“Joshua, I need your expert help. How can a struggling middle-class family build house savings for a down payment?”
OK, I have an answer on house savings. So please be aware your solution is not easy, direct, or simple. Determination, hard work, and sacrifice are critical in your quest. How badly do you want a home? Be sure it is enough to take all the steps and sacrifices required. Beware of the traps involved to stop or deter you from your goal. Lastly, know you can win!
Save Against All Odds
To begin with, save against all odds. It is not easy to save. House savings is even harder and a large goal. Also, please be fully prepared for home ownership as there are many hidden costs. Also, you will not see them until the papers are signed and you are living in the home. Modesty is a huge key. Saving for a house can feel impossible, I completely understand. However, save even when it feels impossible to win your goal of house savings.
Purchase a Modest Home
Remember most people pay double a home’s value for the mortgage. An 80k house was over 160k mortgaged and high payments. Also, find an affordable home that you are affordably able to pay twice the mortgage. Modesty is a critical part of keeping your money for house savings and actually owning your home. We were pre-approved for a $250k for a home loan and laughed. We purchased a 6 bedroom home with a low fixed rate for $35k instead. This turned out to be a very wise move. Anything you can do to help avoid a default is great. We want to pay off and keep our home please and thank you.
Instantly Cut a Major Expense and Divert Into Savings
Next, find extra money in your budget. Cut a major expense for most in exchange for house savings. Eating in or out? If I had all the money I spent on eating out over the years, I could buy a home in cash. I am very direct with my family. I asked them, ” We have to make a family decision. Do you want to eat out now? Or do you want nice house soon instead? We have to agree. What do we want more as a family?” We wanted our home much more than a few better meals, so that is why we sacrificed. Thanks to a great commercial for hitting us over the head, knocking sense into us!
My Favorite Commercial
I saw a relevant and memorable commercial. So after some digging, I found it. Please, have a look and watch this brief undeniable message. Take note as you watch the two couples in this video. What example do you want to follow? One couple is taking a hot air balloon ride while getting massages and eating lobster. The other is having a frugal picnic. Hot air balloon couple can not understand why they have no money for a house after paying their bills. Meanwhile, the other couple who likely has a lower income closed on their home. They built a house savings by not living beyond their means. This is a huge life tip. I want to thank the creators of this commercial. I found this ad to be one of the most motivating and compelling I have ever seen.
Sacrifice, Saving, Big Bills
If you truly want a home you have to make sacrifices. So, begin to save up money now. Our home immediately needed a new $5k retaining wall, $8k roof, $4k gutters, $2k driveway, and many other money sucking needs. Recently, an A/C breaker and condenser fan motor. You had better learn to be handy because that can help moderate repair costs. Personally, I have only been able to just begin the retaining wall project. Be sure to be prepared for multiple major home repair expenses. So save up a lot of money now, because you will surely need it and likely more.
Be Sure You Really Want A Home
Also, please note: There should honestly be a long warning list. Also, a required education with a test before you purchase a home. Almost like a driver’s license exam. Apartments are better to a certain extent. Someone else has to pay to maintain it, cut the grass, etc. It is just a far more simplistic lifestyle, it may be better for you. In addition, you will not need a large house savings if you choose apartment living. However, you should still grow a large saving account for emergencies. Also, be sure you properly manage your bills and debts. Account for not only maintenance costs but also extra monthly principal payments on your loan. Our home is three years paid down in one so far. This method can save you tons of money in interest.
House Savings: You Can Win
So home ownership is very complex. I want you to be fully aware of the pros and cons. However, if you make it a goal and prepare you can do this! Keep up the fight and do not stop asking questions. As that is how you win, by asking the right questions and getting intelligent answers. Also, credit is a key factor, so keep a close watch on your credit score. Starting with a junk score the chances of default or losing a home are well over average (Shocking ‘average’ figure below) and too high to win. Please avoid this huge trap. High interest rates, a variable APR, and many other traps are on that path. However, if you begin with a good or great score of 750+ you have a solid chance of keeping your home.
Lastly, look at the graph above. Can you see how from 06-08 they took back all the ‘subprime’ mortgages? That is just a fancy way of saying mortgages to people with low credit scores. 23.5% subprime mortgages down to 1.7% in two years. Do not become a statistic! Get that score up first!
Final Advice and Shocking Statistics About House Savings
To continue, a shocking statistic not meant to deter but inform you. 70% of home mortgages default on average. So most owners lose their homes and money into them. This is why it is critical to choose a home well below your means. So only take half your pre-approval at maximum and review your mortgage closely. Because only a portion of your payment goes to principal. So make extra principal payments! Build savings as high as possible! Include at least six months of your rent or mortgage payments, a year or more is ideal. If you follow my advice you have much better odds than most. Be sure to share this article with your friends and family to save them from undue hardship!