point if ever, would a conventional 15 year fixed loan be better than a 15 year fixed VA loan?
Are there other options besides taking that investment out (we are pretty set on the house - $345,000).

I appreciate any inputs!

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Re: Take Investments Out to Buy a House?

Post by livesoft » Mon Aug 15, 2016 1:33 am

I really don't understand the question in the title at all.

To buy a house, one needs money. So the money has to come from somewhere. Usually folks take the money out of their investments and savings to buy a house and also get a loan. I'm totally confused why you are asking this question.

Other options to get the money:
1. Get more jobs to earn more money.
2. There are illegal options, but you will probably end up in jail.
3. Sell your rental houses (which essentially are investments, so it is the same thing as taking money out of investments).
4. Borrow the money.
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Re: Take Investments Out to Buy a House?

Post by Tayskiing » Mon Aug 15, 2016 2:12 am

Military Veterans Affairs (VA) loans require no down payment. Both our first homes were VA. Neither put any money down. Therefore, we did not need to take any investments out to buy a house. With VA loans, you usually pay a 1-3% (of the sale price) funding fee which is rolled into the loan along with all the closing costs. Also the loans are back by the VA so there is no PMI.

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Re: Take Investments Out to Buy a House?

Post by stan1 » Mon Aug 15, 2016 4:36 am

I have sold tax exempt bond fund shares to buy cars, pay for remodeling projects, and to fund a down payment, and almost certainly will do so again with no hesitation. I rebuild the bond position over the coming months and years.

For $50K another option is to borrow from the TSP if you have that much in it and have the income to support repayment.

Another option is to do cash out refis or HELOCs on either of the two investment properties you currently own (if you can find a lender who will do that -- hassle factor might be high for the HELOC). Expect lots of supplemental documentation requests from the lenders if you do either. Might help to do all the loans with the same lender (then again it might not).

Both of these approaches assume you have the income to support the loans needed to get the liquidity.

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Re: Take Investments Out to Buy a House?

Post by canga » Mon Aug 15, 2016 5:24 am

First, thank you for your service. If possible you would probably save money in the long run if you apply for a conventional mortgage rather than the VA loan. If you can put down enough money to get a conventional mortgage, then that would be recommended.

I assume you're looking for a house because the military is relocating you. Have you both sold your previous houses? If you're only going to be in an area for 2 to 5 years, you would most likely would be better off renting. I know I certainly would not enjoy being a long distance landlord.

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