{ "media_type": "text", "post_content": "I spent the last 3 months \"growing up\" & now I'm ready to go. 1st thing is for me to get my own place. I'd like to buy instead of rent because I don't want to pay someone else's mortgage.\n\nI'm thinking of selling my car & cash out some of my 401k to buy a house. My thought is to put down 3.5% for a FHA loan then make a big payment towards the principal to reduce long-term interest. \n\nAnything wrong with this thinking or anything else I should consider?", "post_id": "5fabe208e02156002097c88e", "reply_count": 8, "vote_count": 0, "bowl_id": "5d4cfe045cd8b50022df26e5", "bowl_name": "Personal finance" }

I spent the last 3 months "growing up" & now I'm ready to go. 1st thing is for me to get my own place. I'd like to buy instead of rent because I don't want to pay someone else's mortgage. I'm thinking of selling my car & cash out some of my 401k to buy a house. My thought is to put down 3.5% for a FHA loan then make a big payment towards the principal to reduce long-term interest. Anything wrong with this thinking or anything else I should consider?

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Preface this by saying I tend to be conservative with my finances which mY not align with some folks here who don’t value living below their means as much. Buying a house still means you pay property taxes, repair, renovation, and many other things. It’s not just mortgage and you’re done, month after month. And with 3.5 percent down you’ll also pay PMI, I believe. You don’t just put everything straight into equity, in other words and that will eat up your savings. Granted I don’t know where you are. If a high cost of living city versus, say, rural Kansas, this advice may not be relevant. Don’t cash out your 401K. Just keep renting until you can afford a bigger down payment.

Definitely shouldn't be cashing out your 401k. You'll have to pay fees and taxes if you do. Might as well just be a bit more patient and rent for another year while you safe up.

What's your reasoning for putting 3.5% down and immediately making a large principal payment? Why not just put more down to begin with?

Yeah sorry, I dont have my spreadsheet open, I was doing the rough math on my phone, I’ll get a screenshot and show the detailed comparison tomorrow

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