How long did it take you to save up a down payment for a house?

In My Humble Opinion
1

We are starting to consider buying a home/condo and are saving up for a down payment. Right now we have about $5,500 set aside for a down payment and out of curiosity we started looking at what is available on the market. After doing some research we’ve discovered that the cheapest place we could live that wouldn’t require major renovations would be about $280,000-$300,000.* There are some places on the market at about half that price but they aren’t really habitable at this point. To be able to bring the monthly payments to an affordable amount we would need a full 20% down payment of $56,000-$60,000. We would need to save at least $800 a month for more than 6 years to have a decent down payment for a house. If we really scrimped and got part time jobs on the weekends to get to $1,000 a month savings we would still be 5 years away from a decent down payment. :eek::confused::frowning:

How the hell do people save this much money? Are we doomed to line up to sell plasma, sperm, eggs, kidneys, and anything else we have more than one of to be able to own a home? We have no desire to have an ARM loan with a 3% down payment. We have spent the last 2 years saving for a wedding and we will not go into debt to pay for that. We don’t have any student loan debt between us. We have maybe $400-$500 on credit cards that will be paid off in the next month. We are really financially responsible people and this is just throwing us for a loop. Do most people live well beyond their means or do most people wait until they are in their mid-30’s before they own a home and we have just been misled by TV to believe we should be better off than we actually are?

*We live in NYC and are looking in the city and surrounding areas. I know we could move to Kansas and buy a house for $85,000 or something but then we would each take a huge hit in our income so it wouldn’t be to our benefit anyway. Plus then we would have to live in Kansas and neither of us want that. :stuck_out_tongue:

2

We got an FHA loan and put down 10%. It does suck because now we’re stuck with PMI for awhile, but 20% was just prohibitive.

3

86 years. Which is how old my fiancee’s grandmother was when she died and left us the money we needed to put down on a house.

Realistically we never could have done it otherwise. We did buy before the market collapsed and the banks coffers slammed shut, but as we both work in the industry we weren’t dumb enough to finance everything, so we put down…$40k on a $180k townhouse I think it was. All that managed to save us is that we’re not upside down now three years later.

As for people looking to be first time buyers on single family homes I would have no idea where they could ever actually get the scratch together to make what banks want as a down payment these days. There are lots of properties selling for what they’re actually worth these days which is nice, but still 20% of a quarter of a million dollars is a lot of liquidity to expect from someone in their 20s or 30s.

4

I don’t think most people actually save up that much money. Some might, but most people would probably not be able to afford that (barring something like an inheritance). I would imagine that, unless people have really high-earning jobs, they just continue to rent or they buy a house and fix it up.

Do most people pay down 20% on their first home? I sure didn’t. I even had conventional financing, not FHA, and I put down, I think, around 7%. It isn’t an ARM, either. This was just a year ago, too, after the crash. Yes, I pay PMI (though because of extra principal payments, I’m aiming to finish that off in a year or two). But I didn’t worry as much about making the payments, because I bought a much less expensive house.

That’s the thing with NYC. Things are far, far more expensive - if you’re not earning far, far more, then you won’t end up with the same things that people do when they live in cheaper locations. A liveable starter house here in an affluent suburb of Des Moines is in the 110k-140k range. Do you think you make 2.5 times as much as you would here? I doubt it. I’ve seen the pay scales my company uses in different areas of the country; they’re different, but not that different. Now whether or not you’d like it, well, that’s a different story.

5

I hear you. When SpouseO and I were looking, we felt the same thing - “How on earth will we ever be able to save up that much?” It was just unthinkable, really. And this was 8 years ago, during the boom when even dogs could get loans.

Because we both had really good credit, our mortgage guy was able to do this weird scheme where he sort of “fronted” us the 20% for the down payment, then got us a mortgage for the remaining 80% (just as if we had the 20% already). Then, since we had 20% equity, he got us a second mortgage/home improvement loan for that exact amount, with which we “paid him back” the down payment. It seemed rather shady at the time, but I’ve heard since that it’s a rather common arrangement. So we really have two mortgages. It worked for us - we were careful to not buy outside of what we could afford.

One thing our realtor told us when we asked about whether we should wait for a couple of years to save up. At that boom time, he said, “Buy now. The market will outpace what you can afford next year.” His thinking was that the $150K house we were looking at now would be $175-$180K next year, and we wouldn’t be able to save fast enough. His advice would probably be different now.

6

You don’t have to have 20% down to buy a house. We just bought one a few months ago, and the interest rate is so low that we decided to only put down the minimum, which was 5%.

The first house we bought, back in '01, we also put down about 5%.

7

Oh! Forgot to mention - one of the advantages of the 2 loan dealie that I have is that I have no PMI to pay, so that’s nice. Saves me some cash.

8

Another thing to mention - you can take a loan from your 401k for a house purchase. That said, I don’t think it’s something I would do if I could avoid it in any way.

9

1 year.

I know, hate me. :cool:

When I moved to this fair city, I was approximately 20K in debt. I made a plan, paid off a student loan, my car loan, and several thousand in credit card debt. That took about three years, maybe more like 4-5, confirmation bias being what it is.

For the next year, I wouldn’t allow myself to buy clothes, music, or travel. I would not go see concerts, which is a huge money drain for me. Kept my credit card paid off. Did not incur any other debt. Socked away $500-750 a month, sometimes a little more, until I had about $10K saved up.

I bought a house in a gentrifying neighborhood in the middle of Florida’s capital city. (I am literally living slam in the middle of town; it’s even called “Midtown.”) This was in 2003 and pricing was still relatively low, especially for an in-town neighborhood. I got a 3/2, built in 1942, with an addition + upgrade done in 1989, for a few cents less than $100K.

I put maybe 5% down from my own cash and Wells Fargo gave me a variable interest HELOC with a fat balloon payment in 15 years. It was one of those scammy interest-only loans, but only for the other 15% I needed for the downpayment. I have since flipped that loan into a nice secure, low-interest second mortgage. I avoided paying PMI and was able, instead, to deduct the interest off the second loan from my taxes. I hate giving up money (like paying PMI) and not getting anything in return for it. At least by financing my downpayment, I was able to jack up my tax deduction and the PMI premiums weren’t just flushed down the toilet.

I still had about $2K leftover after closing costs, so I bought some new furniture. I am now house-rich and cash-poor, and even with the real estate crash in Florida, I still retain equity because I bought the house for so damn cheap (and did nothing to it in the way of improvements or repairs, aside from paint and landscaping) and its value increased so much in the 7 years since I bought it. At one point, the resale value had increased by about 50%, but I think I’m down now to a profit of only about 30%.

10

When we bought, we also got the people we were buying from to front us some of the down payment (technically, the closing costs); basically we added x thousand to the loan (and thus the money they got) and they paid x thousand of the costs.

11

I bought a house two years after I got married. I guess I had saved enough (the house, in 1966, cost $13.5K and I sold it two years later for the same price) to take over an existing mortgage. I then moved and rented for four years, at which time we were able to save enough for a normal down payment (about $4K), but by borrowing $5K from a friend I was able to take over an existing mortgage whose balance was about 2/3 the cost of the house. So we put over 30% down. I paid off the friend (he charged me only the interest his bank was paying) in under five years and the rest of the mortgage in 19. The house cost $31.8K and is now assessed at $560K. No one who is currently where I was in 1972 could possibly save enough to buy it.

12

You’re living in one of the craziest places in the country, housing-wise, which is a large part of the problem. Even here, we just bought our first condo, and a) we never would have been able to swing it this soon without some VERY generous wedding gifts; and b) we put 10% down, not 20% (conventional loan, though, not ARM). We’re hoping to sock away some extra mortgage payments and get rid of the stupid PMI ASAP, though.

13

When I moved to NY from TX and got a job in the exact same industry for the same size company I got about $14,000 more just for changing locations. Along with the dramatic reduction in my transportation costs (I spend $89 a month for a train pass and 50% of that is subsidized by my job) it more than made up for the increase in rent. If I move to Des Moines and find a job paying me $10,000 less per year I might be making plenty to buy a house but then I have to get a car, car insurance, gas, etc. to get from place to place.

14

It took me two years. But I had to go to Afghanistan to do it. We get some big financial incentives and plus there’s no place to spend it…

15

By the way, I did that as a single person, no kids, no parental involvement whatsoever. Bought the house at age 33.

16

We received a life-insurance payout when my husband lost his mother: two of his three siblings also used their share of the money for the same purpose, and it’s exactly what his mom wanted for her kids, so we all felt pretty good about it.

That said, right now we are saving for IVF ,which is comparable, and we’ve managed to save almost as much as our down payment was in the last six months. But we’ve really moved our lifestyle from “middle middle class” to “lower middle class” in order to do so.

17

6 months. When my wife and I got out of school we both had jobs. Moved into a really cheap apt and saved everything we could. Before we knew it we had 20% to put down on an inexpensive house, and our landlord kindly let us out of our lease.

18

It took us about 7 years to save up the 20% for a house in the size and neighborhood we wanted. It would have taken us longer, but the housing crash brought prices down to our savings level. We could have bought sooner, but we didn’t want a non-traditional loan or a bubble price (despite the willful ignorance of some, it was obvious that prices were unsustainably high). Nor did we want a small “starter” home.

It may seem like a long time, but in the big picture, it’s not. And remember that having the patience for a long time horizon is a necessary component of being financially responsible.

19

I don’t know if things are just different in AZ, but I bought my home on a fixed rate interest (5.5%) FHA loan where I was required to put 3.5% down and we bundled the closing costs into the offer so the seller actually handled them. (i.e. we offered 118,500 vs. the 114k asking price to ensure they would pick up 4500 in closing costs)

I borrowed the 4200 down payment from my parents which I then repayed as soon as I received the first time buyer incentive (8k) when tax time rolled around. Otherwise I could’ve seen it taking me a couple of years to build up to 4200.

20% down is horrifying. Especially in NYC.

20

Well, they don’t pay NYC rents, for one. I’m not sure how two putatively financially responsible adults working at presumably decent-paying jobs can have just $5500.00 in the kitty unless they’re splurging it all on a pretty significant monthly rent. (And, I guess, weddings.)

But to answer your questions:

a. Before the crash, at least, you could get away with much lower down-payments. I paid 10% with a higher second mortgage thingy that allowed me to avoid PMI. Then refinanced later to get rid of the second mortgage.

b. Many people do live beyond their means. Thus the whole mortgage crisis that’s been going on for the past few years.

BTW, the assumption that you won’t be doing remodeling or renovating is optimistic at best. You should have * at least * $2-5K in reserve after the closing in case the furnace craps out the first winter or the roof starts leaking, the old Indian graveyard in the basement needs to be dug up and relocated or you realize that you just can’t live one more minute with the 1970 avocado appliances that the old owner left behind.