How do you save for a home?

[Axon]

If you want to get serious about saving, here is my suggestions:

1.) You need to dig into this $1000 "random" bucket. If it's that much money, it's not random. You need to figure out what is going on here.
2.) Get rid of cable TV
3.) Get rid of $89 gym membership

Do you have a cell phone? How much are you spending on this?

Are you really only spending $200-300 a month on food, or is this overlapping with your $1000 random bucket?

Yes, really $200-300. I'm very disciplined. Its not hard either. Mostly chicken, fish, vegetables. $12 of chicken and rice feeds me for three days.

"random" essentially means paying my father's bills (disabled guy) and occasionally going out to dinner like 2x a month. Realistically, that's not going to stop.

Lots of judgment about my budget, but I feel like there are a lot of blind eyes to reality. I'm not dropping the internet, are you outside your mind? No one really does that for the long term.

 

[Axon]

The first problem you have is perception of what is good and bad. $1000 - $1500/month sounds pretty bad to me. My wife and I have lower expenses than you, but we save $3000 - $4000/month on a very similar salary.

$1000 "random stuff" is way too big to be considered random stuff if it equals your minimum savings amount. You should break that down a bit so that you can see where your money is going.

As for your loans, FHA is the program that lets you buy with 3%. There's the whole "cash is king" theory, where you can save more and invest it instead of paying things off quickly. but I'm pretty risk averse, and would rather own my first piece of property outright than float a loan for 30 years.

I mean no "flaming." But this raised my eyebrow. You're taking in 125k and saving 4k of it? Where do you live?

 

[jaedaliu]

I mean no "flaming." But this raised my eyebrow. You're taking in 125k and saving 4k of it? Where do you live?

Boston suburb.

I took a look at my budget after I posted.

1st big difference: our take homes differ by $1000/month. My wife and I are paid bi-weekly, and we take home a hair over $7000/2 paychecks, and we budget that as a month.

2nd: Our fixed costs are way lower. Our rent is only $1100, and we paid off stupid high 6.8% grad loans early.

3rd: rent, internet (OTA TV,) cell phone, gas, groceries are less than $2500/month (utilities included in rent and insurances are taken out of paycheck) This gives us $4500/month which I've budgeted $1000 for spending (buying lunch at work, dinner dates, and buying stuff) and $3500 for savings. Depending on the month, that $1000 of bonus spending is as low as $200 when we're too busy to buy anything or go out.

 

[Golgatha]

The current 30-year mortgage rates are backed by 2 things:
1) The government
2) You paying them PMI for 5 years (Or simply, mortgage insurance - approx ~$50 month depending) so 12 months x 5 years x ~$50 month = over $3000 down the drain for YOU to pay THE BANK as an insurance for the bank risking their money with you.
3) This is the ONLY reason people are getting these loans with 3% down payments.

If you want to properly own a home do the following:
1) Pay off your loans. Every additional month is another month that your losses are stacking.
2) Slowly save for a 20% Down payment on a home. Baby Steps.
3) Build your credit in the mean time. Your credit is what determines your risk. Your risk determines what the bank is willing to loan you (% Interest Rate)

Or just dive in like every other retarded American with a 3% down payment making minimum payments and upon the next bubble burst find yourself flat on your ass with no money or equity.

All I can say as a homeowner is this: Don't underestimate maintenance costs. Best of luck.

Solid advice.

 

[s0me0nesmind1]

My budgeting has been shit the last 2-3 months. We have been late on birthday gifts for each other. Plus stress from a wedding is a complete Pain in the arse.

Add to that costly car repairs recently (Replace 2 tires + balancing + brakes). Renewing 6 month insurance policy. Renewing flood insurance policy. Fugly past couple months.

 

[Vdubchaos]

My budgeting has been shit the last 2-3 months. We have been late on birthday gifts for each other. Plus stress from a wedding is a complete Pain in the arse.

Add to that costly car repairs recently (Replace 2 tires + balancing + brakes). Renewing 6 month insurance policy. Renewing flood insurance policy. Fugly past couple months.

You are not the only one, don't worry.

 

[vi edit]

Honest question because I'm *absolutely clueless* on the NYC area. But can you even buy a house for $250k there? What would that do to your location and commute?

 

[Dirigible]

Don't pare your budget to the bone. It'll suck and you won't stick with it unless you're weird.

Do keep saving. It's frustrating, because it's slow at first. But it will add up and accelerate over time, especially as your career develops and the raises come. Make sure you're saving for retirement as well.

In the grand scheme of things, 50 months isn't that long. And you should be able to up your income over the next few years to shorten that time if you so wish.

 

[tfinch2]

Yes, really $200-300. I'm very disciplined. Its not hard either. Mostly chicken, fish, vegetables. $12 of chicken and rice feeds me for three days.

"random" essentially means paying my father's bills (disabled guy) and occasionally going out to dinner like 2x a month. Realistically, that's not going to stop.

Lots of judgment about my budget, but I feel like there are a lot of blind eyes to reality. I'm not dropping the internet, are you outside your mind? No one really does that for the long term.

I did not say drop internet. I said drop cable TV.

As far as judgement about your budget. You asked us for our help/advice.

Blind eyes to reality? Sure, buddy. Keep telling yourself that.

 

[bignateyk]

I still think you're much better off just buying the house now for <5% down. You're throwing away $1600 a month on rent right now. A loan for a 250K house will be about the same amount of money.

You can move into a house, continue to save the same amount of money, AND earn earn equity in the house in the process. You'll be able to get to 20% LTV just as quickly if you buy the house now and put extra payments toward it than you would if you save the money for 50 months.

And you'll be much happier in a house than the apartment in the process.

 

[s0me0nesmind1]

Solid advice.

Thanks. I've had to learn a lot. My fiance bought her home on the 3% down payment mortgage before I met her. So I walked into this kind of situation. As of right now, I'm trying to establish equity with our home now that we are stuck in this situation. Sadly the rate she got wasn't smashingly good at 5%.

It's funny, because even on 3 years of living and owning the home we already.
1) Hate the area.
2) Hate the city.
3) Want to move.
4) Want to move ANYWHERE else.

There is nothing I hate more than seeing the amount of your monthly mortgage payment that goes to principle. Hell, your first 5 years alone it barely puts anything into it. The home value dipped quite a bit since it was originally valued too. I'm basically putting an extra $1k into principle every month in order to establish some kind of equity. If we wanted to pick up our shit and change to another city I want to be getting money back from my home sale - not paying more.

 

[s0me0nesmind1]

I still think you're much better off just buying the house now for <5% down. You're throwing away $1600 a month on rent right now. A loan for a 250K house will be about the same amount of money.

You can move into a house, continue to save the same amount of money, AND earn earn equity in the house in the process. You'll be able to get to 20% LTV just as quickly if you buy the house now and put extra payments toward it than you would if you save the money for 50 months.

And you'll be much happier in a house than the apartment in the process.

Honest question because I'm *absolutely clueless* on the NYC area. But can you even buy a house for $250k there? What would that do to your location and commute?

Pretty much my answer to bignateyk's post... This is fuckin' NYC. A $250k home would be a ghetto... literally. A $400k home in California is a cardboard box, NYC isn't going to be any different. Bad homes tend to only go down in value because they build more bad stuff around it.

 

[Axon]

I did not say drop internet. I said drop cable TV.

As far as judgement about your budget. You asked us for our help/advice.

Blind eyes to reality? Sure, buddy. Keep telling yourself that.

It wasn't a shot at you, and there's no need to get aggressive. But half of the advice here either doesn't fully understand the issue or is just repeating stuff that is obvious.

Drop cable? Why? Internet is still $100 in NYC. What would that get me? $440 a year. I'd rather have the TV.

I know how to budget; that's not the issue. Sure, certain things can be shaved here and there, but an extra grand isn't coming off my monthly expenses. But what I really was wondering about (and the answer I got) was that you either do things right and save 20%, like it or not, or you go in for the lower down payment and take a massive risk.

Sucks but true. I'll just have to deal.

 

[Axon]

Pretty much my answer to bignateyk's post... This is fuckin' NYC. A $250k home would be a ghetto... literally. A $400k home in California is a cardboard box, NYC isn't going to be any different. Bad homes tend to only go down in value because they build more bad stuff around it.

It would be Long Island, where the little lady lives. 250-300k home is solid (usually around 3 beds) for a couple.

 

[Imp]

I still think you're much better off just buying the house now for <5% down. You're throwing away $1600 a month on rent right now. A loan for a 250K house will be about the same amount of money.

That $1600 will become interest payments to bank + property tax + insurance + other ownership costs + building equity.

 

[s0me0nesmind1]

It wasn't a shot at you, and there's no need to get aggressive. But half of the advice here either doesn't fully understand the issue or is just repeating stuff that is obvious.

Drop cable? Why? Internet is still $100 in NYC. What would that get me? $440 a year. I'd rather have the TV.

I know how to budget; that's not the issue. Sure, certain things can be shaved here and there, but an extra grand isn't coming off my monthly expenses. But what I really was wondering about (and the answer I got) was that you either do things right and save 20%, like it or not, or you go in for the lower down payment and take a massive risk.

Sucks but true. I'll just have to deal.

Internet can stream netflix / whatever-all-the-other-ones-im-forgetting-oh-yeah-hulu / etc...

Internet can also... download...stuff... :sneaky:

I haven't had cable for over 1.5 years now. Haven't missed it one bit.

 

[Gunslinger08]

It wasn't a shot at you, and there's no need to get aggressive. But half of the advice here either doesn't fully understand the issue or is just repeating stuff that is obvious.

Drop cable? Why? Internet is still $100 in NYC. What would that get me? $440 a year. I'd rather have the TV.

I know how to budget; that's not the issue. Sure, certain things can be shaved here and there, but an extra grand isn't coming off my monthly expenses. But what I really was wondering about (and the answer I got) was that you either do things right and save 20%, like it or not, or you go in for the lower down payment and take a massive risk.

Sucks but true. I'll just have to deal.

It sounds like you didn't really want advice.

You are right that you really only have 2 options - save your money to get 20% or buy now. Personally, I didn't put down 20%. I got a loan with 3% or 3.5% down. My situation may be different from yours though. I bought after the market had mostly bottomed out in my area (late 2008). I don't plan on moving for a long time and I've continued to invest in the value of my house with upgrades. I also didn't buy a house that's at the very top of my budget. So overall, I have a low, fixed rate mortgage payment for a home that shouldn't decrease in value and I don't plan on moving anyway, so being upside down (if the market crashes) doesn't matter to me.

Basically, buy one of the cheaper houses in a nice area and spend less than you think you can handle. If you plan on moving within a few years, don't buy a house.

 

[vi edit]

The unfortunate truth is that the housing prices are skewed to favor the dual income household. If you have a significant other that you cohabitate with then you consolidate current living expenses and build up the house fund warchest that much faster. Trying to do so on your own is very, very difficult. Especially in high cost areas where housing costs are already out of whack with incomes.

Another question I have (and maybe I missed it in the thread)..but how old are you right now?

 

[Exterous]

This will not be a popular answer here, but my recommendation would be to focus on paying off your student loans and then worry about a house.

Normally I would be inclined to agree with you but the artificially low interest rates combined with low(ish) home values makes it a very attractive option. Its a bit of a bet but I doubt this combination would happen again

Uhhh you pay those back because typically those % Interest rates will increasingly go up. It's one thing if you're talking about a fixed rate mortgage, it's another if you're talking about Student loans that randomly double to 7.2%

Your statement is entirely situation specific. It is completely possible his student loans are a low fixed percentage. For example: We have a 2.75% fixed rate loan that we are in no hurry to pay back. The 7% loan got paid back last year and the 4.25% variable is getting paid off this year

OP - what is the interest rate(s) of your loan and is it fixed?

Also - do you have consolidation options to a lower rate? Likely not but it would be worth a look just to be sure. Might actually want to call your loan provider (I had a loan listed that shouldn't have qualified but when I was consolidating the other loans the agent was able to rope it in somehow. Don't know if it was a mistake on their part or my part)

Lots of judgment about my budget, but I feel like there are a lot of blind eyes to reality. I'm not dropping the internet, are you outside your mind? No one really does that for the long term.

Of course we are judging - hard to offer advice without doing so

$140 still seems high so I would at least drop the cable part if you are really serious about the house thing. You may say 'Its only $40 a month' but thats not the point. There isn't going to be some silver bullet to most cases. You get to where you need to be by cutting $10 there, $40 there, $24.75 over there

Food seems a bit high to me. We spend about the same for two people but that could be regional or maybe you and the GF eat together alot?

Your budget is missing ~$700 somewhere in your write-up assuming that $1000 goes into savings. Maybe a bit more goes to your 'Random' than you realize? Not flaming or anything but that what we noticed when we went from what was basically a free for all to a budget.

 

[Axon]

It sounds like you didn't really want advice.

You are right that you really only have 2 options - save your money to get 20% or buy now. Personally, I didn't put down 20%. I got a loan with 3% or 3.5% down. My situation may be different from yours though. I bought after the market had mostly bottomed out in my area (late 2008). I don't plan on moving for a long time and I've continued to invest in the value of my house with upgrades. I also didn't buy a house that's at the very top of my budget. So overall, I have a low, fixed rate mortgage payment for a home that shouldn't decrease in value and I don't plan on moving anyway, so being upside down (if the market crashes) doesn't matter to me.

Basically, buy one of the cheaper houses in a nice area and spend less than you think you can handle. If you plan on moving within a few years, don't buy a house.

Nah, I appreciate all the advice so far. I just thought this might become a budgeting discussion when what I really wanted to hear were stories like yours (which certainly is my fault for not articulating properly). Nonetheless, as in, how did you begin? What bank? Did you just walk into the bank? How much did you have in savings at the time?

Budgeting advice is nice, but its easy to clamp down on someone else's finances, you know? I think my boss spends outrageous money. Concurrently I'm sure people here think I'm spending too much. Et cetera et cetera. My budget is basically as shaved as it can be while I remain sane.

 

[Via]

I would wait until your income increases by marriage or better position. You're single. Why do you need a big house to take care of right now?

Owning a home sounds great (and it is in many ways), but the mortgage is FAR from the only expense you're gong to encounter with home ownership, especially if you're working a lot and don't have the time or energy to do all of the household maintenance yourself.

 

[purbeast0]

Internet can stream netflix / whatever-all-the-other-ones-im-forgetting-oh-yeah-hulu / etc...

Internet can also... download...stuff... :sneaky:

I haven't had cable for over 1.5 years now. Haven't missed it one bit.

well when you steal stuff to justify saving money, then good for you i guess.

people who don't want to steal stuff have one other alternative - to pay for it, which is why people pay for cable and/or movies and have no problems doing so.

 

[NoCreativity]

A word of caution, if you go with <20% down and it's FHA, you may be stuck paying PMI for 11 years or the life of the loan regardless of LTV ratio.

 

[Jadow]

just squat

 

[s0me0nesmind1]

well when you steal stuff to justify saving money, then good for you i guess.

people who don't want to steal stuff have one other alternative - to pay for it, which is why people pay for cable and/or movies and have no problems doing so.

Netflix/Hulu isn't stealing. Nor is going to NBC.com, ComedyCentral.com and streaming their uploaded video.

I don't go downloading season's of Breaking Bad or anything. I really don't watch much TV.

Also, not sure about OP but I pay $29.99 for my Cable Internet. Never lock yourself into a contract. I keep renewing a "special" from Comcast that lasts 6 or 12 months at $30. The kicker is there isn't a contract so after it ends and they raise it to $50-60+ I just have to call them up and tell them to renew it.