Whats a good way to save for a downpayment?

My girl and I want to buy a house together - we are legally married, we want to sock away a couple hundred a month for a few years. She is thinking doing a 401k and borrowing against the 401k is better then putting money in a CD or a mutual fund. While you save on taxes on the 401k's income during the "saving" period, you have to pay it back....I dont think its worth the bother.....She doesnt work, I have a pension plan that does not allow borrowing. I've got open ears for suggestions.

I strongly suggest you to suggest your girl to get a job.

If she is not a College Graduate then she really should go back to school.

Banks don't like couples with only one source of income.

Buying my house was tough. Over a three year period I worked a series of small second jobs (teaching community college courses was the funnest), and saved the income from those. Any unexpected income, a small stock sale (even $100 from Mom&Dad) also went into the pot. Eventually it added up.

Mutual funds. Sock every bit you can away in the mutual funds. they grow and you get more money. I have mutual funds that I put $3500 in four years ago - now have $4100 and I haven't added a dime. If you add some every week it could grow even faster. Talk to your financial guy (I use Edward Jones) very reputable and knowledgeable and every city has at least one. When you've saved enough you sell out and buy your home.

The most important part is putting away money consistently. See if you can set up an automatic deduction from your payroll. That way, you'll never miss it or be tempted to dip into it "just this once" for an emergency.

The best place to "park" your funds for a few years is a no-load index fund. For a shorter period of time, I would suggest a money market fund. The return is lower, but you don't have to worry about the stock market being down when you want to draw it out. It's immediately available any time you need it.

Since she does not work and you have a pension plan, and if you are not contributing to a 401K, you can't borrow from one if you don't have it. Money to be used for the downpayment should go to a CD, since you could possibly lose money in a mutual fund.

My suggestion would be to put it in a high earning mutual fund. cds give you a fixed rate but normally its not a whole lot. Mutual funds normally give you a better rate. You may also look into a money market account. Its the same as a cd but you dont get penialized for taking money out early unlike a cd or a mutual fund.

I don't know how much money you make or where you live, but talk to somebody in real estate. By the time you have enough to have a significant down payment, the market may have escalated beyond your means. See if you can find a developer doing "zero down" or "5% down" houses. The risk in new real estate is that your house doesn't escalate in value for awhile because people are building around you and follks want new construction. But it's better than watching real estate escalate 20% while you're saving $2400 a year.

Another idea? Try to find a "rent to own" property.