Question For Homeowners

[trekkingirl]

So I have recently been thinking about buying now that homes are more affordable where I live. The problem is the down payment. Even with downpayment assistance program I was told I would still need to come up with $10,000.

Unless I could figure out a way to ditch my rent payment, I don't see a way of ever having that much money saved. All I can come up with is praying for a miracle. So that's what I'm doing.

So here is my question...

How did you come into homeownership? I need some creative ideas. Advice?

[Sharlla]

I moved from Seattle area to to the midwest because cost of living is lower.  x and I actually bought a fixer upper for $4,500.  Then DH and I bought a 50K house.  we were going to go FHA and would have had to put down like $1850 but when we went traditional we were able to get the down from FIL instead

[HeatherAtHome]

Paying off debt and saving for a down payment felt impossible for us too. We left our apartment, DH rented a tiny room near his work and I moved in with my parents an hour away. We lived like that for 15 mths and it was hard as hell at times. But we had our house in the end, a cheap fixer upper, otherwise we would have had to wait even longer. Sitting here now, I say it was the best decision ever. Living it was hard. 

[danaf617]

DH and I bought our home when we were very young (21 and 23), before we were married.

We both brought 10k to the table at closing.  I got mine from a small inheritance that my grandmother left me and DH took a loan against his 401k.  This money covered our down payment (10%), our closing costs, and replacing all of the windows in the house which needed to be done right after moving in.

We finally paid his 401k loan back last year!  That felt good.  I'm sure that financial experts would have something to say about borrowing from your retirement $ but we were young and didn't know any better.  We just were set on moving in together and NOT paying rent.  He made a good living at a young age and his father drilled into his head that he NEEDED the tax write-off of a mortgage vs. "wasting his money on rent." (his words, not mine)  So DH was pretty set on buying and that's what we did.

We did buy within our means though.  Our goal was to have a mortgage amount that was close to what rentals were in the area.

We were approved for a much larger amount but I am so glad that we were smart enough to shoot low.  Had we taken on a much bigger mortgage, I would not have been able to be a SAHM when we got married and had babies.  I wouldn't trade it for the world!  ♥

[Momsteader]

You must live somewhere that buying a house is quite expensive!  Or are you trying for 20% down to avoid PMI? Many programs will allow just 5-10% down.

You can look for houses with motivated sellers who might want to pay part of closing costs or give a rebate back for part of the down.

When I bought my first home, I had 5% saved for a down. ($4500) I made a full price offer that included the seller paying the closing costs. She had several contingencies of her own--older lady who needed time to find a suitable one level home, and time to move. So she wanted closing out 90 days, and we actually bumped that an additional time. BUT, I was willing to wait because the offer worked for me. The house needed tons of work, but it was all cosmetic things as she'd replaced the furnace, windows, roof, etc. So, it took a lot of sweat equity and 5 years but it was worth it in the end.

[trekkingirl]

Yes I live in California. I looked up the income levels for my county and Iow income is $81,000 a year.

What is a PMI?

I was reading about FHA loans using a CHFA  down payment program. Has anyone done this? Maybe I should be looking into that?

[Denvergirlie]

PMI - Private Mortage Insurance

Insurance you must pay if you don't have 20% equity in the house. 5 years ago, some people would avoid PMI by taking two loans, a mortage for 80% and a second mortage for the additional 20%. I don't think banks do this anymore thou.

[Norabella]

Originally Posted by Denvergirlie 

PMI - Private Mortage Insurance

Insurance you must pay if you don't have 20% equity in the house. 5 years ago, some people would avoid PMI by taking two loans, a mortage for 80% and a second mortage for the additional 20%. I don't think banks do this anymore thou.

Some banks and credit unions will still do 1st and 2nd mortgages. We are trying to buy a condo right now where we can't get PMI b/c owner occupancy isn't high enough, so a first for 80% and a second for 15% and 5% down is probably what we will have to do.

[TiredX2]

Simple answer: Are you expecting your homeowning costs to be less than your current rental costs?  If no, where will that extra money come from?  Take that money and put it into savings--- when you have $10K you have enough to buy a house.

That's what we did (plus some extra).  10 years ago we were paying $1035/month in rent and saving $1K/month towards our down payment.  That prepared us for a $2100 mortgage.  Now, 10 years later we're still paying on that mortgage (we bought in July, 2001) at around $2350/month (increased property taxes primarily, plus refinancing). 

If you're in the situation, though, that it will actually be cheaper to buy than to rent, I guess you just have to cut back severly until you get there :(  It is really hard in high cost of living areas.  I didn't realize it when we bought our house, but if we had waited a few months we could have bought in the "low income" section--- which was then under around $70K/yearly for this area.

[beebalmmama]

We are looking at going the CHFA route right now, hoping to buy within the next couple of months......fingers crossed. With CHFA here we need to have $1000 down and pay closing costs or ask seller to pay closing costs. We're going with the seller paying closing so we have some cash reserves once we move in. We're more limited with what we can afford but then it really forces us to stay in the price range we should be in anyway.

Originally Posted by trekkingirl 

Yes I live in California. I looked up the income levels for my county and Iow income is $81,000 a year.

What is a PMI?

I was reading about FHA loans using a CHFA  down payment program. Has anyone done this? Maybe I should be looking into that?

[CookiePie]

This reminds me of us when we were trying to save for a down payment.  I think it was a good indicator that we weren't ready to buy.  We ended up with an inheritance that became our down payment & we were smart enough to have saved $5,000 of it in the bank as an emergency fund.  But expenses came up well beyond that number that were not planed for.  If you can't save now for the down payment, than it isn't going to be easy to maintain a house!  I'm speaking from experience.  We have been carrying credit card debt from emergency repairs on the house that were not planned for.  We have had the house 6 years & we are working our a$$es off to get these debts paid off.  Looking back now I can say that we were not really ready to buy.  But our living situation was such that even if we did have the foresight to financially plan better prior to buying, I think we would have done it all over again.... My point is don't rush into a house, if you are having trouble saving while you are renting, the expenses involved in owning a house are almost always more.  We used a CHFA loan & are paying PMI...  

[trekkingirl]

thanks cookiepie

[captivatedlife]

We are in the process of buying a house and the seller has offered to pay closing costs and the house we are buying (if everything else works out!) is 114900. We are all set up to use the CHFA program if we have to, but we should have down payment by that time - actually we have it now (knock on wood). I am the main breadwinner and DH went out 7 or 8 months ago and got a second job (now he's working 45-50 hours a week) so we were able to save, save, save. good luck!

[beebalmmama]

I think part of what you really need to think about in addition to a down payment is your mortgage payment. Dh and I bought our first house with 0% down while we were in school and we were able to get by well even while in school because the mortgage payment was totally reasonable and allowed us to save each month. Right now if we were to save for a down payment at 20% down then it would take us a good 10 years and we don't have that kind of time and don't want to take it. With rental prices always increasing I'm not sure we'd ever get ahead to save 20%. But currently I'm not working and looking at going back to school. So I know if we needed additional income for expenses I could go back to work. If we waited until next year or the end of the summer we would probably have 3.5% down but then wouldn't have cash for move in expenses, which is why we chose the CHFA. Obviously 20% down is ideal but it's not feasible for everyone in every market.

[trekkingirl]

I was taking the time this evening to reread this old thread. Wanted to update everyone who gave me good advice. DH and I decided that we want to pay off all our debt and save the 5-10% for the house. In order to make this attainable we ditched our rental! We are currently living out of our RV full time and hoping to really knock out our debt and sock away the down payment. We had talked about splitting up and living with family for the short term to save and decided it wasn't fair to our kids or healthy for our marriage. I have to say so far I am really loving the RV. So much less cleaning, no yard work, and we're all really cozy! Thanks to everyone who gave me some good advice!   

[pranamama]

Very nice plan!

[TiredX2]

Great update!  I'm glad it's going so well for you.

[lookatreestar]

sounds great!

[MrsSlocombe]

I saved money for a few years by working long hours (largely because I happened to have fallen into a rather fun job caring for kids) while renting a room in a house with other people.  Even though I wasn't especially frugal in every category (I would still go get spa treatments and buy way more clothes than I do now), I was in a city, so I managed to live without a car.  The savings really added up, but I still didn't get quite up to the amount needed to avoid paying mortgage insurance.  If I had been a little more frugal, I might have accomplished this.

I have to say, owning a house hasn't been that wonderful so far.  I like my neighborhood pretty well.  We moved to a fairly nice suburb, and it is really nice not to hear buses outside or worry about things being stolen.  (It happened to my friends and me quite a lot in the city.)  When someone offers to help me, I don't have to worry that they are going to demand to be paid for something as simple as pointing me in the right direction.  (Yes, this happened to me multiple times in the city.)  Still, home ownership has NOT been the money saver I had hoped.

Above all, I implore you, unless you are personally skilled in home improvement areas ranging from plumbing to drywall to electrical work, DO NOT BUY A FIXER UPPER - not even one that just needs what you see as a "little" fixing up.  I had a couple of people tell me that the only way to financially benefit from buying a home (that is, the only way to sell it for more than what you bought it for a few years later) is to buy a home that needs work.  Naively, I did not do the calculations or research necessary, and simply believed these people.  I did do calculations that seemed to show that, over time, owners came out ahead of renters, but I was not considering the fact that maintenance costs for renters are zero, while for owners, it can be thousands of dollars per year.  Does someone inspect your building's heating system now?  To maintain the system you own, you will have to pay someone to do that, every year.   You will also have to buy a new system if you stay in the house for very long, or possibly even if you don't.  If you buy a house with poor windows, you will spend an enormous amount of money having new ones installed.  You'll pay to have the gutters cleaned.  You'll pay to have the drywall repaired when a leak from an upstairs bathtub or radiator comes dripping into your dining room.  You'll pay to have the pipe or radiator repaired, too.  I could go on forever.  On top of all these necessary repairs, you'll have older relatives walk in and, though they say they like the house, add that you'll have to have an entire room remodeled before you can sell it.  That will be at least $10,000.  You never, ever, ever get that money back.  The only home improvements that allow you to break even, never mind make a profit, are minor cosmetic ones such as painting.

I don't mean to imply that you are as naive as I was, but I really wish someone had explained these things to me.  I think I'd be happy in a house that someone else had spent $50,000 or $60,000 remodeling and repairing, meaning I could cruise for at least a few years.  Though that house would likely have cost a little more than my own, it wouldn't cost proportionately more compared to what the owners put into it (meaning, what I subsequently am having to do here).  It's always better to sacrifice size than quality, and if you have a decent landlord, renting can be better than owning.

[MrsSlocombe]

P.S.  I love your RV solution.  If you guys are happy there, what a fun idea that is!  When you've saved up all that money, you'll be glad you have it, even if you decide not to buy.