Author Topic: How did you save up to buy your first house?  (Read 8932 times)

Frugal_NYC

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How did you save up to buy your first house?
« on: January 07, 2016, 12:23:20 PM »
I don't plan to buy a place of my own for at least 5 years probably (I rent and share my place with 3 friends so it's the cheapest option for me now), but I'm just curious what your savings strategies for saving down payment were.

Currently I max 401K, IRA, HSA, etc and everything else I periodically dump in my brokerage account.  I keep between $3K-$8K in my checking account, aside from that everything is invested.  My question is, when the time comes do I liquidate my brokerage account to put towards a home?  Additionally, am I following the right path of just socking everything away in investments in the meantime and not having much of any cash just lying around in the checking account?  If it matters, I would estimate needing a minimum of $100k-120k for a down payment when the time comes

Thanks

mm1970

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Re: How did you save up to buy your first house?
« Reply #1 on: January 07, 2016, 12:27:32 PM »
Pretty much this.  We put our leftover savings into brokerage and/or CDs.  Then I also had stock options, which were 1/2 of the downpayment.

I'm a red panda

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Re: How did you save up to buy your first house?
« Reply #2 on: January 07, 2016, 12:34:23 PM »
For our first house, we didn't save. My childhood savings from accumulated birthdays, christmas, and religious occasions (baptism, confirmation) were more than enough that I had money. Those were supposed to be a college fund, but I got scholarships instead. That's not too useful because "have a lucrative childhood" (really it helped to have a ton of aunts and uncles; I rarely got gifts more than $25...) really isn't a good option for you now, but it answers the question of "How did you save up..." 

For our second house we didn't do anything intentional. We just let money accumulate in our savings account. (Seperate from our 401k/403b and Roth IRA for retirement).  We decided to look for a nicer house when we realized we had enough money and we felt like we wanted more from our house than what we had.  We didn't use equity as we kept the other house for a rental.  But we only needed $70k for the down-payment, so it wasn't a real signifigant amount over many years of saving.

I wouldn't save using the market because it can go down just as well as go up.  I used to like laddering CDs but the rates suck. I guess if you know you are going to buy a house it is better than a savings account.
« Last Edit: January 07, 2016, 12:40:45 PM by iowajes »

matchewed

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Re: How did you save up to buy your first house?
« Reply #3 on: January 07, 2016, 12:36:02 PM »
It depends on how hard and fast that 5 years is. If you really really need to buy one in 5 years then you have to put it somewhere safe and liquid (generally a savings account/CD).

If you are more flexible you can take on more risk.

So it depends on your flexibility and risk tolerance.

KCM5

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Re: How did you save up to buy your first house?
« Reply #4 on: January 07, 2016, 12:42:36 PM »
It doesn't sound like you're solid on buying? If you're not definitely sure, I think your current strategy is good.

For us, we didn't save for our first house. We decided to move to a 2 bedroom, realized a house was way cheaper than rent, and bought a house. (3% down, no PMI using a low income loan program as I was the only one working at the time). But obviously that was a unique situation in a place with much much lower property prices than NYC.

Frugal_NYC

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Re: How did you save up to buy your first house?
« Reply #5 on: January 07, 2016, 12:47:01 PM »
Thanks for the responses, and yes I'm certainly not dead-set on buying any time soon and could see myself renting for 10 years even.

SF'd

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Re: How did you save up to buy your first house?
« Reply #6 on: January 07, 2016, 12:57:58 PM »
I'm struggling with this as well, only on the other coast and with a shorter time frame (~2 years maybe). The main issues are your time horizon and risk tolerance, and I don't think there's a "correct" answer regardless. The shorter your time horizon to wanting to buy a house, the more liquid and low-risk (CDs, money market, etc.) your down payment savings should be. This gets really tricky as the time frame shrinks (18mo-3yr out maybe), as stocks could be down 40% in that kind of window, crushing your down payment, or home prices could be up another 20%+ making your cash savings less meaningful. If you're serious about waiting five+ years, I'd be almost fully invested. If you think it'll be sooner, I'd probably scale the cash % up by 15%/year closer (so 70% invested for 3 years away, 55% for 2y) or something similar to that.

I'm waiting for the SF market to cool down before doing anything, personally. As a result, I have about 40% of my brokerage/house savings account in money market and the rest in index funds/a few names I think are fairly defensive from here. This smells a lot like market timing, which I'm not a proponent of, but I haven't been able to come up with a better solution.

Note: edited my %s because I can't math.
« Last Edit: January 07, 2016, 01:01:01 PM by SF'd »

Josiecat

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Re: How did you save up to buy your first house?
« Reply #7 on: January 07, 2016, 01:03:33 PM »
I used a large bonus from work, savings and got a loan from my 401K for some.  Totally worth it. 

Jack

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Re: How did you save up to buy your first house?
« Reply #8 on: January 07, 2016, 01:08:25 PM »
I didn't. I got an FHA loan + down-payment assistance from the city, and only had to pay $1500 out-of-pocket at closing (which I borrowed from my parents). Then I got an $8000 home buyer tax credit, for a net down payment of -$6500.

(This only worked because it was 2009. If I were buying a house at today's non-discounted prices, I'd save up for a 20% down payment.)

andy85

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Re: How did you save up to buy your first house?
« Reply #9 on: January 07, 2016, 01:21:09 PM »
lived with my parents for 5 years to pay off a shitload of debt while saving 18k for a 5% down payment and moving costs

PhrugalPhan

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Re: How did you save up to buy your first house?
« Reply #10 on: January 07, 2016, 01:44:43 PM »
I bought a fixer-upper using the HUD 203k program loan.  I don't know today's rules, but back in the 90's you only needed 3% down.  Using it I was able to get more money for the house than the purchase price, and used the excess for rehab work.   When the work was done (one year later) the left over rehab money (the rehab cost less than estimated) was the same as the down payment.  So I pocketed that money, basically getting the house for 0% down before loans of that type were available.  You can read more about it here: http://fhainfo.com/fha203k.htm

Prairie Stash

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Re: How did you save up to buy your first house?
« Reply #11 on: January 07, 2016, 03:46:28 PM »
I bought stocks, when it was time to purchase my house I ended up a small bit down. I would have been better off with short term investments like bonds, GIC's etc. Stocks are good for 10+ years but can hurt over short time frames, it was an inexpensive lesson for me, in the grand scheme I'm glad I screwed up young and not when I had big money on the line.

nereo

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Re: How did you save up to buy your first house?
« Reply #12 on: January 07, 2016, 04:06:32 PM »

Currently I max 401K, IRA, HSA, etc and everything else I periodically dump in my brokerage account.  I keep between $3K-$8K in my checking account, aside from that everything is invested.  My question is, when the time comes do I liquidate my brokerage account to put towards a home?  Additionally, am I following the right path of just socking everything away in investments in the meantime and not having much of any cash just lying around in the checking account?  If it matters, I would estimate needing a minimum of $100k-120k for a down payment when the time comes

Just wanted to say "kudos" for maxing out your tax-advantaged accounts plus having enough to put more in a brokerage.  That puts you on the fast track fo FI regardless of whether you rent or buy.

I just used money I had saved in mutual funds over the past decade - mostly from diligently saving in my teens and during college.  'Course, I needed a much smaller down payment ($46k). 

Like others have said, if there's flexibility I'd keep doing what you are doing, then when the time comes draw money from your brokerage account.  If you want to be 'certain' you can buy within a given timeframe, you'll want to stash that money in something safer, like a savings account.  For perspective, how much are you able to put into your brokerage while still maxing out your 401(k) / IRA / HSA?

JLee

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Re: How did you save up to buy your first house?
« Reply #13 on: January 07, 2016, 05:27:28 PM »
Assuming you're in the NYC area, I wouldn't buy a house here....property taxes are painfully high.  I'm just outside of NYC (I moved from AZ for a job) and I will continue renting a room (cheap) until I leave this area.  I love my house in Phoenix and it cost a little more than your anticipated budget for a down payment - paying $400-600k for a house and another $8-15k/yr in property taxes does not seem reasonable to me.

rpr

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Re: How did you save up to buy your first house?
« Reply #14 on: January 07, 2016, 05:39:38 PM »
We weren't making enough to be able to max two 401ks + IRAS and also save for a down payment. Since we did not know how long we would be looking for a house, we decided to just dump the savings into the retirement accounts. When we found a house after about two+ years of searching, we used up a lot of our emergency funds + got a loan from the 401k for the down payment. I didn't touch the Roths. Paid everything back in about 1 year after house was bought.

Retire-Canada

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Re: How did you save up to buy your first house?
« Reply #15 on: January 07, 2016, 06:19:03 PM »
Assuming you're in the NYC area, I wouldn't buy a house here....property taxes are painfully high.  I'm just outside of NYC (I moved from AZ for a job) and I will continue renting a room (cheap) until I leave this area.  I love my house in Phoenix and it cost a little more than your anticipated budget for a down payment - paying $400-600k for a house and another $8-15k/yr in property taxes does not seem reasonable to me.

Good points. I would for sure to a business case analysis of the renting vs. buying a house.

naners

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Re: How did you save up to buy your first house?
« Reply #16 on: January 07, 2016, 07:16:38 PM »
Assuming you're in the NYC area, I wouldn't buy a house here....property taxes are painfully high.  I'm just outside of NYC (I moved from AZ for a job) and I will continue renting a room (cheap) until I leave this area.  I love my house in Phoenix and it cost a little more than your anticipated budget for a down payment - paying $400-600k for a house and another $8-15k/yr in property taxes does not seem reasonable to me.

Depends on the situation. Property taxes on our 750k Brooklyn co-op are actually really low (under 3k per year). I think they're very high in Jersey though. Either way run the NYT rent or buy calculator to see if it makes sense for you. In our case even with the insane price per square foot the math came out wildly in favor of buying. You do need to stay put for a few years though. If you're single, consider the possibility that you may partner up and then your housing needs could change dramatically. For example, our location is very expensive but the only one that works for DH and myself commuting in opposite directions.

Gerard

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Re: How did you save up to buy your first house?
« Reply #17 on: January 07, 2016, 08:39:58 PM »
I'm not recommending what I did, but for my first house, I maxed out my credit card, put the money into an RRSP (Canadian registered retirement savings plan), got the tax refund, pulled out the money 92 days later, and used it plus the tax refund as the down payment. It made sense at the time (in a place/time where rentals were much, much more expensive than mortgage interest and other costs).

WGH

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Re: How did you save up to buy your first house?
« Reply #18 on: January 08, 2016, 02:34:30 PM »
Took out a 401k loan which yes I know is face punch worthy. We have a FHA loan at 3.25 and the PMI and the 401k loan both expire about the same time which is about another 1.5 years. It's been hard but we timed the low interest rate just right and bought a new build right before the builder jacked up the prices. Also since we went through their preferred lender they covered the closing costs. Our income has increased enough that I plan to have all our CC and car loans paid off at that same time as well so the budget relief has me salivating.

More power to you folks who are attacking debt, maxing out retirement accounts, funding kids college funds, and saving up a down payment. That's a tough row to hoe even for a mustachian.

dandarc

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Re: How did you save up to buy your first house?
« Reply #19 on: January 08, 2016, 02:40:15 PM »
Short answer is I didn't.  End of 2009, great deal on condo available, and I took out a personal loan for down payment.  Not the brightest idea, but the place was cheap - like $60K, so it all worked out OK.

birdman2003

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Re: How did you save up to buy your first house?
« Reply #20 on: January 08, 2016, 03:23:07 PM »
Contributed only enough to my 401(k) to get the employer match.  The rest I put into a savings account until I had 20% down payment. Took 4 years.

Jim2001

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Re: How did you save up to buy your first house?
« Reply #21 on: January 09, 2016, 05:37:51 PM »
I borrowed the entire down payment for my first hours from my favorite uncle.  It was tight for the first few years having to make the mortgage and pay him back, so I took a second job.

Rural

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Re: How did you save up to buy your first house?
« Reply #22 on: January 09, 2016, 06:09:08 PM »
Saved every penny while watching for a deal for two years, then jumped on empty land with an "uninhabitable" trailer in 2009 with 25% down and inhabited the trailer to save more.

MsPeacock

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Re: How did you save up to buy your first house?
« Reply #23 on: January 09, 2016, 06:26:19 PM »
Had a time window of about 2 years and dumped the money into a savings account and money market fund. I wanted a very low risk place to stash the money due to the short window of time for savings. At the time we were fortunate to get annual bonuses, which helped with building the nest egg w/ a few substantial lump sum deposits.

Drifterrider

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Re: How did you save up to buy your first house?
« Reply #24 on: January 13, 2016, 11:07:00 AM »
VA loan.

I used the money I'd saved to furnish the house.

BlueHouse

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Re: How did you save up to buy your first house?
« Reply #25 on: January 13, 2016, 01:21:16 PM »
First house was $62K, and I only put down 3%.    I could save that much just by avoiding the bar scene for a month!   

jeromedawg

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Re: How did you save up to buy your first house?
« Reply #26 on: January 13, 2016, 01:44:26 PM »
 I too am contemplating some strategies for this. Technically, the condo we're in now is co-ownership with my parents and I send them a monthly payment of $700. I put down around $15k for the "downpayment" and they paid the rest off from a 1031 rollover on a cabin property they had that they wanted to reinvest. It made sense at the time for me since I'm down in SoCal and they're in NorCal and needed to move their investment into something that made more sense - it was sort of a "win win" for the both of us as it provided a place for me to live and a better place for their assets that wouldn't produce negative cash flow or liability when it did get rented. Anyway, after much thought and consideration, my wife and I are now thinking we should just relinquish my ownership back to them and continue to "rent" from them (since we've technically been doing this for the past 7-8 years but that was technically a mortgage payment). They mentioned they would just give us back the money we've put in towards principal and we could use that plus a loan from them (if necessary) to finance our own place. I'm not really excited about taking a loan from them though but we'll see. Other than that I have a good amount saved up in our 401ks, Roth IRAs, savings/checkings ,and taxable accounts. I probably have enough in our taxable accounts to pay for a big chunk of house at least here in SoCal... question is whether or not I really want to live down here for much longer considering how expensive it is. Otherwise, we may just end up living at this place as long as we can stand it. I just need to get better at decluttering

Trimatty471

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Re: How did you save up to buy your first house?
« Reply #27 on: March 17, 2016, 04:28:37 PM »
I socked away my cash earned via salary, bonus, OT. Into ING Bank which was paying north of 3% interest while living at home with my parents.

DebtFreeBy25

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Re: How did you save up to buy your first house?
« Reply #28 on: March 17, 2016, 05:05:48 PM »
After finishing grad school, I continued to live in student-like conditions with roommates, so I never paid more than $365/month in rent with all utilities included. Keeping my housing costs low allowed me to save money without really trying even though my starting salary was meager (only $33k/year).  I accumulated this money in my checking account because I knew I'd be buying a house soon. I graduated shortly before my 22nd birthday and bought my first house at 23. That first house was a humble foreclosure so putting up a hefty down payment was pretty easy.

serpentstooth

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Re: How did you save up to buy your first house?
« Reply #29 on: March 17, 2016, 05:23:53 PM »
1. First place in NYC, it took about a year of work, savings account.

2. Second place, currently saving, I'm trying to decide between dumping the extra money into the mortgage on place #1 and liquidating that and using the proceeds to fund a new place, and just putting cash into a savings account. Estimate about 2 years.

ketchup

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Re: How did you save up to buy your first house?
« Reply #30 on: March 17, 2016, 06:30:49 PM »
I lived at home for just over a year, working part-time and banked low five figures, and then bought my first house (age 20) at the bottom of market in 2012 for $18k with seller carryback financing only having to put down $3500 with no closing costs.  500 square feet and three people moved in with me.  Not the most elegant, but hey, my GF and I were homeowners at 20 and 19.  We bought our second house last year and kept the first as a rental property.

kpd905

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Re: How did you save up to buy your first house?
« Reply #31 on: March 17, 2016, 06:53:35 PM »
I actually just dropped our 401k contributions today for this.  We will contribute up to the match for the next year and should be able to save up enough for a down payment in that time.  It is definitely going to hurt tax-wise this year, but at least it isn't 5+ years like people in HCOL areas need.

Filliteracy

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Re: How did you save up to buy your first house?
« Reply #32 on: March 18, 2016, 09:40:17 AM »
Saved 20K a year and invested it in GICs (before I started becoming comfortable to invest) and then about a year before I actually bought the house, I put about 40K in the stock market, made 5K in a year, sold in May of 2015 right before the market started going down (I can't believe how incredibly lucky I was in making that move), made a 60K downpayment in June by liquidating 30K of those stocks with 30K of cash. Now i'm buying the same index funds cheaper six months later, rinse and repeat :).

Of course, if my investments had lost money, I wouldn't of went ahead and bought the house. So it depends on your flexibility and willingness to wait for the most opportune time (if, like you said, are ready to wait 10+ years and are very flexible, you can put a high percentage (75%) in stocks). Buy low, sell high, ???, Profit!