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I'm currently spending $15,000 a year in rent and gaining nothing in equity! This needs to change :). Looking to buy a place, I'm in the DC area so it'll be in the $500,000 price range.

I have just started saving (shoulda started earlier...) and have $6,000 put away. I should be able to sock away about $2,000 a month. So:

Question 1: How much of a down payment should I look to put down? I was hearing 20% is a break point that will significantly decrease the interest on my mortgage. However, that is $100,000 and it will take me 47 months to save up to $100k at my current rate. It may not be as good of a time to buy 4 years down the line.

Question 2: When it is time to buy, what is the best way to go about finding a lender / mortgage broker? Are there objective comparison websites around in relatively plain English? I don't know that much about this...

Question 3: What is the best way to invest my money and grow it while waiting to be able to buy the house? I currently have it in a money market account with my bank getting me about 1% APY.

Thanks!

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    You should probably split this up into separate questions. Also, consider you answered your own question on #1, and #3 is off-topic. – JohnFx Oct 31 '11 at 15:30
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    I added a united-states tag since I assume by the references to "DC area" and the currencies quoted in $ that you're in the US. If I'm wrong please feel free to re-tag. – Vicky Oct 31 '11 at 15:48
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    @coergo This is not in answer to your questions, but I get the sense you should do a lot more research on your situation. You may not be "pissing away" $15k/yr in rent, you might actually be doing better by renting vs. buying. It's not an automatic win for buying by a longshot. Search this site or see the NYTimes rent vs. buy calculator. When you factor in property taxes, home maintenance, and mortgage interest, and opportunity costs, renting can often be the much more sensible option. – Chelonian Oct 31 '11 at 16:41
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    I just want to echo Chelonian's comments. Buying is not always better than renting, nor does buying automatically ensure you are "building equity". – gef05 Oct 31 '11 at 19:04
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    Just a quick fyi, saving for four years (forty seven months) isn't that long when you're talking about buying a house. If that's what it takes to get your down payment... – Benjamin Chambers Nov 1 '11 at 1:08
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You are correct that 20% has an impact on your interest rate, although it is not always hugely significant. You would have to do your own shopping around to find that information out. However 20% has an impact that I consider to be far more important than your monthly payment, and that is in your equity. If the DC market tanks, which I know it has not really done like much of the country but none of us have crystal balls to know if it will or not, then you will be more easily underwater the less you put down. Conversely putting 20% or more down makes you an easy sell to lenders [i]and[/i] means that you don't have to worry nearly so much about having to do a short sale in the future.

I would never buy a house with less than 20% down personally and have lived well below my means to get there, but I am not you.

With regards to mortgages, the cheapskate way that I found information that I needed was to get books from the library that explained the mortgage process to me. When it came time to select an actual broker I used my realtor's recommendation (because I trusted my realtor to actually have my interests at heart because he was an old family friend - you can't usually do that so I don't recommend it) and that of others I knew who had bought recently. I compared four lenders and competed them against each other to get the best terms. They will give you estimate sheets that help you weigh not only rates but costs of different fees such as the origination fee and discount points. Make sure to know what fees the lender controls and what fees (s)he doesn't so that you know which lines to actually compare.

Beyond a lender make sure that before closing you have found a title company that you think is a good choice (your realtor or lender will try to pick one for you because that's the way the business is played but it is a racket - pick one who will give you the best deal on title), a settlment company (may be title company, lender, or other) that won't charge you an excessive amount, a survey company that you like if required in DC for your title insurance, and homeowner's insurance coverage that you think is a good deal. The time between contract and closing is short and nobody tells you to research all the closing costs that on a $500,000 place run to in excess of $10,000, but you should. Also know that your closing costs will be about 2% of the purchase price and plan accordingly.

In general take some time to educate yourself on homebuying as well as neighborhoods and price ranges. Don't rush into this process or you will lose a lot of money fast.

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