sw33ternity t1_ja8dyf5 wrote on February 27, 2023 at 4:40 PM

You're likely better off with a lower down payment with PMI. I know when I first started looking the estimates from Zillow and the like went way over on PMI estimates, something like 225/month and it ended up actually being 60/month, which is very little compared to the taxation and penalty on an early IRA withdrawal.

Worst case, maybe reduce contributions to the IRA temporarily for cash flow with the mortgage, but avoid withdrawal if at all possible, or better yet, tighten up your budget on other aspects if they aren't necessary expenses.

fox__in_socks t1_ja8e3bl wrote on February 27, 2023 at 4:41 PM

Thank you! This is really helpful. We do have really good credit so I think we will get a good PMI rate. What concerns me is a higher monthly payment due to a lower down payment with the cost of living going up (groceries, preschool, etc) . I am wondering if we would pay more in the long run on interest than any tax hit we'd get on our IRA's if we put 20% down.

sw33ternity t1_ja8k9yq wrote on February 27, 2023 at 5:20 PM

This is really hard to provide more meaningful thoughts without knowing more details than you may be willing to provide. It will also definitely depend on your local real estate market, but ultimately nobody here can predict the future. For now, you need to set a hard budget first, inclusive of all long and short term goals, calculate from there how much you can comfortably handle on the mortgage, and plug in numbers into calculators with typical interest rates to see how much house you can actually afford, regardless of the preapproval amount listed on your lending letter. Play with the down payment amounts to see how much the monthly payment difference actually ends up being between 5%, 10%, 20% down, etc. Leave a bit of buffer for PMI for estimates below 20% down.

Some stuff to consider:

-You state single income, is your spouse planning on entering the workforce any time soon? If not, can you reduce paid child care needs?

-Sounds like you're public sector employee with pension, so are you still scheduled for any merit salary increases, or are you capped at "top step?"

-On the standard 30 year time frame, will the mortgage be paid off before you retire?

FWIW my median credit score was 804 out of the three bureaus to determine my PMI.

fox__in_socks t1_ja8n5hc wrote on February 27, 2023 at 5:39 PM

I am at one of the lowest salary steps for my classification, my income will keep going up but will hit a ceiling in a few years if i don't get a professional certification (studying now) My spouse does stay home but he will enter the workforce when all our kids are in full time school. My 2 younger kids will need to go to preschool, probably part time, in a year or two. They need the social development