how on earth can we save a down payment?
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Anonymous
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We purchased a $550k home with $70k down in our mid 20s.
- We weren't having kids then, so didn't have any of those associated expenses. -Both H and I were very frugal in our even earlier adulthood and lived in group houses, in not fabulous areas, etc. to keep our rents down. I think the most either of us ever paid in rent was $425 a month until we got married and had an apartment together. This was roughly 10 years ago. -When I had one of those big law summer associate type jobs, I still lived in dirt cheap awfully located housing and I didn't fall into the trappings of the money because I knew I wanted to work in public service so it would be the last time I saw that kind of money. I banked nearly every penny I made that summer. -Drove(and still do drive) old reliable cars bought for cash -Saved all the cash gifts we got from our wedding -When we got married, we lived in a cheap old apartment building that was perfectly servicable but not at all flashy -We didn't eat out or go on vacation or do pretty much anything for entertainment that wasn't free as we saved. We spent plenty of weekends at the zoo, at the museums, at free festivals, etc. We were never bored. It took us 2 years of hardcore saving on top of what we had already each accumulated on our own. And we were making maybe $80k combined at the time. |
Anonymous
| What about NACA? |
Anonymous
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From ages 22-24 we both worked two jobs and saved every penny from second jobs. We saved $15k this way. At 24 when we were making $65k/year combined, we put 5% down on a house in a terrible neighborhood that cost $250k. It was tight, but we did it. Then we each went to grad school and increased our income. The neighborhood has improved, and so have our careers. Now we make $155k/year and have a house worth $500k.
We had no family help. Our advanced degrees are in social work and education. Our salaries are mostly topped out now. |
Anonymous
Forgot to add: we didn't have children when we bought the house but we do now. |
Anonymous
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Hmm, all the talk of not having children until later and saving like crazy from early on is irrelevant to OP. She cannot undo it nor change some other stuff that's already done (cc debts, income tax repayments).
So, from what I see - only place OP can really shave things off - cable and phone. The rest is hard to change now. OP, stick to the budget and just hang in here: childcare costs are not forever, it will end soon, so do your debt repayments (hopefully); you'll have a bit more cash on hand to save for down payment (and you can only have 5% to start with). Good luck! |
Anonymous
| I think what a lot of folks here are missing is that many current renters have truly missed the boat. In other words, asset appreciation is occurring at roughly the same rate of saving. Past a certain point, in effect many are paddling toward a receding horizon. It's sad, really. |
Anonymous
OP is not the only person reading this thread who wants advice on how to save for a down payment. There are some people who may be pre-children who want some advice on how to do this. |
Anonymous
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Saving money for a down payment from middle class salary is an exercise in futility in this market. How much could you possibly save compared to asset appreciation? A $600K house appreciating at, let's say, 3% is $18K per year, or $1500 per month. That means that the first $1,500 of down payment saving you're doing each month (after making a crushing rent payment, of course) is being gobbled up by appreciation. Many are paddling toward a horizon which is never getting any closer. OP, the fact is you are competing with others who are getting serious cash infusions from elsewhere which does not make this game a fair fight!
Everybody knows there are seven paths to DC-area homeownership: http://www.dcurbanmom.com/jforum/posts/list/344167.page |
Anonymous
This is not true. The concepts that have been discussed, which are cutting back and saving apply to many renters. Unfortunately, in this day and age, too many have become fooled by the trappings of what many consider to be everyday life, Internet, cable, cell phones, nicer cars. Things you do: cut back on luxury services like expensive phone plans. If you are complaining about saving, you shouldn't be spending over $100 for cell phone service. If you are complaining about saving, you shouldn't be spending money on expensive cable and Internet packages. If you have a high car payment, you look for a holiday trade-in event and look for a used car that you can trade your existing car in and purchase for a lower monthly payment. And they do exist. Talk to a car dealership about ways to decrease your monthly payment and they'll find a way to make it work to get the sale. Yes, you will extend your payments usually back out to 60 months, but if you can save monthly on the car payment, you can sock that extra money away into a down-payment fund. You can learn to eat more frugally. Frankly $800 a month or $200 a week is a mid-to-high budget for a family of four, so if you are trying to scrimp for a down-payment, you can cut this back to $140-150 per week or $600 per month. Drive less. $265 is amazingly high for gas and fuel. That's over $60 per week in gas. Really? Carpool, combine errands, go out less on weekends, look for closer alternatives. So, places that I would recommend that OP cut back: $800 groceries, you can save $150-200 by eating more frugally $265 gas and fuel, you can save a lot here (my family of two adults and two toddlers uses about $125/month on gas and fuel) $260 mobile phone, you can save over $100 here by switching to a service such as Net10, VirginMobile, etc Television and cable, cut back, use netflicks or Hulu. If you have to have your sports, look for ESPN streaming. You can save up to $50 here. OP says they save about $125/month. They can save a lot more just by managing their luxuries better. |
Anonymous
| Cutting out cable and eating out is pretty much the answer to all life's monetary obstacles and the cornerstone of DCUM financial advice. That's pure gold right there, PP. |
Anonymous
And some people like to hear themselves talk. OP specified those with children. No one else has chimed in asking for other advice. And there's plenty of other threads with it anyway. |
Anonymous
PP here. I got my graduate degree after I bought my first home. I don't mean to say do one but not the other. I'm saying that prioritizing getting your first home should be very high. For me, buying property before acquiring student loan debt was better. I have known people saddled with student loans who can't save for a down payment because they have a 75-100K school loan debt. Some of those people went on to high paying jobs but not all college degrees guarantee a high salary but, nearly every home in this area has appreciated steadily over the years. |
Anonymous
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Making drastic changes in lifestyle to buy a home is a difficult adjustment to make. But it can be done. My next door neighbors were "boat people" who all pooled their resources, lived with relatives, worked 80+ hours a week and in a year paid cash for their first home in Annandale. Now they all have their own homes (never borrowed for any of them).
Part of the problem in American culture is the shaming that goes on when someone lives in a group home, or in their parent's basement, driving a crappy car, etc. |
Anonymous
I get what you're saying, but there are two things I'd like to point out. First, it seems you assume that those who can't afford to save for down payments all presently enjoy numerous expensive luxuries like meals out, smartphones, cable, cars, food, etc. and that's the impediment to saving. The fact is that many folks do not indulge in these expenses and still cannot afford to save for a house in this area. Not. Even. Close. Second, think through the consequences if everybody who wanted a home took your advice and cut way back on everything merely to afford a halfway decent place to live. It's an escalating, universally-destructive path: Person A: "I will cut my cell phone plan (in order to afford a down payment)." Person B: "Oh yeah? I will cut my cell phone plan and cut my cable (in order to afford a down payment)." Person A: "Don't even bother. I am cutting everything and eating store brand catfood for several years (in order to afford a down payment) and outbid you on that run down shack." And in an area as packed with competitive people as this is, you can see why prices are getting bid up so high. Not to mention the soul-crushing experience of saving for 10 years on rice and beans for a down payment to be outbid by hedge/trust fund money that walked in yesterday with an all cash offer because they heard some chatter about an up and coming neighborhood and decided it would make for a nice investment. How are middle class folks supposed to compete with that around here? |
Anonymous
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What is your credit score OP? As others have mentioned, you can get a conventional loan with as little as 5% down. If you, your spouse or your parents/in-laws are military or work for the DoD, you may be eligible to join Navy Federal Credit Union. They have 100% financing on home loans. Interest rates are a little higher (the last time I checked), but there's no PMI or mortgage insurance and you'd be able to get into a house. Another option would be to buy a new build in the suburbs. Typically the builders have preferred lenders who offer FHA loans, 5% down, etc. and offer incentives (finished basements, closing costs paid, etc) to get you into the home. Of course, the builder is motivated to sell you whatever they can, but in my experience the lender won't give you a mortgage you're not qualified for, which isn't the same as what you can afford.
I'm a dc native and work in biglaw (with student loans from law school), but I quickly came to the realization that buying a forever home now was more important than saving 120k+ for a down payment, especially in my tax bracket. So we're going with a new build in the MD suburbs and 5% conventional loan. Our PITI will be cheaper than my rent on my dc apartment. |