The Buzz: Financing Your First Home

The Buzz is a Weddingbee series created by the hive, for the hive! Each week, we’ll head to the boards and ask a series of three questions””one geared toward pre-engaged, one toward engaged, and one for newlyweds. We’ll look to you to quickly provide your expert advice, and compile a selection of great answers into blog posts. Learn more here, and contribute your ideas for future “Buzz” questions you’d like to see answered!

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For our next The Buzz post, we’re tackling a question for homeowners: How did you save up enough money for the deposit for your first home, and/or at what point did you decide you were financially ready to invest in your first home?

NowDontLetsBeSilly (wedding date: August 17, 2013)

When the market looked to be just about to start turning around, interest rates were really low, and we were just emotionally ready to buy a house (he proposed, so we were definitely in it for the long haul!), we decided to start looking. We lucked out—in the year since we bought, houses have started going immediately after being put on the market, and often for more than the list price.

We had some savings, but most of all my fiance’s parents were willing to give us a low-rate loan for the rest of the 20% down, which was very helpful. We also were paying about the same in rent as we would have been on mortgage payments, so it made sense. We don’t regret it in the least; it was a great decision and we have the cutest house now to call our own.

Mrs.H2B (wedding date: August 4, 2012)

We used the money from our full-time teaching and accounting jobs to pay the bills at our apartment, student loans, etc., and I used money from my part-time job as a photographer to put toward our down payment. We still had to borrow some from our parents since we found a home much earlier than expected, but will have them paid off in full by the end of the summer.

Mrs. Mouse (wedding date: September 11, 2009)

We bought our house in 2008 and decided to go with an FHA loan, which are available to first-time home buyers and allow you to qualify for a mortgage without putting down the full 20%. We hadn’t had a chance to save up for a down payment yet (I was still in law school), but we found the perfect house in an area of town where property values were increasing rapidly.

With a generous gift from my mom, we were able to put 3% down and pay our closing costs. We were planning on putting down 10%, but our mortgage broker talked us into the lower amount by showing us that it would only add about an extra $100/month to our payments. If I had it to do over again, I’m not sure I would go with 3%. It was nice to be able to tell my mom we didn’t need as much money as we’d previously thought, but one thing to keep in mind when putting down less than 20% is that you will have to pay mortgage interest (PMI) until you have paid off 20% of the value of your home. Almost five years later, we still have a ways to go before we get there.

Also, due to the fact that I didn’t have a full-time job, we decided that The Dude would purchase the house in his name only. He has/had a good, steady job and a good credit score, so this was the right choice for us. He bought the house before we were married. Because we live in a community property state, this means that when we got married the house was still his property. (Basically, property you accumulate while in marriage belongs to both of you, and property you own before marriage belongs to you solely.) So because of that we decided to put my name on the title as well when we could. We were able to do that when we refinanced (see next paragraph).

We also took advantage of the lower interest rates to refinance our home a couple of months ago. It wasn’t a difficult process, but we did hit a few stops and starts before finding a bank that would work with us. We ended up using a local credit union, and they treated us really well and got us a great interest rate; we didn’t even have to pay closing costs! We plan on continuing to pay the previous amount of our mortgage for as long as we can, and that way we will pay off our loan much sooner than we would have otherwise.

terpalum10 (wedding date: August 23, 2013)

We live in a rural area, so we used a USDA loan to purchase our first home last year. FI and I were 24 and wanted to purchase a home before the wedding so that we wouldn’t agonize over every dollar spent on the wedding. There is an income limit associated with USDA, so we wanted to buy before we crossed that threshold as well. If we had waited until this year to buy, our new incomes would’ve disqualified us.

I believe we only spent about $1,000 out of pocket (inspections and small fees); the seller paid closing costs. I got a great interest rate and I don’t pay PMI, so if you’re in a rural area (the USDA website has a map that will tell you), I highly recommend looking into this option!

Mrs. Meerkat (wedding date: December 14, 2010)

I couldn’t agree more that limiting what you buy helps the most.

One of the things that really helped us was a down-payment-matching programing (matched up to a threshold). It was something our state was doing to help increase home sales in our area. It was basically a few thousand dollars free that matched the down payment we were putting in. So make sure you look at what state and local governements may be offering.

ceemarie7 (wedding date: October 1, 2014)

I bought my house a year ago; I was 23 and right out of college. With 100% financing I put no money down, I had the seller pay closing costs and prepaids, and luckily my uncle is a home inspector so he did it for free. Downside to a USDA loan? Because I did 100% financing, I owe more on my mortgage than my house is worth even after paying on it for a year. So I will have to rent my house when SO and I decide to purchase a bigger home in a few years or lose a lot of money.

 

Mrs. Wallaby (wedding date: November 2012)

My husband and I both put ourselves through college for the most part, and we both graduated from college debt free. As soon as we began working full time we began individually putting money away to save up for a house. Neither of us bought any major splurges, like a fancy car, the first few years of working, knowing that any major purchase would postpone the time when we’d be able to buy a house. The facility where I work was sold off to another company, and in the process we were offered a lot of incentives, including bonuses, to stay and continue working for the facility. I squirreled away every bonus check I received, and those added up to a big part of our eventual down payment. And the rest of the down payment came from interest—we’ve invested our money in mutual funds with the help of a financial advisor for the last year. We close on our house on Friday!! Fingers crossed that everything goes smoothly!

Sunnyday278 (wedding date: September 21, 2013)

Funny you should ask because we JUST became homeowners on the 18th!!!

It honestly just kind of happened…when I graduated in 2011, I was not able to find a job in my major, and I got an OK-paying job at the end of that summer. I wasn’t able to save too much, but I could save some.

Meanwhile, my FI was still in school, and he worked a lot and had REALLY awesome summer internships. He was able to save quite a nice little chunk of change, close to $10,000. He had been saving that up for at least three years.

We got engaged in February of 2012 with no immediate plans to buy a house. But he and I DID start talking about possibly buying an “income” property. He had a friend who had one and it was an excellent investment. We discussed it, hypothetically of course, and I agreed that if the opportunity presented itself I would be willing to be a landlord.

Fast forward to fall of 2012, and the market where we are located currently was INSANE. A decent house in town (three-bedroom, attic finished room, little yard, two full baths, not a thing wrong with the house) could be $75k–$80k. Between the FHA loan and his down payment, and the fact that loan rates are wonderful right now, we decided to go for it! We waited until he graduated and he luckily got a job in his field right away with somewhat decent pay, and I finally landed a job that pays me real money! It was the most grueling stupid process because we ran into a LOT of problems having brand new jobs and not being married, but we did it!

We’re renting the house for now, and in the meantime we are saving for our own home in a few years, as well as saving some money for any repairs to this one that may come up. But in a few years time we hope the equity (plus our personal savings we are able to save because we’re basically living almost payment free) will give us the opportunity to buy some land and build our dream home!

Mrs. Dragon (wedding date: September 22, 2012)

We never really had savings until we got engaged, at which point we realized we had to start putting money away. We each contributed the same amount to a savings account every month, and after a while we didn’t really miss it. After the wedding we decided to keep doing the same, knowing that we’d want to buy a house sooner rather than later. We put the money into a tax-free savings account to generate a bit more interest, and that has become our down payment. We borrowed a bit from my father to deal with closing costs and legal fees, but if we didn’t keep saving after the wedding we would have had absolutely nothing!

AB Bride (wedding date: June 25, 2011)

I always just saved money, knowing it could go toward a wedding, house, car, whatever.

After getting married, we knew most of the money we got would go toward our down payment. When DH graduated and started working, our lifestyle didn’t change much, and we just kept saving. When he was transferred closer for work, we started saving the money we spent for renting a second place.

Financially, the plan was to wait until I graduated, but our rent was jumping up and we were fed up where we were. We had enough for a 20% down payment, plus closing costs without using our RRSPs, our comfortable chequing account balance, or a few of our investments which are currently down in value.

Things will be a bit tighter than our original plan, but we got a good interest rate, and I haven’t seen anything I like on the market since we’ve bought. We can either ramp up savings or our mortgage payment once I’m working, which hopefully won’t be too long, and we still have breathing space with just DH’s salary.

FreckledFox (wedding date: October 20, 2012)

I cannot answer from complete personal experience, but I watched my DH buy his home. (He was only my BF at the time.) He saved up 20% down, and paid down credit cards so he’d look better to the bank! He used some money from an IRA account from an old job and made sure to offer low! He bought a fixer-upper, and we used the saved money for repairs and renovations to make it our own.  :)

funnelcake (wedding date: October 29, 2011)

We both saved around 25–35% of our income for four to five years in order to put down the required 20% in Switzerland on our flat. And because it was a new build, we did need to take a loan from his parents for the initial 15% reservation down payment a year and a half ago, which we will pay back by the end of this year. We saved money by avoiding shopping for clothing and personal items, making most of our meals at home instead of eating out and being homebodies. We did still make time to travel but not on the luxury level.

 

bleusteel (wedding date: September 27, 2014)

We had been living together in an apartment, and we both knew that we wanted to make buying a home our priority. While living in the apartment, we made it a goal to minimize our expenses and debt. For me, this meant selling my old car (which constantly needed expensive repairs) and buying a new, but more reliable, car. For him, this meant putting more money into student loan payments to reduce debt. Together, we reduced monthly expenses by cooking meals together, getting a shared wireless plan, and commuting together.

Originally, we had planned to live in the apartment for two years and save for a higher down payment. But our apartment decided to raise rates significantly after the first year; the rent was not too far off from what we currently pay on our house. We did the math and discovered that, in our case, it was better to buy the house now with the down payment we had than to wait another year for a higher down payment. We’re really glad we made the decision because it’s been over one year since buying and supply is really low for houses in our town, so we likely would have had to pay more for the same house.

  crayfish (wedding date: September 11, 2010)

We lived in a small one-bedroom apartment that was way below what we could afford, only ate out once every two weeks, kept a strict entertainment budget, and used public transit instead of owning cars for several years. Where we live, two-bedroom homes start at around $500k, and we wanted to put 20% down and still have an emergency fund left over, so it took a lot of diligence and self-control on our part to make it happen!!

Mrs. Penguin (wedding date: June 7, 2008)

We bought our condo about eight years ago (I was 24)…it was peak of the market (doh!!!), so that was a bummer. Rent in our area is so high, we knew that mortgage or rent prices would have been so comparable at the time, so we decided to buy, and hang onto it as a rental property should the market slide (and boy, did it ever)! Building up a down payment for a place in the Bay Area feels impossible! I actually lived with my parents for three years post college with a full-time income, which was the primary way I squirreled away cash.

Once we bought, we were “flat broke” again (spent everything we had on our down payment). We didn’t end up furnishing our place (we had the bare minimum—bed, old couch, old desk, and some kitchen stuff) for a year or so. It’s hard to get a place and not “nest” immediately, but we didn’t. We weren’t married yet either so we really had a mishmash of college stuff. I once broke down and cried because we didn’t have a blender (I was trying really hard to wait until we got married to register for things), so we had to buy one. But we limited ourselves. I also didn’t contribute to my retirement fund for two years post buying our home.

The biggest thing that helped us build back up our cash reserves was opening up a series of online bank accounts that automatically withdrew money from both of our checking accounts for various things. Mortgage/property taxes, car, vacation, taxes, retirement, “rainy day”…the list goes on. Each account automatically “sucks away” cash from our checking accounts shortly after payday, so we don’t even realize we have that cash. That money is hard to access as well, since it’s not in our “regular” bank accounts. We have to jump through hoops to make withdrawals (which is a good thing!). Since I’m not a budgeter, it’s a good way to make sure that we’re saving without being too proactive about it…and my checking account always seems to hover around zero, so I feel cash poor, which helps curb spending.

Mrs. Boa Constrictor (wedding date: May 2012)

We got married immediately after finishing college, and a month later we were moving to Cincinnati to start new jobs. We knew we wanted to buy a house ASAP and take advantage of the super-low interest rates. We were fortunate enough to have great friends living in the city, who graciously offered to let us to stay with them so we could save our money for a down payment. Living with another couple (with a two year old) didn’t make for a super-romantic first year of marriage, but the sacrifice allowed us to buy our first home after eight months of saving. We saved enough to cover our down payment and closing costs but had to borrow a bit from my parents to cover part of the three months of mortgage payments the bank required be in our bank account.

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What do you think of these tips, hive? Do you have any advice to add for bees trying to save for their first home?

Stay tuned to the boards to participate in our next round of The Buzz!

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  1. Guest
    lauren, Guest @ 6:11 pm

    It’s pretty sad that some people rely on their parents to buy a home. I mean, come on. Seriously? It’s sad people can’t be responsible adults and live below THEIR means (not their parents’).

  2. Member
    keylimepie 35 posts, Newbee @ 6:32 pm

    @lauren: I don’t really understand why it’s “sad” that some people’s parents are able and willing to gift or lend their children money for a down payment on a home. Plenty of parents do that for their children’s education and weddings; why is a house any different? It seems wonderfully generous, not sad at all.

    I also don’t really see what any of that has to do with living within one’s means. The two may or may not be related, depending on the situation, but we have no idea, so who are we to judge?

  3. Member
    sugarpea 4692 posts, Honey bee @ 7:11 pm

    @lauren: My FI and I have a good income and are able to afford to pay a mortgage and expenses. However, we’re also 22 and at this point don’t have reliable work experience that we can show to a bank. My parents bought us our house and we pay the mortgage each week and the bills that go along with owning a home. We put our own money into decorating and taking care of the house. Someday we’ll buy this house from our parents, but we need to save a down payment and keep working full-time for a couple years to get a good interest rate. It’s helped us a lot because my parents were able to get an awesome rate for our mortgage! I don’t think it’s sad at all.. it makes my FI and I happy (and my parents happy because they love providing for us). Actually, I find it pretty sad that there is only one “acceptable” way to purchase a home (meaning: without outside help). My FI and I aren’t financially irresponsible and we live within our means. I am so grateful for everything my parents have done and their contribution is very selfless and generous…NOT sad!

  4. Member
    Mrs. Funnel Cake 1171 posts, Bumble bee @ 5:58 am

    @lauren: we could have bought a home without help from parents, but since we had to put down 15% a year and a half before construction was done and still pay our $3100/month rent, it was his parents who made affording a 2BR in the location we wanted possible.

    I don’t think living in a more rural area with a much longer commute or in a 1BR where we could possibly have a kid would have made us any better off. We also bought at least 10 years earlier than most buyers in Switzerland and to be fair, our deposit here could have bought an entire home in Columbus where I’m from. :-/

    I think if parents are lending to kids who are savers in order to help them secure a better mortgage rate or a more desirable, profitable property, then that’s great. It’s not like everyone’s parents are just randomly buying houses for them. And I wouldn’t have dreamed of asking my parents for help.

  5. Member
    steene222 96 posts, Worker bee @ 9:23 am

    I agree that it is a sad state that so many people have to rely on parental help, but not as a reflection of their inability to be financially responsible. But that the market is almost impossible to crack into as a first time homebuyer. (unless you are making 6 figures and when your in your early to mid 20s that doesnt generally happen). A knock down house can sell for well over half a million (in my area at least).
    Its Sad that even a generation before us didnt have this kind severity of a situation, and it was perfectly reasonable to get married buy a house and start a family all by the time your 30.
    Now most people are only starting into the beginning years of their carrers by this time, not to mention paying for student loans, and wedding costs, and having a life ( I dont mean an extravegent life either, but food, rent, heat, taxes, insurance!) all before you can even really begin to focus on getting 20% for a down payment.
    I see it as an example of just how far the middle class has fallin in the last few decades.

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