When I bought about a year and a half ago, there was a deposit into my bank account for around a thousand dollars. It was because I had gotten a certified check for that amount to use as a good faith check during home buying negotiations. I had gotten a certified check because I ran out of regular checks and forgot about it :smack:
A few days later I got my checkbook, wrote a normal check, and then cancelled the certified check. Therefore it was redeposited into my account.
The lending bank - Bank of America - made me provide copies of the statements from when it was first written and when it went back in, plus a copy of the cancelled check, and a signed letter describing what happened.
eta: The reason, they explained, was to make sure that it wasn’t a loan from a friend or family member.
Yep, but that’s where the 300 a month savings (once they purchase) comes in… put aside for stuff like that. Sweat equity can reduce the costs of a lot of the maintenance issues…
and of course factor in the tax deduction savings. Of the 1000 a month mortgage payment, let’s say 800 is interest and taxes initially, and let’s say they’re in a 15% tax bracket. 15% of 800 is 120 a month.
Obviously the more they can scrape up in the short term, to increase the down payment / reduce the mortgage amount, that would lower the payment and free up more cash after they buy.
Huge expenses like a new roof or a driveway would be caught before we buy. They don’t “just happen.” Storm damage is covered by your homeowners insurance anyway. As to the smaller stuff, I’ve no problem doing the majority of the work myself which vastly reduces the cost of such repairs. I’m handy.
The real problem with the OP’s idea is that “about 5K” isn’t really enough capital to get that much leverage from.
Let’s say the OP puts the $5K in a dull, bland, vanilla CD with a rate of 1 percent. At the end of a year, he’ll get back $50. Now let’s say he finds a wildly speculative 1-year bond. Assuming the company doesn’t go bankrupt, it will pay a whopping 10 percent. That’s still only $500 – just $450 more than the most conservative investment, and only $50 more than he’d make in a single month by tightening his belt.
If you want to save for a mortgage, you need to play it safe.
We bought in February 2010, and applied for the mortgage in December 2009. We’d gotten some substantial wedding gifts in September 2009, which went toward the down payment. The mortgage officer told us she didn’t look past a 60-day window before the loan application, but if the gifts had been any more recent, she would have wanted a letter from the giver that it was, in fact, a gift and not a loan.
Oh, yes, they do. Trust me and every other homeowner out there. They may not happen in the first year, but they’ll happen sooner or later. If not the roof, then the furnace or the sewer pipe or the water heater or…something. It’s not an ‘if’, but a ‘when’.
Homeowners, back me up here.
You misread me. I said “$200 per year”. That’s what you’d have to cut back on in order to outperform the safe investments out there. I didn’t say it to mean it would be difficult. I said it to put in perspective how little an amount we’re talking about when we’re talking investment interest rates. On $5k, it’s a piddling, which is why I’m telling you not to bother taking any risk at all and just focus on tightening the budget.
Major issues do not just happen. They are the result of long term neglect, lifetime expiration, or catastrophic circumstances that should be covered under insurance. A savvy buyer checks all these things before purchasing and does the preventative maintenance to avoid big repairs.
Look, little shit happens, and it adds up fast. I get it. Air conditioners break, etc.. The best most people can hope for is to plan for mishaps and keep a rainy day account against that. There is no magic number to fix that issue. When you buy, you take a risk and make a huge investment. You get all the problems and benefits that come along with that. Smart buyers look very carefully at everything and decide how much risk is worth the benefits of owning.
I don’t know how I can make it any clearer that we have no problems making our bills, extremely little debt, and with a little care and less indulgence can have a significant amount left over each month. The additional money saved between the rent amount and that of the mortgage can be tossed into the rainy day fund as well. We only lack the initial capital. The point of this thread was to ascertain the most lucrative ways of saving that capital.
Have both you and your wife change your direct deposit information to put half of your take home pay into that second account.
[ETA If you are both working it might make more sense to just put one of your incomes into the second account]
Don’t touch the account until you buy a house.
What this means is that you and your wife/spouse/partner need to make a conscious decision about what is more important: immediate gratification, or long term financial security. [ETA The second account is to pay for what you consider important, ideally it would be your new house]
If you would rather go to the movies this weekend than have money for a down payment, than you have chosen immediate gratification.
Look at all the things you spend on in a month, and ask if you’d rather:
a house next year, but stop eating out for a year
a house in three years but you get to eat out every week
After your rent is paid for, and the very basic bills paid, cancel everything that isn’t immediately urgent, starting with your cable if you have it. News paper, magazine, Netflix subscriptions. Daily latte frappa mocha. All that shit adds up to what could have been a larger down payment.
The time to ask about what to do with that capital so it will grow is after you’ve saved it, not before.
No, they really do. It takes very little for a window to leak and destroy the wall below it. For the hose to the dishwasher to come lose. Frankly, anything involving water either coming in, being stored, or moving out has the potential to cost thousands.
At the very least your insurance will have a deductible, and a great way to make your insurance cost less is to increase your deductible. It’s a trade off you’ll need to make.
My personal story: I had the standard home inspection, plus brought in a friend, and looked around myself–a few things found but otherwise how was in good shape.
Several months later I was replacing some cabling in my basement that runs within the drop ceiling. And as I was running it I noticed that T-junction on the air duct had separated. This was the first junction off the main line that runs to the living room; I estimate about 70% of airflow is through this section The problem was that it was in the worst possible place, about 2ft out of reach.
There is no way this part just fell off. I figure it’s been like that since the house was made 20 years ago. So during that time either cold or hot air was being pumped into the ceiling, instead of the living room, dinning room, and kitchen.
This was an extremely difficult thing to find, and has been costing me a lot of money in waste. To repair it would have meant cutting the ceiling in the downstairs bathroom, and a damn lot of very expensive work. Instead I managed to reach it with the ends of some golf clubs and patch off the leak. Means I don’t have heat into my kitchen, but that’s okay because with the leak I didn’t have heat anyways.
Not sure if I have a point here. Except to say that not everything can be found on inspection. And even the most minor of problems can be costly.
And even if stuff doesn’t “just happen” things wear out. We bought our house new. We’ve been here 14 years. We’ve replaced two out of three toilets. We got a new driveway this year. A new garbage disposal this year. New appliances three years ago, including the washer and dryer. A new deck a few years ago. I think the water heater might be after the roof. New mulch in the yard every year or two. Dig out the dead plants and replant. I need to replace the coachlights on the garage.