Generally, I prefer staying in over going out, second-hand over first-rate, and D-I-Y over V-I-P. (Some might call it cheap, but I prefer the word frugal). So when it came time for my husband and I to think about buying a house, I was less than stoked. Especially living here in Austin, Texas, where horror stories of "multiple offer situations,” “rising mortgage rates,” and “Californians with cash” abound.
Here's how a copywriter and a line cook saved up to move into the house of our dreams.
1. Dream small.
Sure, the world is your oyster. But if you can barely afford to eat oysters, you should set your sights on something smaller. Follow the rule of 28, which says your mortgage payments should not exceed 28% of your monthly take-home pay. (Find a home loan calculator online). For us, that meant no McMansion in the 'burbs or high-rise luxury condo. (Sorry kids, cats!) Instead, we figured out a reasonable house budget based on what we already paid in rent, and found a neighborhood within our means. This made our dream more attainable, without setting us up for failure or future foreclosure. Pro tip: Get pre-approved from your lender, so you're sure of your set budget.
2. Ditch the debt.
Or better yet, don't invite it in. While this might sound as realistic as avoiding traffic during rush hour, it can make or break your savings strategy, especially when buying a new home. This means student loans, too! Go old school -- learn an art or trade, like my husband did. Or if you do go to college, apply for scholarships or enroll in a work/study program and live off your stipend (see #4). If you do have debt, use the snowball plan to pay it off. A note on credit: While incurring debt is detrimental, you still need to build good credit history. Unlike that permanent record your high school teachers warned you about, your FICO score really will haunt you forever. So open a credit card, charge one thing a month, and pay it off in full each time. And remember: Missed payments can cause your APR* to skyrocket and your credit rating to fall faster than you can say "modern-day serfdom."
*The fine print that tells you how much you're over-paying for your purchase.
3. Work it!
I know it's hard to find one job in this economy, let alone two. But if you can swing it, moonlighting is a great way to grow extra cash to buy a house. Use your free time to make money solely for savings, whether it's pet-sitting, slinging cocktails, or working at your favorite retail store. Draw on your interests. I tutored college students, taught yoga classes in the park, and poured wine in grocery stores, while my husband sliced meat at a local butcher shoppe. Bonus: Time spent working means less time spent shopping on Etsy.
4. Beans, Beans, Beans.
Indeed, they are magical. While you may have lived off Ramen noodles as a young adult, you’re older now and will need complex carbs to work that extra job. If beans sound boring, look beyond your legume-ical limits. Consider black bean soup, refried pinto bean dip, red beans and rice, hummus, daal, hoppin' john, and other creative bean dishes. Buy in bulk at your grocery store or co-op, and save even more. The number of meals is endless, and one day you’ll look back fondly on what you'll call The Bean Years. Because saving is cute in retrospect.
5. Move On from Your Mega-Bank.
Here's a secret: Credit unions and community banks offer the lowest home mortgage rates around. Not only that, you won't feel like another number getting stuck in a bunch of red tape. Instead of getting a loan from my big box bank, we went with my husband's local credit union where we got a low rate, in-house underwriting (read: faster processing), and personal service. Plus, they gave us a free blanket and water bottle at closing. Win!
6. Reap the Rewards.
Rewards checking, that is. Free Kasasa checking accounts offer different rewards, like really high interest, cash back, or reimbursements for online purchases. Link Kasasa Cash® or Kasasa Cash Back® to a free Kasasa Saver®; savings account and have your checking rewards transferred for automatic savings. Use Kasasa Tunes® to get reimbursed for home décor, furniture or cleaning supplies. Kasasa checking is a great way to stretch your dollar to the max.
While it's not easy, saving up for a house is certainly possible -- and worth building future equity. Plan ahead and make sure you and your partner (if applicable) are on the same page. Because as The Dude would say, "A house divided against itself will not stand, man."