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Vuala_Ahem · Sep 15, 2008, 02:45 PM

Background:
I am 24 years old and I feel that these are great times to buy a home. My goal is to buy a home within the next two years. I make a little over $60k a year and take home about 65% of that (after taxes, 401k, etc). I continue to quickly pay down my auto loan and I now have zero debt other than that. I don't have very much saved right now since I've been working on improving my credit score. But this week I'll be moving back into my parent's home and riding my bike to and from my new job (with this will save me about $1200 a month in rent and gas). Once I make the move, I'll be able to save about $20k in a year (and still keep my lifestyle). $40k in two years.

I would like to find a way to turn those 40k into more because I plan on it being my future down payment. I've looked into savings and CD accounts. But it doesn't seem to give me the return I'd like. How or where could I invest my money to get a better return? I would like to achieve this in two years, but if this is not possible, I am willing to wait a few more years. I am trying to avoid the private mortgage insurance.

rockinmommy · Sep 15, 2008, 03:03 PM

Just remember that the higher rate of return you find on an investment, the riskier it is. If it's money that you only want to GROW, and don't want to take a chance on a loss, I'd consider siticking with a safer investment. Especially since you have a very specific use in mind for the money.

I would not be so afraid of the PMI. As a real estate investor (and home owner) I've had roughly 50 standard mortgages over the last 15 years. My strategy was to get the property bought, then get the PMI removed. I don't know what the market is like where you live, but if you buy something right - with some built-in equity - and are able to continue setting a bit aside even after your purchase you should be able to get the PMI removed fairly soon. With a combination of getting the house to appraise for more than you pay for it, and possibly paying down the principal a bit. The appraisal business is tricky. At the time of your purchase, your appraisal will almost always come in at nearly exactly what you're paying for the property. But then you can turn around in a couple of months and independently order an appraisal for another reason and get a completely different (usually higher) value. We've done this many times.

Did that make sense?

jjwoodhull · Sep 15, 2008, 03:08 PM

Good for you that you are so organized, driven and responsible. I wish I had known at 24 what I know now...

Like Rockinmommy said, high rates of return come with high risk. I think in your case you would be better off with a CD or internet based savings account.

Have you thought about finding part time work to boost your savings? There are plenty of night or weekend jobs you could get. Don't overextend yourself, but I'm sure you would have time for 10 hours a week.