How Big of Safety Net?

[amma_mama]

We are finally in a position to buy a house and are deciding on the size of our downpayment and, hence, the budget for our purchase price. As we would like to put as much money down as possible (15-20%), we are trying to figure out how much savings we should keep in our bank account for "just in case". What share of your family's annual income would you consider a reasonable safety net? Or alternatively, how many months of living expenses? We are in a fortunate position regarding finances at the present, so I do not want to bite off more than we can chew with respect to the downpayment.

[velochic]

We personally have about 2 year's worth of basic necessities in our emergency fund. 1 year with some extravagances like cell phone and internet, but not private school for dd.

This is our own personal comfort level. Dh is a tenured professor, so the likelihood of him losing his job is next to nil, but he's also 54 years old.

I think it has to depend on what your comfort level is depending on potential job loss/medical coverage/potential disasters in your life.

Funds for home repairs/upkeep are a separate issue from an emergency fund. Home upkeep is a KNOWN. You will have to keep up the home. I consider an emergency fund to be for unexpecteds.

In regards to just home upkeep, each year we have one project that we do on our house. Our house is a 2,000 sq. ft. English farmhouse that was built in 1939. It's a really neat and well-built house, but of course it has repairs that just have to be done for upkeep and changes we want to make. Last year we put in new Energy Star doors (almost $10k). The year before that, windows (again almost 10k), the year before that a renovation for my mother who moved in with us ($30k). When I first bought the house over a decade ago (pre-marriage and kids) I had a lot of time to do the renovations myself. Bathroom, walls (tore off wall paper and painted), floors (tore up carpet and refinished oak hardwoods underneath), deck, landscaping, etc. I would say that each year we've invested somewhere between $2,000 - $10,000 in the house. Even if it's just been seeding the yard, getting gutters cleaned, having the drive resealed, having a dying tree taken out, etc. it will take a few thousand a year for simple, simple upkeep.

Good luck!

[Carson]

Originally Posted by velochic

Funds for home repairs/upkeep are a separate issue from an emergency fund.

First, YES, a million times!

I will tell you that we kind of made a gamble when we bought our house to put as much as we possibly could down, which ended up being 14%. I did it as a calculated risk, borrowing money from our efund that I reasonably forsaw that I would be getting in the future. We're also a dual income household and the likelihood of DH losing his job is pretty minimal (knock on wood).

Our efund when we bought our house was about 2.5 mos of expenses. I borrowed from it and it left us with 1.5 mos of expenses. Not really enough, IMO.

[samandhenrysmom]

I think a conservative standard is 6 months of expenses.
You do also need extra money for home/appliance repairs each yr. I just started really paying attention to our money this year and I am amazed at how much money is going into our house. It was built in 1952 and is in very good condition. My husband is in the home building industry so we get great deals on most things and we still spend several thousand dollars a year on general upkeep.

[~Laura~]

Originally Posted by velochic

In regards to just home upkeep, each year we have one project that we do on our house. Our house is a 2,000 sq. ft. English farmhouse that was built in 1939. It's a really neat and well-built house, but of course it has repairs that just have to be done for upkeep and changes we want to make. Last year we put in new Energy Star doors (almost $10k). The year before that, windows (again almost 10k), the year before that a renovation for my mother who moved in with us ($30k). When I first bought the house over a decade ago (pre-marriage and kids) I had a lot of time to do the renovations myself. Bathroom, walls (tore off wall paper and painted), floors (tore up carpet and refinished oak hardwoods underneath), deck, landscaping, etc. I would say that each year we've invested somewhere between $2,000 - $10,000 in the house. Even if it's just been seeding the yard, getting gutters cleaned, having the drive resealed, having a dying tree taken out, etc. it will take a few thousand a year for simple, simple upkeep.

This exactly, but our house was built in 1988. That's why I get annoyed when people refer to buying a home as a "good investment." I would be in a world of hurt if all my investments took money in and never put money out!

We have a couple of years worth of cash reserves, too. I am pretty laid back about pulling out of that account, but I always make sure to return it as quickly as possible.

Laura

[SleeplessMommy]

Just FYI, in many markets right now, resale is actually pretty easy for affordable housing right now, and much much harder as you move up to higher priced housing. I would encourage you to get the smallest house which will meet your needs, not the biggest you can afford.

20% down will avoid PMI, saving you money for the next few years.

[crunchy_mama]

I would agree that 6 months is a good safety net for just household expenses. Right now we just have 3 and I really feel uncomfortable w/ that. I also agree that there are always tons of projects to spend money on- I thought we were the only ones Man, we are always putting out a ton of money for this or that. Of course we are still rebuilding, but even not withstanding that there is always something.

[Poddi]

We only have two months living expenses saved right now. We have a huge HELOC allowing us to borrow tons of money cheaply, though and DH and I feel OK about that. Before we got the HELOC we had 6 months saved.