How To Save For A House Down Payment

House DP

When I grew up in Orange County, CA I dreamed of one day owning a house. The American dream right? I remember thinking that in order to make it in the world you had to own a house. The sense of pride in something you own physically was always appealing to me.

So naturally, as I grew up in Orange County I didn’t think much of it. Owning a house was simple, in fact I had lived in multiple houses as a kid, only two of which I can remember. It wasn’t until I got married had an above minimum wage job, that I started to finally think about saving to buy my own home. You think to yourself how hard can it be?

Well, ignorance is bliss.  I like most people was ignorant to the fact of what it took to buy a house, not just in Orange County but anywhere in the US. You aren’t taught in school or by your parents. There is no road map how to save your meager income, while paying student loans and saving for retirement. Instead, knowledge is first substituted by a drive, a want, this primal sense of ownership.

I knew I wanted a house and that drove me to discover how to save for one.

I have still yet to buy a house in Orange County, where the median home price is $350,000, but I have bought a house. Here’s how I saved up to get one.

Define Your Goals

Check out Zillows, Redfin and Trulia. These online databases give you a start to so you may see what is on the market in your area or neighborhood you would like to live. How big of a house do you need? Style, location all these things are important to have in a house where you will be for a good number of years. (It takes roughly 5 years to break even from purchasing and selling a home with all the fees and expenses) So what will it cost to be in that neighborhood you want? Maybe it’s $400,000 for a 3 bedroom, 2 bath. A good starter home for any family to grow into.

So there you have it, the goal of $400,000. What kind of down payment do you need to meet in order to get this house. With lending tightening you would be hard pressed to get a loan with under 5% down, although they do have those types of loans available. Lets say you will shoot for a 15% down payment, which means you will still have to have mortgage insurance. (Needed for anything less than 20% down)

So far we have in mind a $400,000 house at 15% down that’s $60,000 you would need to save up for.

Save, Save, Save

You have the goal in mind, so start saving. Project out your income. If you make say $40,000 how much could you set aside income for these savings? Ever heard of sacrifice? How quickly do you want that house? Could you save $5,000? Well that’s only 12.5% of your income. How about $10,000? You know what that means, it would take you 6 years to save up. How does that sound?

Adjust Your Goals

Now that you see how long it will take you to save how realistic is your initial goal? Can you get a cheaper house or even save more income to speed up the process? Pick up an extra job perhaps? Mainly the best piece of advice on saving for a house is this:

Stop Buying Useless Crap

You read it right. Just stop it. You’re probably thinking of that thing you know you don’t need, right now. How badly do you want that house? Sacrifice by stop buying useless crap. You think you need cable TV? What expensive hobbies are you doing? Can you stop doing those for a couple years to get that house?

You can’t have it all but you can have a house. You need just a simplified plan, some sacrifice and whole lot of motivation. It took my wife and I 2 years to be ready to start shopping for a house, but not in that price range above.

How long did it take or will it take you to save up for that house down payment?

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