Any tips for when you're saving for a house

[Markola]

Not even close here.... renting is much more expensive than buying if you plan on staying awhile.....

That's just it. Who knows the future? We planned to stay a while each time we bought but have instead ended up buying 4 houses in 20 years. I know there are fierce arguments on both sides of this unsolvable question, so my comments were about my experience. YMMV.

 

[Bamaman]

I was thinking how nice it is to live in one of the cheaper housing markets in the U.S. I see HGTV shows from Toronto and Southern California with people spending $600K for a house that'd cost $80K here. Most of those houses are sub-standard until completely rebuilt--another $300K.

I bought a really nice 2800 square foot house for my daughter last year. The living room/dining room is 14' x 34'. The den/kitchen combo is 16' x 40'. And it has a 24' x 25' play room on top of 3 bedrooms and 2 baths. $105K

Low priced locations mean you don't have to save very long in order to be a buyer.

 

[Marita40]

My experience is very similar to Texas Proud's. When I bought my first house at age 28 in the town I had moved to for my academic job, I opted for a neighborhood that was stable but not high class: small, neat houses with a mix of older folk and young professionals. I felt I could not afford a house in the more desirable neighborhoods closer to my work. I bought my house for $50,000; those in the more desirable neighborhood were about $75,000-80,000. Although I remained in that house for nearly 20 years the neighborhood slowly declined around me until I was lucky to finally bail out for a not-so-bad price (just before the recession hit). I'm now in the desirable neighborhood and sometimes think about how if I had had the foresight to just spring for it at the time--despite what seemed to be a HUGE mortgage--I'd have spared myself some moving grief and expense. Anyway, I'm trying to apply the lesson learned to some related things today. For example, I'm contemplating a kitchen remodel. My new place needs one and it will certainly be a capital improvement but I'm balking at the $25,000-30,000 price tag. It seems HUGE. Yet I'm fairly confident that in the long view of things it will be worth it and even seem relatively inexpensive.
Anyway, if I could get a do-over of that first house situation, I'd urge a first time homebuyer to buy a house with potential to grow in in the best location--and then plan to stay put.

 

[Texas Proud]

That's just it. Who knows the future? We planned to stay a while each time we bought but have instead ended up buying 4 houses in 20 years. I know there are fierce arguments on both sides of this unsolvable question, so my comments were about my experience. YMMV.

Completely agree.... I was just giving my info to show that it make a difference where you live and your circumstances... some places renting makes sense and some places owning make sense.... you just have to take a good look and see where you are in the mix....

 

[Greencheese]

A lot to take in from everyone. I perused some of the other financial sites and it seems the general consensus here and almost everywhere is smaller but the best location one can spring for, even if it is a bit of a financial stretch initially. Obviously watching the housing collapse has had an impact on me, although I luckily grew up in a household where buying far too much house was not a lifestyle. Unfortunently I also grew up in a smaller town where $100k got you a very nice house, around the larger cities... not so much

A little additional information about me...

I'm currently a 26 y/o CPA with a salary of $75k and ~$5-$6k annual bonus. No debts and I have the budget to comfortably save $500+/month after setting my payroll deductions to max my 401k, HSA, and Roth IRA annually without trying to deprive myself monthly. Could trim some fat but I'm naturally pretty frugal. Was lucky enough to land a new job in 2015 which allowed me to ditch the leased car (was out of necessity at the time) and bank that money as well while utilizing public transit. Fiance is 27 with a salary of $35k and current student loans of $58k. At the current payoff schedule I expect the debt load to be ~$45k by the time we tie the knot mid next year, at which point I'll shift my budgeting towards debt extinguishment 100%. Prediction is end of 2018 to be entirely rid of the debt.

Cashflow wise we're in great shape, and I've been tracking our expenses for 4 years now so I know all income vs expenses for that time frame. Honestly a mortgage for 3x our current earnings would be easily doable while still maxing retirement accounts if there was not any student loan debt, and that doesn't factor in wage growth for the 2 of us + an expected promotion within the next 2-3 years for myself either. With some possible medical concerns we're likely going to need to look at children sooner than later as well once married. However with the current student loans we're going to be short on time to get 20% down, especially since houses around major population centers seem to be much more expensive than those smaller towns.

I didn't realize there were still a few programs out there for less than 20% down, and potentially even a way to either avoid PMI or hit 20% and be rid of it. If that's the case, we're likely to shoot for one of those while pay excess amounts to get the mortgage to a more reasonable amount as soon as possible.

I'm enjoying reading other's experiences with buyings houses as well, so additional perspectives are always appreciated. And with 5 years to go at least, I'll know for sure if Illinois get it's s**t together or if its time to bail before setting down some more permanent roots . Because once those roots are down the goal is to stay put until the kids out of the house, of course life could change but ideally there won't be any moving.

 

[papadad111]

I was thinking how nice it is to live in one of the cheaper housing markets in the U.S. I see HGTV shows from Toronto and Southern California with people spending $600K for a house that'd cost $80K here. Most of those houses are sub-standard until completely rebuilt--another $300K.

I bought a really nice 2800 square foot house for my daughter last year. The living room/dining room is 14' x 34'. The den/kitchen combo is 16' x 40'. And it has a 24' x 25' play room on top of 3 bedrooms and 2 baths. $105K

Low priced locations mean you don't have to save very long in order to be a buyer.

Is buying a home for your adult children a common thing now days? My folks couldn't afford to buy me an old beater car... Let alone a house.

My kids can live in a tent and learn to work really hard before I buy them a house

But it does seem that I'm hearing more and more people doing that for their kids ... Good or bad... I dunno

 

[meierlde]

It is not an investment....

My first house cost me $66K.... lived there for 25 years and sold for about $115... not a great 'return'....

Current house bought during the RE crash, so cost $160K and is probably worth in the $230ish range... been here 7 years... most of that is due to the recovery of RE, so I guess you could put some of that gain on the old house...

I bought a house in Houston in 1978 for 55k and sold it in 2005 for 98k or so after spending 26k on fixup things (new roof, fix sheet rock, paint....) The sort of things one can live with but can't sell the house with. Once again not a really good return on investment over the 27 year period.

 

[athena53]

Is buying a home for your adult children a common thing now days? My folks couldn't afford to buy me an old beater car... Let alone a house.

A friend who lives in a HCOLA area (Bergen County, NJ) just reported that her son was engaged; he and his brother (ages 28 and 31) had been living with parents because a decent home in their town runs about $500K. The nice little 3 BR postwar Cape Cod I owned there sold for $550K in 2003. OK, so it had a swimming pool.

I was really curious about how the son and his fiancée were going to find reasonable housing- she told me they'd held onto their first house in the town and used it as a rental; now the son and fiancée would occupy it. Not sure what the second son is going to do if he ever wants out!

In some markets, it's impossible to get a foothold in the market without help from somewhere. I guess parents help if they have the mans. I am SO glad we moved to a LCOL area and DS bought a nice little house in Des Moines on his own, 3 years out of college.

 

[Senator]

My advice would be to rent. Max out your 401K, HSA, IRA, Roth etc.

Rent only what you need. If there is only two of you, rent a 1 BR or studio.

• Rent it close to where you work. You will save money on yard tools, and home maintenance.
• If the neighborhood gets bad, you can move.
• Use the extra time that you are not using for commuting to pick up a side hustle and make extra money.
• Work longer and get promotions. Your door to door time will be the same as someone who lives further away in a home.
• If you get a new job, move closer to it.

Home ownership is not cheaper than renting when you factor in the extra costs of maintaining the larger space than you need.

 

[Markola]

+1 Senator. http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

 

[Totoro]

+1 There too, if there is enough supply where you want to live (rural renting can be troublesome).

Also, choose your landlord wisely. I've had many and some are very cool, others are a tad neurotic.

Yes, it is your house, but I live here!

 

[Bamaman]

Is buying a home for your adult children a common thing now days? My folks couldn't afford to buy me an old beater car... Let alone a house.

My kids can live in a tent and learn to work really hard before I buy them a house

But it does seem that I'm hearing more and more people doing that for their kids ... Good or bad... I dunno

Our daughter came to spend the night with her 4 year old and 8 year old kids. She was still here 10 months later--in spite of having a place 1 mile away she didn't feel safe in.

We had to get her out so we could have our life back--and so we could get a good night's rest. My wife has health problems that require more than average rest.

We've lived frugally over the years and had plenty enough money to pay cash for the house without getting into any retirement funds. But the house is essentially her inheritance. We all may as well enjoy the money while you can, and her living here was not enjoyable for anyone.

 

[DrRoy]

Buy the cheapest house in the best neighborhood you can afford that has a superior school district.

+1 Great advice for holding value. Also though, buy the smallest house that will meet your needs while you are there. Do not buy as much as you are told you "can afford". Lower housing costs will help you get to FI.

 

[Dash man]

Don't forget to consider the expenses after the purchase of your home. Build an emergency fund for the things that break or wear out. New roof or roof repairs, HVAC maintenance, repairs and eventual replacement, plumbing issues like hot water heaters and leaky faucets. And those remodeling jobs you'll eventually want to tackle. It helps to learn some basic skills to fix things around the house, but some things you'll need a pro for. Homes are money pits, so keep some money put away for those surprises.


Sent from my iPhone using Early Retirement Forum

 

[Greencheese]

+1 Senator. Why your house is a terrible investment

I hadn't thought about how essentially during my entire memory of housing prices interest rates have been on a slow and stead decline which in turn propped up the market.

Being stuck in an area that declined would certainly not be exciting. I guess if I was renting in a place like Flint MI, if the s**t hit the fan I could always move quickly... Wasn't Milwaukee the place to be at one point in time? If so... it's certainly fallen a long way since then.

 

[pb4uski]

Just had a discussion with the DF yesterday about our 5 year gameplan post wedding day and the idea of housing has started coming into play. Does anyone have any good tips for saving for a down payment? With about 5 years until we'd like to make the big leap we're currently socking away money after funding our 401ks to match, HSA, and Roth IRAs. I'm looking into opening an online savings account to keep that money from encouraging lifestyle creep but should I be doing anything else that you may have found useful?

An online savings account is a good way to go. If you take what you would need for a down payment divided by 60 months is that amount doable within your budget?

I think it best to view your house as a place that you live in rather than as an investment, even though it is quite possible that you may sell for more than what you have into it.

We made a bunch of money on our first house, but it was a combination of luck and good strategy. It was an "expandable" gambrel.... "expandable" meaning that only the main floor was finished (kitchen, dining, living and one bedroom) and the second floor was nothing but one studded wall down the center. We built two bedrooms, a bathroom and master bedroom suite on the second floor, doing all the work ourselves other than plumbing. A couple years later we ended up moving as a result of a job change. During our roughly 4 year hold the market did well and we sold for about twice what we paid.

We were in our second house about 25 years and sold it for about what we had into it. Our current house is probably worth about 85% of what we have into it so overall we have been up, down and in-between.