Time to start saving for a house :)

**druthb00** · 09-14-2010, 12:58 PM

In light of BF's raise, among other things....I think it's time we start saving to buy a house. I'd love to lock in at a low interest rates before the market rebounds. However, I don't know that we'll have a big enough down payment for at least a year and a half (that's thinking super-positively lol) and possibly two years (that's probably closer to the truth.) Things we want to get accomplished/start doing/etc. before then are:

(1) I will be seeking part-time employment in addition to the few hours I work at the company he works for. This will happen around Nov. or Dec., which will be at the same time we'll be buying a second vehicle (more on that in a minute.) I'm hoping to find something in the 20 hour/week range so that I'll be able to finish school this coming spring. I have about a full year left. After I graduate, I'll be seeking full-time employment.

(2) After talking with our bank, I think we've decided the new(er) car will be partially financed rather than taking a major hit to our savings. We're going to try to stick around the 7-8K range, which means after taxes and all the other BS, we'll be closer to 8-9K. We're going to finance 4-4.5K and put that same amount, if not a little more, into a CD for 5 years. After the end of that period, it'll come out and become our new emergency fund...since theoretically we'll have a house by then. The loan on the car will probably be 63 months, but we'll pay it off before applying for a mortgage.

(3) Student loans...I have yet to dive into that mess. I'll most likely be paying for my last year of college, so I need to start seriously looking into a loan that won't be payable until after I graduate. I have no idea how that will effect our ability to secure a mortgage, because I have no idea how much the monthly payment will be on the student loan.

As it stands now, we have approximately 20K saved, with that number decreasing once we buy the new(er) car. Our rent is $1,100 a month...an amount I would much rather be going towards owning something. Our goal is a 37K down payment, on an approx. 180-200K home. If we can get a decent interest rate, our payment plus insurance & prop taxes will stay right around what our rent payment is now.

Ok, so that's the plan...roughly. Oh, and we'll be married by then, btw. The point of this post is so that I've got my goal somewhere permanent, to remind myself. And also, I want feedback.

What are some things you wish you would have known or considered when buying your first (or 2nd or 3rd..whatever) house?

**frugal is fun** · 09-14-2010, 03:13 PM

sounds like a plan other than maybe consider buying a less expensive car so you don't have a loan on it.

And I would start looking around for scholarships. There are alot of small ($1,000-$2,000) scholarships out there that alot of people don't know about or go for considering they are so small. Anything to get the final cost of school down is good enough.

And don't forget that when you buy a house the average person spends $4,000 in the first month of owning. I am true to this statistic. So you defintiely want to have more in cash when you do finally buy that house.

good luck !

**Greebo** · 09-14-2010, 03:22 PM

Originally Posted by druthb00

In light of BF's raise, among other things....I think it's time we start saving to buy a house. I'd love to lock in at a low interest rates before the market rebounds. However, I don't know that we'll have a big enough down payment for at least a year and a half (that's thinking super-positively lol) and possibly two years (that's probably closer to the truth.) Things we want to get accomplished/start doing/etc. before then are:

(2) After talking with our bank, I think we've decided the new(er) car will be partially financed rather than taking a major hit to our savings.

I think this is a bad idea. You're going to voluntarily pay out interest on a depreciating asset, which means you'll be less able to save money for a house.

We're going to try to stick around the 7-8K range, which means after taxes and all the other BS, we'll be closer to 8-9K. We're going to finance 4-4.5K and put that same amount, if not a little more, into a CD for 5 years.

Why on earth would you choose to pay out 6% so you can maybe make 1%?

After the end of that period, it'll come out and become our new emergency fund...since theoretically we'll have a house by then. The loan on the car will probably be 63 months, but we'll pay it off before applying for a mortgage.

Maybe you should just save up for a car with cash w/o touching your EF, then save up for a house?

(3) Student loans...I have yet to dive into that mess. I'll most likely be paying for my last year of college, so I need to start seriously looking into a loan that won't be payable until after I graduate. I have no idea how that will effect our ability to secure a mortgage, because I have no idea how much the monthly payment will be on the student loan.

You also don't know if you're going to graduate. I would not ever suggest you get a student loan for an education. Save up and pay cash. You will not "get ahead" financially by borrowing money to get a degree - because when you graduate sooner you'll be deeper in the hole than when you started.

As it stands now, we have approximately 20K saved, with that number decreasing once we buy the new(er) car. Our rent is $1,100 a month...an amount I would much rather be going towards owning something. Our goal is a 37K down payment, on an approx. 180-200K home. If we can get a decent interest rate, our payment plus insurance & prop taxes will stay right around what our rent payment is now.

Your rent is going towards having a roof over your head. Interest on a car, house and degree is going to someone ELSES profit.

Ok, so that's the plan...roughly. Oh, and we'll be married by then, btw. The point of this post is so that I've got my goal somewhere permanent, to remind myself. And also, I want feedback.

You asked for it. You got it.

I think you're about to head down the same road most normal broke people take, and you won't like where you end up.

I think you and your intended should take Financial Peace University NOW and rethink your long term plan, cause there's an AWFUL lot of selling tomorrow with interest to buy today in your plan.

What are some things you wish you would have known or considered when buying your first (or 2nd or 3rd..whatever) house?

That it's STUPID to buy a house when you have car debt credit card debt and student loan debt.

That owning a house costs a LOT MORE than just the mortgage taxes and insurance.

That doing what everyone did would get me where everyone is - broke and desperate.

Please please please do not commit to any of this plan without going through FPU first.

**itlw8** · 09-14-2010, 03:37 PM

sounds like you have a start on a plan good thing about plans you can change them.

not so sure the bank is guiding you the most frugal way though. It is a great plan for the bank they keep your money and they get more interest than you earn.

I guess it depends on whose money it is and whose name the car will be in. I do not like to mingle money until you are married.

so If it is your money can you find a cheaper car and use the money for school instead of taking out more loans?

**itlw8** · 09-14-2010, 03:44 PM

lets make a new plan so you do not end up like most of us.

take out as few student loans as you can

make sure you have no cc debt.

learn what wants and needs are....

by having no debt and then saving for that house you will be in a better position to buy the house.

housing varies so much in different areas here you would have a very grand rental for that much money... but I realize it could be a hole in the wall where you live but cutting expenses is a way to save for dreams.

**frugalwarrior2** · 09-14-2010, 03:53 PM

Too Much TOO soon. Clean up 1 mess before you start another. Don't finance a car,pay cash. Save up and e-fund and payoff those college loans.
You are assuming you'll graduate and walk into a job unlike everyone else right now. Suppose you have to relocate to work?
Also owning a house (not necessarily a appreciating asset currently) cost way more than you think. Even w/ inspection and disclosure there are suprises. Surprises are expensive.
Slow down. Please.

**Telephus44** · 09-14-2010, 04:00 PM

I like your plan. For the student loans, I would look into a Federal Stafford loan It's been a long time since I've done student loans, so I'm not sure who qualifies for what anymore. Used to be anyone could get a Stafford loan for a certain dollar amount depending on what year of schooling it was, loan repayment didn't start until 6 months after graduation, and it could be paid over 10 years. Check with the financial aid office for current regulations. Stay away from private loans if possible.

I also understand financing half a car rather than depleting your EF. I have done and would do the same thing. Interest rates are cheap right now. Paying 6% of 4500$ a low price to pay for knowing that you have cash in the bank.

I bought my house with 10% down. (23K down on a 231K house). Things I wish I had known - well, quite frankly, I did my homework and didn't have any suprises. I priced out how much trash removal would cost. I asked 3 other people who have oil heat and similar sized houses what to expect for oil costs. I did a home inspection so I didn't have anything major surprise me.

My only advice on the mortgage would be not to freak out if rates rise a little. A larger down payment with rates at 5% instead of 4.75% will be worth it. I would get worried if rates rise dramatically.

Lastly - seek out advice on other places than FV. This is an extremely conservative crowd. You probably want feedback from other people than the "I hate debt - pay cash for everything - credit cards are evil - never borrow money - you must listen to Dave Ramsey" crowd, which is mostly what you'll get here. Not that this type of advice is wrong, but it would be to your benefit to get different perspectives.

**druthb00** · 09-14-2010, 04:08 PM