My husband and I have put together a plan for buying our first house. Not just buying it in the “take out a mortgage” sense–we want the house to be paid off.
In short, we’ll:
- Continue building our emergency fund (expected completion date sometime this summer)
- Save every extra amount in a high-interest savings account or short-term CD for two to three years
- Put at least 20 percent down on a home, but probably closer to 30+ percent
- Take out a 15-year fixed rate mortgage on the remaining balance
- Make extra payments each month until the house is ours
- Our goal is to have the house entirely paid for by June 2015–the month I turn 30.
Right now, we rent an apartment. I like being a renter–when things break, the apartment company fixes it on their dime. I don’t have to deal with maintenance issues.
We don’t know how long we’ll be living in Pittsburgh, so buying a house right now wouldn’t make sense.
At this moment, we don’t have a dime saved for a down payment. We have no business trying to take out a mortgage at this time (and probably wouldn’t qualify, anyway).
We don’t have credit card debt to deal with, so money left over at the end of the month is building up our emergency fund. Once we get it nice and healthy we’ll continue saving toward a down payment.
We’ll tighten our belts and save as much as possible over the next two to three years, using high-interest savings accounts or short-term CDs to let compound interest work to our advantage.
If in 2-3 years from now, the location of my husband’s job is permanent (and if we’re ready), we plan to put a down payment on a house.
Real estate in Pittsburgh is affordable, as are homes in Indiana and other places in the Midwest. I hope to live there, but if we end up living in an expensive real estate market, our plans will have to change.
Anything could happen in this two-year time period. House prices could drop even further, or they could go up. I looked at the Sunday classified ads to take a peek at the asking prices of homes I might like. The average price for what I’m looking for in today’s market is $135,000.
That will buy us a decent-sized house in a good neighborhood. It’s not the fanciest thing here or the largest, but it would be a wonderful first home. We’ll choose a home that we can live in for at least 5-10 years without outgrowing, and then if we need to move to a bigger or smaller house, we’ll sell our house, take all of the money from its sale, and put it toward a better place.
By the way, head over to My Journey to Eliminate Debt to see the impact making extra payments can have.
Now, why do I want to have a paid-for house in seven and a half years?
- The peace of mind! How cool to not have to worry about a mortgage payment, ya know?
- We’ll have plenty of extra money each month to put toward home improvements, saving, and investing
- My husband will be able to retire from his job at much younger than age 67 or something ridiculous
- We’ll save a ton of money on interest
Only time will tell if our goals are doable or laughable. Stick with me, and watch me make it happen (or not).
Do you have a plan to be a homeowner? I’d love to hear about it!