How long before I can afford to buy a house?
Average price of homes meeting our needs/wants: $170,000
This means we need a down payment of: $34,000
This is of course, assuming that we pay 20% down payment, which is what we want to do ideally. However, we also want to buy in the next 12 months. My goal with this blog is to analyze whether or not we will realistically be able to have $34,000 for a down payment in 12 months or less. We also want to keep at least $1,500 in our checking account as a nice cash buffer. We have lots of un-utilized credit as well as family members that will help us if we need emergency funds. I expect that we will build our emergency account back up fairly quickly after the purchase.
That brings my target savings to a grand total of: $35,500
If we pay 10% down... we need a down payment of: $17,000
When you include the emergency fund and the checking funding, that brings our target savings at 10% down to: $18,500
This means we need a down payment of: $34,000
This is of course, assuming that we pay 20% down payment, which is what we want to do ideally. However, we also want to buy in the next 12 months. My goal with this blog is to analyze whether or not we will realistically be able to have $34,000 for a down payment in 12 months or less. We also want to keep at least $1,500 in our checking account as a nice cash buffer. We have lots of un-utilized credit as well as family members that will help us if we need emergency funds. I expect that we will build our emergency account back up fairly quickly after the purchase.
That brings my target savings to a grand total of: $35,500
If we pay 10% down... we need a down payment of: $17,000
When you include the emergency fund and the checking funding, that brings our target savings at 10% down to: $18,500
posted by Jonathan Bright @ 4:51 PM
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3 Comments:
At 4:30 PM,
mOOm said…
Why buy in the next 12 months? My expectation is that house prices will be flat or down for the next few years - they tend to follow a 15 year cycle.
I use credit cards for my emergency fund. But then I have already a bigger net worth.... You can always use the credit card and then pay it back...
At 8:30 AM,
Jonathan Bright said…
Thanks for the advice moom. I do have a lot of un-utilized credit cards that would get me through most emergencies. I would like to have a small buffer of cash though, maybe not 4,800 but at least half of that. Don't you think?
As far as the housing bubble... I am keeping a close eye on that. When do you think would be the best time to buy? And what are some good sources of information regarding the housing bubble?
Another thing to consider is that in my area housing prices are not nearly as high as they are in most areas. I live in rural Kentucky and you can buy a 2 year old 3000 sq. ft. home w/ 2 car garage etc. for about $170,000. In most areas a home like that would be $500,000+. I was thinking that maybe the market won't be affected as much in my area since it is rural and still growing.
At 11:34 PM,
mOOm said…
Yes, I'm in upstate NY and housing is pretty affordable here too. I'm reckoning 2010 might be bottom of the cycle. I just started a Roth IRA as a tax free savings plan for a downpayment in that period.
There are various housing bubble blogs out there, they mostly focus on California though.
zillow.com is a really cool website I just discovered - for California and some other areas I checked it gives amonth by month graph of the estimated price of each house. Some of the bubbles are eyepopping - Las Vegas for example...
Given where you are probably prices won't go down... might make sense for you.
Makes sense to have some cash and not really to start investing in other things until you get to that emergency fund level. I must have been in an odd mood yesterday.
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