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Is anyone hoping to buy a home soon? If so, how much of your savings do you think you'll spend? Or if you're already a homeowner,  how much of your savings would you suggest a new homebuyer put down?

I got a letter from a woman who wants to buy her dream home and rent out the one she and her boyfriend currently own. To make this happen, she's considering using 90% of her savings. https://www.thepennyhoarder.co...se-savings-for-home/

Honestly, I'm grappling with the same question. I'm hoping to buy a home at some point in the near future, but the idea of parting with a huge chunk of my savings sends me into a bit of a panic.

I think it's ultimately less about the percentage of savings you're using and more about whether you'd be dipping into your emergency fund. I'm keeping my six-month emergency fund, but realistically, all of my savings beyond that will probably go toward a down payment. I don't plan to use any money from my Roth IRA (even though I could use all my contributions plus $10K of the earnings since I'm a first-time homebuyer) or my 401(k).

In the letter writer's case, it sounds like 90% is a bit much — not only because she would probably dip into her emergency fund, but also because it sounds like spending so much of her money at once would cause her a lot of stress.

Unfortunately, with home prices so ridiculously high right now, many potential homebuyers will have to spend most of their savings if they don't want to rent forever. How do you know if you're spending too much on a down payment?

Robin Hartill aka Dear Penny is a certified financial planner and a senior writer at The Penny Hoarder.

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I did an owner finance when I bought my place last year. I also agreed to the former owners' terms of payments, which was not bad at all for me. I did double up on my monthly payments just so I could get it over with.

I would not give 90% of my money for a house as a down payment unless I have twice the amount in my checking/savings/retirement accounts knowing that I would be alright in the long run.

I say put 20 to 30% down as payment and then make the monthly payments on time.

I most definitely wouldn't put 90% of my savings in a home. Buying a home to live in just has the "joy of ownership" and it's slightly more convenient because the landlord won't have you move from time to time if they are selling the building/house.

Other than that, there's no financial benefits. Buying a home to live in is not an asset, and is purely a liability unless you have a concrete exit plan to capture the value of your equity (pretty much everyone doesn't). For so little benefit and such massive downside, spending 90% of savings to buy a home just doesn't make sense from a financial perspective.

Buying a home to live in isn't a requirement - it's purely a luxury item. So I'd say the pride of ownership + have a place to call "yours" is probably worth maybe 10-30% of your savings to do the down payment with. Otherwise, it's too much opportunity cost.

No, I would not put 90% of my savings toward a home down payment, especially if my emergency savings are commingled with those funds. I would leave a generous emergency fund, and if I were to buy a house now, I would also want extra funds set aside for things that always come up with houses. If I couldn't do that, then "now" would not be the time to buy a home in my mind.

Last edited by sthom

Great question! I concur with everyone on this thread. Putting 90% of your saved money down on anything  these days is a risky venture in my opinion. There is too much that can go wrong and you haven't even considered the inevitable issues that will surely come up with buying a home. They simply always do. Having said that. I'd like to push back a bit against the idea that homeownership isn't a good investment. When the time is right, and what I mean by that is. You're not using 90% of your savings, but more like 20%-30%, as has been stated here. You don't buy when the market is as outrageous as it is now and you consider having at least 3 to 5K saved for home repairs. Owning property is currently still one of the few assets that the average American has that accumulates personal wealth. The housing market ebbs and flows, but owning one gives vastly more opportunities than renting. There's nothing wrong with renting. My wife and I rented for about 3 to 5 years, saved money for home and were pleasantly surprised to get in for much less than we thought. That extra money funded our emergency savings/home repair fund. All i'm saying is, if you have to spend 90% of your savings to get into a home. IT IS NOT WORTH IT. At least not right now. Keep stacking your bread and know that you'll be at a ready when it's time to strike!

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