I think we agree more than we disagree wcc. . . For one, I COMPLETELY agree that people who want to buy "big ticket" items like houses, etc. SHOULD put money down. Look at the insanity that 100% and 105%/110% financing has created in the housing market for an example of why. If people have a financial stake in something, they tend to value it more and are less likely to let it either go to hell or to just chuck it and walk away (or accept foreclosure).

That said, these kinds of "oh, just save up" posts crack me up because they're SO completely out of touch with reality. What should the savings level be in order for a person to be deemed "worthy" of homeownership then? 5% of gross salary for 5 years? 10%? 30%? Where would you draw the line?

The conventional 20%-of-purchase-price-down guideline is good/secure from an investor/loan backer standpoint but it's RIDICULOUS in this day and age from the point of view of discretionary income. Prices are WAY out of whack with salaries - and not just for houses. The inflationary effect on the average household is HORRENDOUSLY understated in the (biased and less-than-objective) federal numbers.

Savings is absolutely a virtue, and that goes for emergency/contingency "rainy day" savings, retirement/401k/IRA-type savings and purchase savings (like saving up for a large purchase). The U.S. savings rate is NEGATIVE right now for the first time in history, and although a lot of it has to do with young idiots spending their coin on "bling-bling" 22" Dub rims for their Lincoln Navigators and on 60" flat-screen TVs, a lot of it has to do with more "defendable" concepts - like the fact that it really does cost a lot more to live nowadays.

In years past, you didn't have to carry $60,000 worth of student loan debt to get an "average" job. You didn't have to pay $300 a month to own a car that isn't liable to fall apart under you. You didn't have to pay $50 a person per week in grocery costs. All these things add up and salaries have NOT kept pace. Not to mention the recent run-up in housing costs have the thought of purchasing such things seem completely INSANE for a lot of folks (me included). There's simply no way to realistically buy without getting a "liar loan" or a "sucker loan", so it's easy to simply say "aww f*ck it", give up and put the $$$ elsewhere. I imagine when there's an underlying belief that things are improving and hope is on the horizon, people might be more motivated to go after it, including finding the discipline to earn/save for it. Right now, prices are so high, it's a complete DE-motivator. It's nuts. Speaking only for myself, I am certainly not beyond sacrifice (I did it for years while in school earning a master's degree), but there comes a point when you have to ask the question, "is the sacrifice worth it?"

For housing in particular, I know a lot of people that are saying "no" and opting to live their lives with a modicum of enjoyment rather than either being miserable, cash-strapped and dejected, either due to being "house poor" and taking one of those "sucker" loans and buying in the bubble or saving up in the Polyanna-ish belief that maybe, some day they MIGHT be able to earn the right to sweat and worry about making their mortgage payment every month. . .

See the distinction?

I have to agree with not using a 401k loan as a down payment on a home...unless you have other assets to repay it if you lose your job...or you are in a govt/military job which has little possibility of ending. If you do not repay the loan when terminated, you are stuck with the early withdrawal penalty...which is potentially crushing since you are already in financial trouble and may find it hard to find alternative financing when unemployed.

Jeff (POP), I think a lot of posters here don't live in an area like Los Angeles. The cost of housing here, even with the recent price adjustments is a huge portion of the family monthly pay check. I love how the feds tax people on their adjusted gross, without regard to how much it costs to live somewhere. You make $100K in many parts of the country your doing very, very well. In LA that won't qualify you for a conventional loan on an average house. Here an average house is about $475K and its a 1950 or 60's tract house with about 1,200 sq. ft. and a 50'x 100' lot if your lucky. My sister makes almost a much as me and she lives in Kentucky, outside Cincinnati, and she bought an average for the area house there for $105K last year. I think her housing costs, as a percentage of her pay check is a fraction of mine.

Hugh, you're absolutely correct...many of us can't relate to the insanity :)! I know Jeff will do his research, but I would suggest that it might be preferable to withdraw (rather than "borrow") from a 401k and maybe even move that portion beforehand to something more stable than equities, etc. (if you haven't already for other reasons). It would just suck to borrow for a down payment, etc. and begin to incur all the other expenses that come with first time home ownership, lose your job, and then have Uncle Sam stick out his greedy hand. I agree with Fint, but if you have the assets to "pay it off", why not use them instead of borrowing in the first place? Just my .02 worth, but not worth nearly that much...

P-o-P, I feel like a broken record. Every time you go on one of your housing rants I just shake my head and think "You are living in California...one of the biggest housing bubbles in the nation."

If you want to own a home and not have to tap into your 401k (which is a bad idea, IMO, because you pay a huge penalty for early withdrawal and THEN you are taxed) then move to an area where housing is reasonable...basically anywhere but the west coast or east coast. There's a whole country in the middle you know...

Yea, but your sister has to live in that horrible place known as the Ohio Valley, you know, the place with horrible weather (4 seasons), a cultural wasteland (Big Time Zoo, Symphony, pro and college sports), and gasp, very little "diversity" (very low crime out in the burbs) ...

+1
I saw my 401k at idle mode. Right, wrong, or indifferent we borrowed against my 401k and bought acreage. We believe this was a lucky smart move given the prices and conditions today.

In one year, I will be done with the loan.