What's the minimum I should save?

Question

My husband and I will be buying our first home in about 4 years. I know we got a late start on saving. We're going to be buying a 4+ bedroom, 2+ bathroom in northeastern Oklahoma. I would like to save enough for a downpayment, as well as have money left over to put in new carpet, or paint the walls if need be. I also realize there should be money left after all that, in case something goes wrong and we have to fix or replace something expensive.

How much do you recommend that we save? Please keep in mind that my husband is in the military and we have four children. We're not exactly rolling in the dough here. (Last time I asked this question, in polls and surveys, I got two answers. One suggested that I save $62,500 or $1,300 a month!)

Thanks, in advance, for all your help!

Answer 1

The 'standard' answer will be 20% for the down payment plus closing costs and the reserves for improvements or unexpected expenses.

If you are in OK the prices can be very reasonable to the dollar amount might not be that high.

If you are in a higher priced area consider moving a bit further out to reduce the amount you need.

Also consider other options. You might be able to get into a home that needs more work or where the seller will pay some closing costs or offer to finance part of the loan. Sellers are more flexible in slow markets and when they have a problem property. Estate sales are one example as many times the heirs do not want to put cash into fixing the place so they will sell at a deep discount.

If you expect your purchase to be in 4 years sharpen you knowledge along the way. Books at the library, free info on the web and other such things. You can easily build your knowledge and skills so that your bargaining powers fund some of what you need (lower prices, credits back from the seller, better financing).

Also assume that the first house will not be your last. You might need to squeeze into something to get started and in a few years move on or add an addition.

One website that has a lot of info is noted below. It is focused on RE investors. That said much of what an investor learns is valuable to someone who wants to live in the property they are buying. There are how-to articles and success notes. There are definitely investors from OK so you could even pick up some local market information.

Think of this as a long term project. As you already noted that you are starting 4 years ahead you have plenty of time to sharpen your game. Saving is tough. It never gets easier. Do what you can and really keep your eyes open for a bargain. Let people know that you are looking if they have a project or a deal that is not generally on the market already. Then be patient while you 'hunt'.

Answer 2

I would try to save up to about 25% of the value of the home. If the home is $200,000, then $50,000 would be a reasonable amount to have in savings. That is a savings of about $1000 a month. BUT...don't let that worry you. There are ways of investing smaller amounts for a greater return. I would consider talking to a financial planner to decide the best option for your family. $50,000 would be the minimal that I would have saved for a $200,000 home, $25,000 for a $100,000 home, etc.

There are less expensive alternatives that you may want to consider. Purchase several acres of land first, build you a small home on it. Build the home so that additions will be simple to do and inexpensive to have done a little later. This lets you build as you save. Many people buy the land, place a mobile home on it and live in the mobile home while building their permanent home on the land. After their permanent home is complete, they rent out the 1st home...thus having extra income.

If you purchase the land first, there are also log home kits which can be purchased and placed on your property for decent prices, and they are very attractive. This one for example is 3 br 2 bath in the $80,000 price range and it is gorgeous (and this is a high end price too). There are 4 bedrooms available for just a little more, you just have to ask about them. http://www.countrylogcabins.com/Pages/PlansPricing/ppDetail.asp?planId=573

Do some research on log home kits, they are afforable, beautiful and easy to finance. PLUS...no carpet or painting necessary...hardwood flooring. You would only have to come up with a downpayment, and that would depend on your credit. The most you would pay down would be ab $20,000, and that is if your credit was bad or if you didn't have any.

After the home is purchased, try to always keep 6 months worth of bills (utilities, motgage, insurances, etc...) in a savings account. This is for emergencies, in case of accident or job loss...and you can't meet the mortgage for a while. This is to only be touched in extreme emergencies when other arrangements can not be made.

Good luck with this and congratulations on your new home! i hope you find what you are looking for.

Answer 3

Check with a realtor in your area or see what a 4+bdrm/2bath home goes for in your local paper. You really want to be able to put at least 20% down, plus figure another $5000 for closing costs etc. With 20% down you would be getting a "conventional loan" and wouldn't need what's called PMI which is an insurance you would pay additionally. So just for example, if the house you want costs $100,000, you would need $20,000 down + approximately $5000 for closing etc. for a total of $25,000. You would have to figure your bills now to see how much you have left over each month to save for it.