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Buying Our First Home: How To Save Money For A House

By on July 11, 2011

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In my last post in the Buying Our First Home series, I mentioned that G and I are saving 50% or more of our income for our future first house.  A reader e-mailed me and asked me how to save money for a house, so I thought I’d fill you in on how G and I got to a place where we can put 50% of our income into our house savings.

First things first, there are some major reasons why we are able to save so much of our income:

  • We opened up an Ally Bank Online Savings account.  Having an online savings account helps us from spending that money and online savings accounts offer better interest rates than most offline accounts.
  • We became debt-free a couple years ago, paying off about $60,000 in debt (mostly student loans, a car loan, and a minimal amount of credit card debt)
  • Although, I have been a victim of some sort of lifestyle inflation since I became debt-free (mostly in the form of freer spending), we still live quite modestly.  Our fixed monthly expenses (rent, phones, utilities, gym membership) account for less than 15% of our take-home pay.  It definitely helps that I’m not a fashionista and I’m not into many expensive habits. :)
  • After being in the corporate business world for 6 years (both of us), our income is more than double what it was when we were entry-level.  Had we tried to buy a house right out of college, it would not have been pretty.

As I mentioned above, I have fallen victim to a bit of lifestyle inflation since I became debt-free.  I haven’t started spending like a mad woman though, as evidenced by my still-debt-free status and my ability to save a good chunk of money each month.  But I have noticed that I shop at more expensive grocery stores because they’re more convenient, I don’t bother myself with looking for deals on groceries as much (which is GOING to change), and I’ve become much more generous in gift-giving (still working on increasing my charitable donations, though).  The gift-giving thing is FUN.  My younger brother is still in college, and it makes me all giddy to send him a $25 Visa gift card during finals.  I also love giving more expensive shower and wedding gifts now that I’m debt-free.  So, although I still consider it lifestyle inflation, it’s good lifestyle inflation.

Still, although I’m spending more on some things, many of my old frugality habits still remain:

  • I hardly ever shop for clothes.  I went shopping for some new clothes for our honeymoon and afterwards I felt torn between wanting to buy more and feeling guilty for spending money on clothes.  Luckily, I didn’t have a chance to shop again after that since the wedding madness immediately followed.
  • I don’t have any expensive habits or hobbies.  If anything, this blog is my most costly habit, but it also generates a small amount of income.  Plus, it brings me a great deal of happiness, so I’d probably blog no matter how much it cost me.  My other hobbies are free or fixed expenses:  I can get books from the library, I can run outside or at the gym, I can visit with friend for free (or at the pool!), and so on.  I know some people have regular hobbies or interests that cost quite a lot, so I’m happy I’m interested in things that don’t cost much.
  • On that note, sometimes I think you have to learn to like things that don’t cost much.  Or, put another way, discover some new interests that don’t cost much or are free (especially if you’re trying to pay off debt!).
  • As Gretchen Rubin puts it in the Money chapter of The Happiness Project, I’m an under-buyer.  I hate buying things with one use or that I can use another item for (like her, I HATE buying Kleenexes!  Hellooo, toilet paper accomplishes the SAME thing).  Although I always feel like I’m missing something at home, I don’t buy a lot of useless things or one-use items.
  • As far as entertainment goes, G and I don’t go to movies anymore.  We got sick of paying so much – movie prices are rising like crazy!  We’ve limited ourselves to one or two per year.  The last time we saw a movie was around Christmas.  Now we Netflix everything.
  • Overall, the only “extras” we spend money on are eating out and that’s definitely our biggest budget buster.

Since we combined finances (right after we returned from our honeymoon), we’ve been extra sensitive to spending, too.  Not only are we figuring out each other’s spending habits, we’re also really trying to pinch pennies even more since we’re going to seriously start house-hunting in the fall.

How do you save money for a home? is a very personal question that varies with every situation.  For us, becoming debt-free and minimizing our “extra” expenses as much as possible has been extremely helpful.

How do you save money for major expenses, like a home, a vacation or a car?

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P.S. Your comments on Friday’s post — How Do YOU Define Balance? — were amazing!  They were so helpful to me and I can’t wait to use them for inspiration in the future!  If you haven’t commented yet, please check out the post here!

Categories: Buying Our First Home, Dollars, House, Saving17 Comments

Buying Our First Home: An Update on Savings and Realtors

By on June 27, 2011

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It’s been awhile since I talked about our home-buying process.  Not much has changed in the last couple months.  We’ve just been saving like crazy – or as much as we could during the wedding planning shenanigans.

We were going to meet our high-end savings goal right at the end of our lease (April 2012), but with the money we received from the wedding, we will meet our goal at the end of this year (2011).

This is great news, but doesn’t change our plans much.  I am adamant about buying towards the lower end of our desired price range, so since we’re meeting our high-end savings goal by year-end, we’ll probably be able to put more down on the house than we had anticipated.

How much are we saving?  A lot.  As much as we can.  About 50% of our take-home pay (after taxes, retirement contributions, insurance, etc.).  And even though we’re saving a lot of our income, it has still taken a LONG time to build up our savings to home-buying levels (well, our version of home-buying levels, anyway).  Houses are expensive!

We have chosen a realtor!  I actually JUST sent him the initial e-mail this morning letting him know that we wanted to meet and discuss the home-buying process with him.  I really have no idea how this works.  When I was drafting the e-mail, I felt like I was asking him out on a date almost!  “Will you be my realtor?” sounds a little corny, right?

He is a great guy that we’ve known for a couple years through our church.  Hopefully he wants to work with us!  I’ll update on how that goes in my next home buying post.

At our initial meeting with our realtor, I’d like to just go over what we’re looking for and what we’re wanting to spend just so he can be on the look out for us.  Then, I’d like to SERIOUSLY start house-hunting this fall – maybe starting in October.  Like I’ve mentioned, our lease ends at the end of April, so it would be GREAT if we could time our move to coincide with our lease.  I know that’s going to be hard to do as we move into 2012 (especially if we have any hiccups in the buying process).  It’ll be interesting to see how things shake out once we start looking!

If you’re a homeowner, how did you choose your realtor?

Categories: Dollars, House, Saving14 Comments

Buying Our First Home: Finding Budget & Spending Balance

By on March 14, 2011

First-time-home-buyer1This is the first post in a new series on Blonde & Balanced – Buying Our First Home – where I’ll chronicle our process to first-time home ownership!

A new home is in my near future!  If things go as planned, we’ll start looking for a new house – and become first-time home owners! – in the first few months of 2012.  We’ve always had the same budget in mind, but it’s a wide price range (not a high price range … the two are very different!).  We never plan to buy more house than we need, but how do you find that sweet spot between being too frugal or spending at the top of your price range?

Our price range spans about $100,000, meaning the lower number in our price range is $100,000 less than the high-end of our price range.  Even if we buy on the upper end of that range, we’ll still be within our budget – we’ll just be at the top of that budget.

The question is, do you sacrifice and spend less or do you go all in and spend more?  We’ve been living in apartments and spending frugally for many years, always thinking of our dream house.  Part of me wants to go big and get everything we want (within the budget).  But the other part of me wants to go frugal and buy at the lower-end of our budget so we can pay the house off several years quicker.

Since we never really bought a “starter” house, we’ll likely be in our first house for many years to come – maybe even until our kids graduate high school.  When I think of that, I want to go for the dream house at the higher end of our budget.  We’d still have it paid off by then, it would just take a little longer.

The zip codes where we’re looking at homes in is the biggest driver of our price range.  If we wanted to move back to our hometowns (other suburbs in Kansas City), we could probably spend about $100,000 less on a home.  Sounds tempting, but we’ve made a new home in our little space of Kansas City, we love this new “area”, and it’s closer to church and our jobs.

There is something enticing about owning a home with 5 bedrooms, a 3-car garage, a finished basement, an updated kitchen, and a huge backyard.  We could easily find that for an affordable amount in other neighborhoods, but it’s doubtful that we’ll find it where we’re looking to buy.

I guess I won’t know for sure which end of our price range we want to spend in until we start house-hunting with our future realtor.  Who knows, maybe in 9 months, the housing market will be on a rebound and prices will be rising.  Or maybe we’ll even find our dream house with all those extras at the lower end of our price range (now, THAT would be ideal).

In the meantime, I do plan to continue this series – Buying Our First Home.  I think many people are interested in what it’s really like to save for, plan for, shop for, and buy a new home.  We’ll be in the planning and saving for stages for several more months, but the house-hunting will be here before we know it!

What topics would you like to see in the Buying Our First Home series?

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Categories: Budget, Dollars, House, Mortgage, Planning, Saving21 Comments

My Journey To First-time Home Ownership on the Lending Tree Blog

By on November 16, 2010

First-Time-Home-BuyersG and I plan to buy a home pretty soon after we get hitched.  I’ve wanted to own a home for as long as I can remember and I cannot believe it’s creeping up on us so fast!

I was lucky enough to write about the impact the current housing market has had on my home-buying views for the Lending Tree Blog and the article was posted today!

Here’s a snippet from the article:

Homeowners are being hit hard by the failing housing market: decreasing property values, inability to sell, or being forced to accept lowball offers.  While stories like these are abundant, there’s another side of that equation: renters and future first-time homebuyers are able to purchase dream homes with a lower price tag and snag shockingly low interest rates.

Please head over and check out my article – Taking the Plunge: A First-time Homebuyer Considers the Housing Market!

I’d love to hear what other fellow future or current first-time homebuyers think.  How has the housing market hurt or help you?

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Categories: Blogging, Dollars, House, Notes, Saving, shopping6 Comments

Operation “Buy Our First Place” Has Commenced!

By on September 21, 2010

I’m pleased to announce that Lloyd and I have set a date!  …a date for when we plan to buy our first place!

Before you get too excited, we’ve still got a ways to go, but the point is that we have a plan and a set date (or month) that we will start looking!  I’m a little obsessed with planning ahead for events (be it a run or buying a house), so I’m ecstatic that we have a plan in place right now.

As you all know, Lloyd and I are 100% debt-free and have been for quite awhile now.  When we became debt-free, we starting socking money away for our first house like crazy.  But, we’re not just saving for our first house, we’re also saving for our New Home Expense Fund (NHEF).

House Down Payment

We are planning to buy a house in the $250,000 range.  Our true range that we’re looking in is between $200,000 – $300,000.

However, I really don’t want to spend more than $250,000.  Where we live, $250,000 can buy you enough house to raise a family of 4 or 5 (which we plan to have … someday).  Sure, we could probably get approved for a house much more expensive, but we don’t need that much house.

I am adamant about not buying a house until we have 20% or more of a down payment.  With the timeline that we have set up, we should exceed that goal by the time we start looking.

New Home Expense Fund

I can’t stress enough just how important a new home expense fund is – home ownership comes with more expenses than just a monthly rent payment.

For example, a good friend of mine recently bought their first house and was telling me the other day how the air conditioner had just gone out that weekend and cost a cool $5,000 to replace.

Where are you gonna get that money if you don’t have a NHEF?  There’s no way I’m financing that $5,000 and getting myself back in debt.  It just won’t happen.  I broke up with debt a long time ago and I don’t see us rekindling our romance ever again.  That ship has sailed.

So, in addition to saving for our down payment, we’re also saving for all the expenses that come with home ownership.  But we’re not just saving to maintain our house, the NHEF will also cover other expenses.  The NHEF will not only cover maintenance costs, but it will also cover furnishings, decor, and other home equipment (like lawn mowers, tools and all that jazz).  We currently have enough furniture to furnish a two-bedroom apartment – not a four bedroom HOUSE – so we’ll need to spend some dough furnishing our new place.

And because home maintenance never ends (one of the perks of renting, people!), neither should the NHEF end.  Which means that eventually I’ll just refer to my NHEF as my HEF.  Cute, huh?

We Set The Date!

Now that you know what exactly we’ll be saving for, you’re probably wondering when exactly we’re going to start looking for houses, huh?  I can officially tell you that we are going to start seriously looking for a house in December 2011.

Why December 2011?

The date mostly revolves around when our lease is up and our savings accounts.  Our current lease will end in April 2011, which is just a mere two months before our wedding.  We probably wouldn’t be 100% comfortable with moving before our current lease ends, so we’re just going to sign another one-year lease next April which will then end in April 2012.  While we’ll probably be more than financially ready to move during the summer of 2011, but we don’t want to break our lease or rush into anything.

So, since we want to move out before our lease ends in April 2012, we’d like to start looking in December 2011.  That way, we’ll have plenty of time to look for our dream house without being in too much of a rush.  Additionally, it’ll give us that many more months to pad our savings account.  If we do happen to find a house before our lease is up, we are okay with paying the rent for a couple months after we’ve moved out.  Trust me, it’s much better than paying a cancellation fee!  Those things are ridiculous!

So, there you have it:  We plan to officially start house-hunting in December 2011.  Until then, we’ll be quietly padding our down payment and NHEF accounts in preparation for the big move.

If you are a homeowner, what has been your experience with buying a house?  Did you feel like you bought too early or at just the right time?  If you’re a renter, why are you waiting to buy a house?  Are you saving for both a down payment and a New Home Expense Fund?

Categories: Dollars, House, Saving23 Comments