How do you save for a home?

[s0me0nesmind1]

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.

I think the requirements are (Correct me if wrong): At least 5 Years into the loan AND reached 20% into the principle. So if you're making minimum payments, you won't be anywhere close to 20% into the loan by 5 years.

 

[vi edit]

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.

I'm 35 years old and am on my 4th house at this point. One of the things I hope to be able to relay to my kids is to *wait*. Yes, owning does sound great and people beat you over the head with benefits of "owning your own home!". But don't rush it. Get settled in. Let your career mature. Figure out if it's where you really want to live (location, city, state, ect). Don't rush into a $100k/200k/300k noose around your neck until you are really sure that's where you want to root down for 5+ years.

I've spent more in realtor fees and other associated costs to almost outright pay for the first place we bought. Just know that life changes, and to really think about how long you plan to be in that place. If it's not 5 years or long then keep renting until you think you are able to answer that question with a "yes".

 

[bignateyk]

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.

That's why you read the mortgage documents. I only had to pay for 2 years, at which point I could have it taken off if I reached 20%.

 

[jaedaliu]

I think the requirements are (Correct me if wrong): At least 5 Years into the loan AND reached 20% into the principle. So if you're making minimum payments, you won't be anywhere close to 20% into the loan by 5 years.

You're wrong! You've been corrected!

They changed the rules recently. PMI for life of the loan. Though, you could away refinance and it goes away.

And to answer OP's updated question, you shop around. Talk to friends that bought a place recently (helpful if it's in state, banks are typically only allowed to loan for purchases in specific states) and web searches (www.bankrate.com is a decent search engine)

 

[MiniDoom]

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.

Not necessarily. I bought a foreclosure (FHA loan) for about 20% less than appraised value with 3% down and refinanced to a conventional about a year later and since my principle is less than 80% of the value I no longer have to pay PMI, only put 3% down and can invest the other 15% i would have had to put down into higher return investments.

 

[s0me0nesmind1]

That's why you read the mortgage documents. I only had to pay for 2 years, at which point I could have it taken off if I reached 20%.

Then I doubt it's an FHA is what we are saying. I'm pretty sure FHA has more... ahem... "Universal" type of rules.

Not necessarily. I bought a foreclosure (FHA loan) for about 20% less than appraised value with 3% down and refinanced to a conventional about a year later and since my principle is less than 80% of the value I no longer have to pay PMI, only put 3% down and can invest the other 15% i would have had to put down into higher return investments.

When you REFINANCE it negates the original loan (FHA) HENCE it's no longer an FHA loan. So no - not the same deal.

 

[Gunslinger08]

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.

I found a local mortgage broker through referrals by friends/family and my realtor. The broker found a lender for me. I had to submit the typical stuff (W-2 for a few years, bank statements for 2-3 months, ID) and I got approved right away. I have good credit. At the time, rates were considerably higher - I got 6.25%, which was pretty good. I had enough in my bank account to cover the mortgage for about 1.5 to 2 years.

I understand that wants and needs are different for everyone. Personally, I wouldn't cut out things like television service, cell service, or date nights. These are the things that I enjoy and make working worthwhile to me - I get to come home and enjoy shows/sports that I like, go out with my wife, and have the ability to connect to my friends and family.

The things that I would cut are random purchases. I think we all get into spending-mode sometimes where we have 5 Amazon orders being delivered in a month for stuff we really don't need. We can also get into a rut where it's easy to spend a bunch of money for convenience; stuff like eating out for lunch, buying coffee and a bagel every morning, paying for VOD movies, paying for cleaning/landscaping services, etc. Some of these are going to be worth it for some people. Some aren't. You need to find a good balance in life of spending money for convenience vs. saving.

 

[Murloc]

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

You're already saving as most as you can, at this point you can only shave off small quantities of money by renouncing stuff that you want.
And 440$ is not nothing.
Also isn't over the air TV free in the US? You could use that instead of cable.

Also if the random 1000$/month expenses are just 2 dinners and helping out your dad, it means that like 900$/month are going to your dad. You're basically paying for another person's livelihood. That's commendable since he's disabled and you live in a country that is low on social assistance, but realize that it's a difference that can explain why your friends can spare money faster (you could double the rate), although I guess them taking big financial risks plays the biggest part in the story.

 

[MiniDoom]

Then I doubt it's an FHA is what we are saying. I'm pretty sure FHA has more... ahem... "Universal" type of rules.



When you REFINANCE it negates the original loan (FHA) HENCE it's no longer an FHA loan. So no - not the same deal.

well, it's a way to avoid paying the required 20% down for a conventional loan. no pmi, 3% down, conventional loan=win.

 

[dave_the_nerd]

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.

You're saving ~25% of your monthly take-home; that's actually quite good.

Unless somebody dies and leaves you mad cash, or your rich uncle gives you a down payment as a wedding gift, you're just going to have to save the down payment a bit at a time.

Thing is, until the subprime mortgage shitstorm and all this no-money-down stuff, that was normal. People would go to school, get married, have kids, scrimp, save, and by the time #2 was on the way, they'd have enough saved for a decent down payment or to buy a home outright.

 

[Axon]

I'm 35 years old and am on my 4th house at this point. One of the things I hope to be able to relay to my kids is to *wait*. Yes, owning does sound great and people beat you over the head with benefits of "owning your own home!". But don't rush it. Get settled in. Let your career mature. Figure out if it's where you really want to live (location, city, state, ect). Don't rush into a $100k/200k/300k noose around your neck until you are really sure that's where you want to root down for 5+ years.

I've spent more in realtor fees and other associated costs to almost outright pay for the first place we bought. Just know that life changes, and to really think about how long you plan to be in that place. If it's not 5 years or long then keep renting until you think you are able to answer that question with a "yes".

This is what I'm afraid of. I just turned 34 Sept 2013.

People say owning a home is fantastic and it does seem so. Some of the people I know who have owned for some time complain about property taxes, maintenance costs (if your boiler blows up, you are screwed) and the like. And I see desperate posts on facebook all the time looking to unload that s**tbox starter apartment they bought.

The other side of the coin is that I literally feel like I am throwing money into a furnace by renting. I doubt I am going anywhere as my father is disabled and not easily moved. I really would like to have somewhere I could call my own, but I don't think I have time to conduct repairs that take more than an hour. I feel stuck in a rut in many ways.

 

[s0me0nesmind1]

Axon: Maybe shoot for a condo? There are places (similar to apartments) where you can own the condo, but much of the maintenance is taken care of. Personally I have no experience here - and since we are talking about NYC something tells me that isn't something really offered there...

also, aside from your budget, I hope you are planning for something more important than owning a home. Retirement... And if you're just putting in your company match I will hit you over the head with a bat.

 

[Axon]

Axon: Maybe shoot for a condo? There are places (similar to apartments) where you can own the condo, but much of the maintenance is taken care of. Personally I have no experience here - and since we are talking about NYC something tells me that isn't something really offered there...

also, aside from your budget, I hope you are planning for something more important than owning a home. Retirement... And if you're just putting in your company match I will hit you over the head with a bat.

Dude, I might get a little defensive re: budgeting but I have no other financial knowledge at all. I'm a complete schmuck when it comes to that by my own admission. I don't even know where to start.

 

[Via]

This is what I'm afraid of. I just turned 34 Sept 2013.

People say owning a home is fantastic and it does seem so. Some of the people I know who have owned for some time complain about property taxes, maintenance costs (if your boiler blows up, you are screwed) and the like. And I see desperate posts on facebook all the time looking to unload that s**tbox starter apartment they bought.

The other side of the coin is that I literally feel like I am throwing money into a furnace by renting. I doubt I am going anywhere as my father is disabled and not easily moved. I really would like to have somewhere I could call my own, but I don't think I have time to conduct repairs that take more than an hour. I feel stuck in a rut in many ways.

And don't forget about taxes.

When I bought my home it was assessed at $150,000 - about average for where I lived. Through a combination of motivated sellers and big down payment I was able to get my monthly mortgage payments down to around $612.

My taxes are $350 a month, so more than half of what I'm paying on my loan. A lot of that is for school tax and I don't even have any kids.

Don't get me wrong - I want people living around me to be educated. But it still needs to be considered.

 

[NoCreativity]

I think the requirements are (Correct me if wrong): At least 5 Years into the loan AND reached 20% into the principle. So if you're making minimum payments, you won't be anywhere close to 20% into the loan by 5 years.

Requirements changed June 3rd , 2013. The 5 year/78% was the previous rule. New rule is 11 years with >=10% down or life of loan with <10% down. And don't forget the 1.75% of loan value up-front cost that is in addition to the monthly payment.

At least that's how I interpret it from the FHA site.

In OPs case for a $250K house with a 10% ($225K loan)down payment and loan at 4% he would owe $3937.5 up front with a roughly $240/month insurance payment. He would pay over $35K for nothing (at least for him).

Bottom line is to stay as far away from an FHA loan as possible if you can. There may be some options other than FHA tith less than 20% down. Talk to friens/co-workers to see who they used.

If we have any experts here please correct me if my understanding is incorrect.

 

[spacejamz]

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.

you must not like sports (basball, hockey, basketball....)

 

[s0me0nesmind1]

And don't forget about taxes.

When I bought my home it was assessed at $150,000 - about average for where I lived. Through a combination of motivated sellers and big down payment I was able to get my monthly mortgage payments down to around $612.

My taxes are $350 a month, so more than half of what I'm paying on my loan. A lot of that is for school tax and I don't even have any kids.

Don't get me wrong - I want people living around me to be educated. But it still needs to be considered.

Whats worst is when you have that huge amount going to School tax and you have to wonder if the dumb kids around you are being educated :biggrin:

 

[s0me0nesmind1]

you must not like sports (basball, hockey, basketball....)

Watching sports is much more of a social thing to me. When I want to see my college football or city football game I'd rather meet up with friends and watch it at a bar over a drink.

 

[spacejamz]

Heard from a friend who is home shopping right now that on many loan programs now, the PMI is permanent if it is needed when the loan is originated and wont' be removed once the LTV hits 80%....that would totally suck...

 

[KentState]

You should easily be able to save 30-40k on that salary a year. Take home on 125k is around 9K a month, after expenses you should have at least 4k for savings.

 

[spacejamz]

Watching sports is much more of a social thing to me. When I want to see my college football or city football game I'd rather meet up with friends and watch it at a bar over a drink.

So what about the people who like to watch their favorite NHL/NBA/MLB teams?

Guess they could suck it up and listen to it on the radio for free, right?

The money you spend when going to watch the games at a bar can add up pretty quickly...

 

[s0me0nesmind1]

Requirements changed June 3rd , 2013. The 5 year/78% was the previous rule. New rule is 11 years with >=10% down or life of loan with <10% down. And don't forget the 1.75% of loan value up-front cost that is in addition to the monthly payment.

At least that's how I interpret it from the FHA site.

In OPs case for a $250K house with a 10% ($225K loan)down payment and loan at 4% he would owe $3937.5 up front with a roughly $240/month insurance payment. He would pay over $35K for nothing (at least for him).

Bottom line is to stay as far away from an FHA loan as possible if you can. There may be some options other than FHA tith less than 20% down. Talk to friens/co-workers to see who they used.

If we have any experts here please correct me if my understanding is incorrect.

Holy fucking shnike!

For once I can say I'm glad we got ours earlier and these terms dont apply to ours. 11 Years of that would drive me to alcoholism.

 

[Scarpozzi]

This is correct.

If you're young enough, single, and live close enough to a university.....consider buying a fixer-upper and get a roommate. Use the rent money to renovate the house and pay more on the mortgage. Live there a few years...when the market recovers more, sell and profit form the equity you earned.

I lived in my fist home for 5 years and walked away with a 40-45% return on investment. You could potentially do even better if you find the right property, but realistically, a 20% return is more likely...

If you want to get a nicer house, start small and work your way up. Unless you find the right place and can secure good financing. Financing this past year has been under 3% in a lot of places....so cheap most people are buying much more house than they typically would.

 

[RedShirt]

This is what I'm afraid of. I just turned 34 Sept 2013.

People say owning a home is fantastic and it does seem so. Some of the people I know who have owned for some time complain about property taxes, maintenance costs (if your boiler blows up, you are screwed) and the like. And I see desperate posts on facebook all the time looking to unload that s**tbox starter apartment they bought.

The other side of the coin is that I literally feel like I am throwing money into a furnace by renting. I doubt I am going anywhere as my father is disabled and not easily moved. I really would like to have somewhere I could call my own, but I don't think I have time to conduct repairs that take more than an hour. I feel stuck in a rut in many ways.

My wife and I recently bought a house (January of this year). Prior to that we lived in a townhouse that we owned outright (only 3 rooms, not very big) with an association that took care of all the outside work.

Let me tell you, that while owning a house can be quite rewarding, there are ALWAYS unexpected fees and work. Here is what we have had to deal with so far:

1) There are always tools that you need to buy. Little things like ladders, socket sets, etc, to bigger things like snow blowers (I live in Iowa) and lawn mowers.
2) Fridge was going bad, spent $1500 on a nicer new fridge.
3) We recently had high winds (70mph) that damaged a substantial portion of our fence. $800 to fix.
4) Property tax just went up to over $500 a month (luckily next year it's going down substantially. Owners before us had an abatement that just expired. I believed they artificially inflated the appraised value when the abatement was active so they'd get more "revenue"). Please remember that this is Iowa, the cost of living is quite lower here (and so are incomes) compared to a place like New York.
5) The deck is rotting and needs, at the minimum, resurfaced. We didn't see this when we looked at the house since it was winter and the deck was covered in snow. We are talking about redoing the whole thing with composite material which is a lot of $$$.

Then there are some things that some people may hire out that I took care of myself, mostly plumbing related. We had several leaky faucets, fixed them all. Had a bad toilet, fixed that. Had a sink that had it's sealant go bad (how? I have no clue) and had water go all over the cupboard, fixed that. Fixing this stuff takes time and a little bit of money. I'm sure there are other things that I'm forgetting that had to be fixed.

I'm sure we'll have many more unexpected bills coming our way.

When we were in the townhome, we could save like mad. Obviously, it helped that we owned it outright.

Now that we are in the house, we try to save what we can, but often times it's tough. It doesn't help that we went for a 15 year loan vs a 30 (lower interest).

Owning a house is not cheap, and there is a lot of extra work involved with it. Don't feel like you are throwing all that money into a furnace by renting. You are saving yourself a lot of aggravation.

Later, when you are married, having a house will most likely make sense, especially if kids come into to the picture. I'd say just save what you can and stay where you are until that happens.

Just my 2 cents.

 

[s0me0nesmind1]

So what about the people who like to watch their favorite NHL/NBA/MLB teams?

Guess they could suck it up and listen to it on the radio for free, right?

The money you spend when going to watch the games at a bar can add up pretty quickly...

1) Nothing says you have to order a drink at a bar. Water wont hurt you.

2) I don't have cable. That doesn't mean I don't have our local air channels. Who do you think plays the majority of the local games?

3) ESPN / live sports is pretty much THE only reason cable-tv hasn't gone A 'la carte. That's pretty much been agreed upon. Disney/ABC/ESPN (Same company) can all DIAF.