Posting’s been light this past little while as I get used to new routines, husband home, time change, etc.
I’ve been having conversations with quite a few friends lately who are looking at purchasing their first home in the near future. Her post outlines almost exactly the process we went through as we were working toward buying, and it worked really well for us right from saving for the down payment through making it through the sales process to living with a mortgage.
So now we come to the Gail’s Great Advice part. This is where you figure out if you’re ready for the responsibility of home ownership. If you can come up with $2,277.05 a month for your savings (less whatever you may be paying to keep a roof over your head right now), then you’re ready.
Hey, I’m not talking about if you can THEORETICALLY come up with the money. I’m talking about taking that money and socking it away every single month. So if you’re currently paying $1,000 a month to keep a roof over your head, you’d be committing to socking away $1,277.05 every month to your Home Buying Account.
She’s also got some great tips for coming up with the real monthly cost of home ownership (above and beyond the mortgage), which is also helpful. But we did one extra thing that she doesn’t mention: finding out what we could actually afford each month in terms of housing, then working backward.
The general rule of thumb is to spend no more than 30% of your gross income (that’s income before taxes) on your total housing cost: mortgage, utilities, taxes and maintenance. Knowing what we could afford before we started looking at properties, then extrapolating what percentage of that would be our mortgage and aiming for house prices that would give us that monthly payment amount in the mortgage terms we want (we were aiming for a 25-year or less mortgage) gave us a firm point to hold on to for a sanity check as we looked at different places.
Mostly I posted this because it makes me feel smart to have come up with a strategy, all by ourselves, that a financial planner is recommending. And it’s always nice to see real-world examples of these somewhat abstract suggestions. It worked for us, so of course I can recommend it.
Anyone else have some good strategies that have worked as they traveled the long road to homebuying? Any other tips or lessons learned to pass on to others who are moving down that path?