patrick.net

Even without the matching it doesn't make sense to reduce your 401K contributions. Max that baby out. Its all pre-tax money. The biggest two tax breaks for the average middle class worker are the 401K and MID (mortgage interest deduction).

I agree with most people on this site. One should not buy a house without having at least 20% down payment AND 6 months of expenses saved up. I'm not saying you should put 20% down, just that you should HAVE it. The decision on how much to put down is very individual, but how much you should have is not...

Don't forget you can take a loan from your 401K. Or if you have an IRA you can withdraw up to 10K penalty free (for first time home buyers)...

@rob8024

You are incorrect. A ROTH IRA has no penalties for withdrawing anything less then the contributions.

A (traditional) SIMPLE or ROLLOVER IRA is the one with the 10K penalty free limit.

In both cases you have to pay INCOME TAX (the ROTH you paid it before putting it in).

contribute to your retirement plan first, then buy a home.
otherwise it's mortgaging your future for present gratification.

wuaname says

Yes, it is part mental about buy vs rent.. especially when you do the math… in 5 years I’ve paid $65K in rent.

Do you think buying will cost you less than $1083/month? Include insurance, tax, maintenance, etc. There are many calculators that can help you out with this online. The best I've seen for is missionite's (http://submedian.blogspot.com/), but it may be somewhat California-centric.

I'm with some of the others here that 3.5% is an extremely low down payment, and our government should not be subsidizing loans this way. For many people, it is very risky to be that close to the margins. The government is basically trying to cause Bubble Part 2.

Well my point is that the original poster could both save for retirement, AND be putting money away for their house downpayment using a Roth IRA; basically pushing the decision about how to use the fund off until later.

More about using an IRA for a down payment for first time home buyers.

http://www.fool.com/money/allaboutiras/allaboutiras12.htm

401k, you can borrow against your 401k if you are a first time buyer at a very low rate.

Another option is to just take an early withdrawal and suck up that penalty. Paying 10% more tax on 2x the money beats the pants off of paying normal tax on 1x the money. Assuming you've been saving for a few years already, you might have enough to do that now.

Locking in a low interest on a fairly-priced home that you plan to die in should only prove to be a bad move if you die too soon, or get forced out of it by miscalculation or hardship. Otherwise, your earning power should grow while your housing payment stays fixed.

So it might make sense to buy sooner rather than later to guarantee a low rate. Be sure to account for property taxes, insurance, maintenance, and changes in transportation and utility costs --in addition to the payment.