[Jena]

Coming up with a down payment is hard, especially the first one. I thought it might be helpful to tell how people have come up with them.

I bought my first house when I was 20 years old. My husband, baby and I moved in with my mother for 8 weeks to help save the money. At that time, interest rates were around 15%. We found a seller, with an assumable loan for 12%. Assuming the loan lowered our closing costs and also got us a better interest rate.

I have also bought three houses by drawing on or liquidating (due to change of employment) my 401K. I always maxed out my contributions to the 401K (20-25% I think). I hardly missed the money because of the tax difference and it adds up quickly. The penalties for withdrawing the funds were offset by the tax savings of buying the house.

I have sold houses to people without much down payment by letting them assume my loan or doing a lease with option to buy.

That is how I have done it.

Jena

 

[Irish Pixie]

Our first house we went through HUD and only had to pay the closing costs. I was 23 and DH was 28 at the time and it worked out well for us. The house was a fixer-upper and we worked on it for years. We sold it and used the equity to put the down payment on the cabin and 113 acres we have now.

It was hard when we were young just to come up with the money for the closing costs but we did it.

Stacy in NY

 

[RANDEL]

most of the undeveloped properties we've bought with no down payment at all. houses have been fixer-upper @ 1000.00 down which we have just saved after signing purchase agreement and before closing. u can usually bull out a closing for 45 days or so if u need time to raise the remainder of the down. we've been known to borrow cash from mom, or use income tax refund. but the days of earned income credit are over for us now, as well as tax shelter from all those thousand-dollar down homes we bought that were so easy to get into because they really weren't worth buying....

seems like whenever we have a good lump sum ( which i define as more than 3000.00 cash-in-hand) we've never used it to buy a place.

i wouldn't get involved in the typical lease-option deals i've seen cuz they've always been contingent upon getting financing by a particular date, and i never feel i can count on that. i much prefer owner-financing: it's not cheap but if u can refinance later sometimes the owner will settle for less than the full balance, for the sake of that ol' lump sum...

 

[Guest]

Good question, Jena!

I got mine the old fashioned way--lived at home until I could save it. I know not everyone can still live at home, but my parents were from the old school where you were always welcomed back in good times and bad and you took care of your parents when they needed it. Not like today, where kids can't wait to get away from strict Mom and Dad, or the home life is so bad they have to get away.... I think living at home or with friends until you can save enough money can really work if you set up some ground rules on paper. Like room and board in exchange for doing all the housework/babysitting/yardwork--they might miss you when you do go, LOL.

Other thing I did which helped was to not listen to the real estate drivel about being able to afford a house 4x your income. 2x gives you a much better cushion in case of emergency, or if you want to do something other than just stay at home....

 

[Jena]

Good point RAC about the amount of mortgage to borrow. I think the going rate is that you can supposedly afford to spend 40% of your income on a house payment. NOT!

I've never bought a home that cost as much as I was approved for. I didn't feel I could afford a mortgage that high, so I didn't buy a house that expensive. I budgeted an amount I felt comfortable with.

Jena

 

[Carol K]

I saved and got my deposit when I was 20 and bought and sold 4 homes since. there was enough equity in the last transaction that we now have 5 acres and a log cabin(built by us) and no mortgage!!! Took about 25 years but feel good now. Keep trying to tell my 15 year old boys to buy land and build asap, even if they rent it out while they are in college, they will always have a home.

Carol K

 

[Sharon in NY]

For our first home, we worked and saved 5% of the purchase price, and were able to get a mortgage with that. For our second home, we had saved enough to put the standard 20% down, but because we were buying the house jointly with Eric's grandparents so that we can take care of them, they kicked in the same amount, giving us a lot of equity.

I never quite understand it (I'm not criticizing, just curious) when people say they can't afford to buy a house. If you buy in the right place and use the right program, you can put very little (occasionally nothing) down and have mortgage payments that are similar to rent.

Sharon

 

[pumpkinlady]

When we decided to buy a farm, we moved into a little old trailer on a rented lot. We lived mostly on my income and banked hubby's. Took us almost 4 years to find the place we wanted in our price range. The good thing about the wait is that we only had to borrow 1/2 of the asking price. Now our payment is low and we only have a few more years to go. We are now saving to purchase the 175 acres next to our 90 acres.

 

[Guest]

Right now Sharon, with interest rates the way they are, you are correct, it does make more sense to buy than rent. I think a big mistake people make is getting car loans and having credit cards that they charge more than they can pay off in the month. Find another way to get to work until you can save enough to buy that car with cash. Only charge what you can pay off each month.

There is no shame in saying that you can't afford something because you're saving up for a house.

 

[Guest]

Believe it or not I sold Avon to get my down payment. No car, I just walked all over town with a baby in a carriage. Seems like people enjoyed that somehow and were happy to ask me in, give me a drink and admire the baby and buy, buy, buy. Best thing I ever did. 15 yrs later the place was all but paid off and I walked away with a nice big profit. Hence I paid cash this time.

If you can pay rent somehow you can find a way and a place to buy.


Liz

 

[BCR]

Savings mostly. And then I was still short about $2K, so since I owned my car and it was worth more than that, I took out a loan on it with the car as collateral for what I still needed. So it was kind of creative.

 

[agmantoo]

Initially we started out reading the menu from right to left saving every chance. We have never made a car payment nor have we ever owned a brand new car. I learned to fix nearly everything and seldom every hire a repairman. The first place was bought with only a few hundred down and assuming the mortgage. Paid for the place (fixer upper and 30 acres) in 4 years. Borrowed money on that place and rented the repaired house for income and bought the next place (78) acres. Worked offshore and saved money for a new home, returned and built same with me as the contractor and hiring what I could not do. No debt on the house. Farmed at night and worked public work during the day. Bought more rental property and got a good cash flow, bought more land and went into the tree farming business. Still repeating the process. Oh yes, I gave up the public job.... The key to financial success is simple, just spend less than you bring in!

 

[Sedition]

Well, I think I did it right.

I went to college and got a 4 year degree. I graduated with $29,000 in student loan debt, and the next Monday I had a job paying $28,000 a year as a CPA, when the average house was costing $103,000. My wife and I didn’t buy new cars when we graduated (still haven’t), rented a basement efficiency for $200 a month, and after 8 months I wrote a $6,000 check (still had those loans though!) for the down payment on a $58,500 house with a 15 year loan. The house had a leaky roof, water in the basement, was filthy because it had been a rental, and was too old and abused to qualify for FHA. But it was CHEAP and in a good neighborhood.

For my second house, I borrowed against my wife’s 401(k) and sold other investments to come up with the $30,000 we needed for a down payment on a 120 YO seven acre farm 25 minutes from my new job as a corporate CPA downtown in a small city. This was when I was 28 years old, 26 for my wife, and with a newborn. We owned both houses for over a year while I remodeled the first house enough to sell for a decent price – and pay back the down payment money to myself.

Seemed easy as pie to me. I know what I wanted, which was to not be poor like I was growing up. So I did what I needed to do to achieve my goals. I was a ****-in as an apprentice plumber, because my dad is a master plumber, and his dad, and his dad. But my father still only makes peanuts with 40 years experiance. So college was the only way to make the money I felt I needed to buy my freedom.

And since my mother got her 4 year degree when I was a teenager, I know that people of any age can do it. Even manic-depressive middle aged menopausal single mothers on welfare. She also got her degree just a few months before purchasing her first house. I liked living in a place with a LAWN and a garden where I could grow stuff, that I decided then and there that I was never going to be poor white trash like I was raised. I was going to have my own land – paid for, and the knowledge, ability and skills to always provide for myself and my family.

And I am damn proud of the fact that I almost can. Sometime in 2004, I will have enough money to pay off the mortgage on my farm and own it free and clear. I have not had a day off of work since August of this year, and I haven’t taken a vacation in almost 10 years. I can’t remember my last “2-day” weekend off. I worked freakin’ hard to get here, but I will do it, and I’ve done it at a very young age by being dedicated to doing what I NEED to do, instead of what I WANT to do. That is how you get your first house – like your grandparents and I did. You work hard and don’t spend money.

You want the easiest way to buy a house? Go to college at 18. The 2nd easiest way, is to go to college after life has kicked you around a bit. The first way is a LOT easier.

 

[eb]

>>You want the easiest way to buy a house? Go to college at 18.

Not sure its that easy anymore...with some of the colleges out there, going to a four year private college may leave you about 100K-150K in debt when you get out...yikes! Unless you are going to be a doctor or a lawyer, not sure how anyone would want to start out that far in the hole!

 

[Guest]

Our way of saving for our place is to manage 36 units of apartments. We looked for homes first and were so dissappointed with what we could get for our money. We had been looking for a year for an apartment complex to manage and the week we decided to quit looking at houses we answered an ad for managing a place 2 blocks away from where we rented. We have been there for over a year and are well over 1/2 way to paying cash for our first house. It sure isn't easy being responsible for 35 units and sometimes it seems the people's happines even, but it is sure paying off. Plus we've learned a ton on how to fix things that would have taken years to learn owning my own house. I couldn't do it alone though my wife and I are team and it is demanding, but she's awesome. For example we have a tenant to check out today, Christmas Eve, and he wasn't ready for his move out and wants my wife to meet him 3 hours later. If you can handle the responsiblity I would really recommend living free while taking care of apartments.

 

[big rockpile]

We saved the money for our first place by me putting all my Pay Check in savings,lived off the wifes Check.But we were Renting a place with all we needed for $35 a month.Pluse Fur Prices were high back then it was hard not to have $10,000 in your pocket at the end of the season.

But anyway we paid cash for our first 100 acres,with a huge 6 Bedroom House.

big rockpile

 

[Kirk]

My first house I saved $2000 dollars in 1992 and found and old clunker of a dump for $17,000 on a land contract. Payments were about $242 a month. Lived there a year did a small amount of needed repairs. Sold for $4000 down take over payments. Ended up costing me about $50 a month to live there.
Life, jobs, disability ect happened, lived in an apartment for the last five years. Bought a small lot for $2200 cash about three years ago. was going to build on it but while going through the loan process we found a house we liked. Went with a fha program ended up with $842 check at closing. Bought way less house than the mortgage company thought I could afford. So maybe I can afford it. They were willing to loan around $140,000 and We borrowed $86,000. I just put a for sale sign on the lot last week. Property values have shot up and I am hoping to sell the lot for around $8500 ( the vacant lot not the house)
Anyway there are plenty of ways to get onto a peice of property for very little money, If you keep your eyes open.
Kirk

 

[Guest]

College doesn't have to be that expensive--most of those 6 figure amounts people bandy about include extras like living at the dorm, or going all 4 years at the same place, instead of doing 2 years at community college first. Another way to save on college costs is to see if your high school offers an early start program. If highly motivated students enter that type of program they can complete a 2-year community college degree and at the same time get their high school diploma, for free except for books (big caveat here, make sure that all the classes transfer--some of the high school counselors only care that the high school requirements are being met, your child could wind up repeating classes at your expense). And why go to a private college when in most cases no one really cares as long as it is an accredited college and you have a degree?

Another option is to take a proper full load (20 quarter units--I don't know what that would be in semesters) of classes per quarter, or more if your college lets you (you can only register for a certain amount at one time, but can also run around the first week and add more classes if the instructor lets you in. This saves you some of those repeat admin costs (health, parking, library fees) as well as gets you out before the next tuition hikes). Yes, you're on campus all day, but between classes there are often on campus part-time tutoring jobs etc. that pay higher than minimum wage. I see too many people drag a four year degree out to 5-6 or more years (and several tuition hikes) and not because of genuine emergencies, either. I agree, the best time to go is in high school or right after, while you're still in school mode and grades are important. Take a year off AFTER college graduation if you can to tour the country or Europe or just kick around, then go to work. Once you get married and settle down, it becomes very difficult to just take off because of the other family members you have to consider.

I've gone back to college again after some years just to take some classes and it is just not the same--in a way it is nicer because, while you don't want to fail a class, it just isn't that much of an issue whether you get an A or a B, you're just going to get what you can out of the class and the instructor.

If you read the Rich Dad, Poor Dad books, they have lots of good ideas about how to think of money and property. In his view, your own paid-off home is not an asset.

 

[BCR]

College doesn't have to be that expensive. Heck, I finished a master's degree by age 22 with $1,800 in debt. And I'm not even working in that field now! I worked multiple jobs, took full loads and worked for the dorm system to pay for room/board/and in grad school that covered tuition and a stipend. Well worth it. But college is no guarantee of anything. I have lots of college friends working at waitressing, etc. It really depends on your patience, drive and ambition and willingness to work I think.

 

[Sharon in NY]

I went to college at 18 and stayed there, since after the BA, they paid me to go for the MA and Ph.D - not much, but enough. But if I do the math and consider investing the cost of even a cheap college education starting at 18, I could have gotten my land and house a heck of a lot sooner - it isn't always the best way, although it certainly can be.

Sharon