You’ve done it. You’ve finally decided to buy a house… sometime in the next 5 years. You’ve got your eye on a certain neighborhood. The homes aren’t any “mansion-in-the-sky.” But it doesn’t matter. Because baby, it’s all yours… (Cough! Well actually it’s the bank’s... at least till you pay it off. But who likes that dream?)
But now that you’ve decided to buy in 5 years, you realize you need to start saving. You figure if home prices continue their uptrend, you’re dream house will probably cost about 325,000 USD once you’re ready. The average cash down-payment typically runs about 20% of the purchase price. And for the foreseeable future, it seems reasonable that you can get 7% annual return (compounded monthly) if you invest your savings in a mutual fund.
If you choose to automatically deposit money every month into such a fund, how much do you need to save each month in order to afford the down-payment for this house?