Should I go admiral with Vanguard Index Fund for saving for a house?

Admiral shares simply carry lower costs for large accounts when compared to standard investor shares. It's still a mutual fund, with all of the risks that come with whichever type of holdings it contains.

Your root question is whether you should invest this money in equities or simply put it into savings. And to that, the only answer is that it depends. If you have a soft timeline and can wait out market fluctuations and only liquidate when the market is up, by all means, invest in equities. However, if your liquidation date is going to be some kind of deadline, you're much safer just getting your 1% from Ally.