Buying a home is a huge financial commitment, its also usually one of the smartest financials choices you can make. However its important to know if its the right commitment at the right time. Having a small or a large home loan will affect how much money you can stash away in you 401K or other retirement investments. Should you save more money for a down payment to buy a home? Should you invest more in your 401K so you can retire early or have a larger retirement income? There is not a right or wrong answer that fits everyone’s needs or wants. Here are three questions to think about when deciding between buying a home or investing in other retirement funds.

Question #1: Where will my down payment come from? 

To get the lowest rate and the keep the lowest monthly overall payment its best to have a down payment. A 20% down payment gets you the best of the best, depending on credit score. But a 20% down payment is not a hard and fast rule in today’s market. What ever you do save for a least the minimum down payment. If you are not sure what that is please contract your friendly loan officer at Beam Lending. There are time when home buyers have pulled money from their 401K or other retirement funds to use as a down payment. Pulling money from these accounts can have tax issues as well as you no longer have money in that account to use for retirement. Be careful in choosing where your down payment comes from and do your homework before proceeding.

Question #2: Does my employer match my 401K? 

Each employer is different but if your given the chance to have your 401K contribution matched by your company you would be silly not to take advantage of it. Don’t ever pass up free money. If buying a home limits what you can contribute you need to prioritize and figure out a budget that works for what your financial goals are.

Question #3: Will buying a home change when I can retire? 

For most of us the money set aside for social security wont be enough to live comfortably on. It all depends on what lifestyle you will want after you are done working full time. Be careful not to think that buying a home a building equity will be enough to sustain you.

Moral of the three questions, make sure you are careful about what eggs you put in what basket.

 

Photo Copyright: pablo631 / 123RF Stock Photo

Clint Carver
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Clint Carver

Loan Officer at Beam Lending
Clint graduated from the University of Utah with a degree in English. His prior experience includes 10+ years working under the direction of an Architect. When not helping families and individuals through the home buying process he can be found golfing and spending time with his family. Licensed in Utah and Wyoming. NMLS#826251
Clint Carver
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