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Seriously! Half our income goes to rent each month, and between stuff like food, gas and electric, water, cable....I might as well just kiss all my money goodbye. We want to buy a house but I have no idea how to manage it!!
Oh, Miss Burgundy, I feel your pain! I have no idea how people do it these days! I don't pay rent and I can't even fathom it!
I know you're mostly frustrated, but I feel your pain. We're really lucky. The husband and I are looking for a house, and most of our down payment is going to come from my parents--some as a gift, some the remnants of a savings account they set up for me. We've been saving pretty aggressively (although that money is mostly for the hubs' tuition) thanks to direct deposit sucking it away before we can think about it.
Do you have a monthly budget set up? Tracking our spending really aggressively helped us cut back a bit more.
I totally feel your pain... we never thought we'd be able to buy a house with everything else going on (apartment rent/other bills), but since we were first time home buyers, we qualified for a loan that required no down payment. That was several years ago though.... not sure if they're still doing that b/c of the whole mortgage fiasco.
Hang in there! :)
Honestly, the only reason we were able to buy our house this year was because it was a foreclosure. We probably wouldn't have been able to buy a house for years to come, but our house was on the market as a foreclosure, and we only paid half of what it's currently worth. Our mortgage is even less than rent was at our townhouse!
There's some good programs out there for first-time homebuyers you can look into (tax credits and such). Also, if you can get approved for an FHA loan, you only have to have 3.5% for a downpayment instead of 20%. Plus, if the seller is desperate enough, they might even pay some or all closings costs, which can really cut down on the upfront money buyers need.
I would say if half of your total monthly income is going to rent, though, that's pretty high. Could you look at lower cost rentals for a while, maybe a year or so? That way, you'd be able to sock away all the money you're saving on rent for a new home!
haha ummmm they don't live in CA? :)
Seriously though-- it is hard but its a LOT easier depending on location. We're looking at buying a house in the next few months but we live in Columbus, Ohio where we can get a really nice house (probably 4 bed 2-3 bath) in a nice suburb for 200-250K. I'm sure our salaries here are lower than they would be bigger cities but not THAT much lower.
Well, I moved towards more affordable housing for one...where I was living before a starter home in the area would have still been in the $400k range with property taxes close to $10k a year. But, the other thing that was REALLY helpful is we put a really good sized down payment on our house and were able to eliminate PMI payments in addition. IF you can do this, I highly suggest it. Paying PMI is like throwing money away each month...so it's great if you can wait it out and save more and more $. Having a good nestegg saved up for AFTER the home purchase is important too. We easily spent a few thousand the first month on random misc. things...lawnmovers, rakes, shovels, patio furniture, garbage cans, extension cords, leave blowers, paint, paint brushes, cleaning supplies, blinds, etc....all misc. stuff that you don't think about but you need right away and it adds up QUICK!!!!
Is there another more affordable rent option for you? It will be super hard to save if over 1/2 your income is going to rent. And, seriously consider moving if you can still find work and be happy somewhere else.
eek! I wish more people were buying. I am trying to sell and it is depressing. I would recommend buying because you will get a great deal right now. Also, you can qualify for a first time homebuyers tax credit of $8000! that will help you with your downpayment. Some people get creative and have the seller provide their downpayment. It may up the purchase price of the property, but it will provide you with a downpayment.
I feel you. Half my income is rent as well, and that's not including utilities, groceries, cell bill, etc. The bank called me up to ask if I wanted to open a savings account and I actually laughed. I know it was her job, but the thought of someone staring at my account balance and then inquiring if I wanted to open a savings account was hilarious.
It really depends on where you live (rent) and where you want to buy a house. I think San diego can be pretty pricy.
Right now, I feel your pain. A sizable chunk of what I bring home goes to rent. If I buy a house where I live (just a modest small house, 2 or 3 bedroom), I'll need to pay even a bigger amt in mortgage (provided 20% down payment magically materializes). If we move out of the bay area and live in some suburbs of TX, we can probably buy a huge house outright with cash...lol BUT, we probably cannot find a good job there. It's catch-22.
Oh well, gotta save save save...
I feel you on the CA issue - we're in NJ and houses are ridiculously overpriced everywhere near NYC (where we work). I'm planning on renting for a while.
Oh, you could also look into rent-to-own options! My husband and I were talking with a friend earlier this year who couldn't sell her home; she decided to start advertising a rent-to-own option and started immediately getting interest.
Basically, a part of your rent every month goes toward the downpayment on the home. After a year or two, you'll have enough saved up to actually buy the home. Plus, you get the added benefit of having lived there for a little while and being able to really try it out. I think it's definitely making a comeback in this economy.
My fiance and I wanted to buy an apartment when we moved in together several months ago (when prices were even lower!) and an 800 sq ft tiny little place in the area of San Francisco that we wanted to live in was over $500,000!! We don't even live in the "rich" part of the city, either. We were pretty bummed, but are sticking to renting (which still costs an arm and a leg here)
even harder trying to sell!! uggggh. We each have a condo and there is no way we can sell them in the next year. It sucks too.
@almostduffy--I think the only thing going for us as we house hunt is the fact that we don't need to worry about selling a house at the same time. It seems like a way bigger break than the $8K tax credit, as much as we need that too!
ehhh...it's the location. and it's super tough, no idea how people do it.
Foreclosures, low interest rates, huge tax credit for 1st time buyers...depending on the cost of the house and how much you can put down, the mortgage payment isn't much more than a rent payment.
Move to Michigan! haha. No really our housing marketing is crazyyyyy bad. You can get a house for $20,000 and only have to do a few things to it. You can buy a house that'd be worth $500k plus for around $150-175k easily. FI bought our house 2 and a 1/2 years ago for $80k and that was a really good deal because it was when the economy was just starting to go to crap in Michigan. Now its only worth $40,000. It keeps getting worse and worse.
Agree on the location. We just purchased our first home. We both have full time jobs; & we lived @ home until we saved for a downpayment. Rent is basically wasting money if you are interested in buying. And if your rent is half your income; your living way outside of your means. Even buying a home; they won't loan you anything with a payment that is more than 30% of your income. & 30% is about the max around here. We are around 21% of our income. I recommend looking into Credit Unions. They are better than banks right now; as far as mortgages go. Basically we've had to really budget & focus on what is important to us.
Ugh, I was just talking to a friend about this. All the girls I went to high school with are buying houses in upstate NY. That's all well and good, but I'm tired of hearing, "when are you going to buy a house?"
1) I live in Manhattan. There are no houses here.
2) The down payment on an apartment would probably cost what your entire house did.
3) My rent is probably more than your mortgage.
I love it in NYC and have no problem with renting but to me, this question is akin to "when are you going to have a baby?" ARGH
Budget budget budget. How about renting a home? I have friends who do that and find it quite affordable.
DH is a captain and I'm an engineer. If we didn't make what we make, I think we'd really struggle to own a home.40K a year would not be a big enough salary for us to be able to afford a nice home in our neighborhood. We'd have to move to a more affordable neighborhood. We had the downpayment also, which i firmly believe in.
Sometimes rent is more expensive than home ownership. I have friends whose mortgages are $750 a month and their apartments were $900 a month. But, home owner taxes are a B. I just paid mine and they were like $3,000 for the year. Plus there are things that break (garage door for one) and landscaping (gardening, leaf removel, mowing), and all that jazz. Electricity costs more, too! Your first home would be really tiny but it's totally doable, you just have to be very incredibly savvy. Do some searches online and see what types of houses are in your affordable range. Then, look for houses about 15K lower than that. You'll get an idea of what you can get for your money. And start saving. I bet there are corners you can cut in your budget. For me, I don't eat out. I keep my house at 68 or 69 unless i have people over. I have insulated windows to keep my heating bills down. I rarely go shopping. I'd rather spend my money on furniture and furnishings than clothes and stuff.
Also, percent of income going towards rent in NYC (and probably CA) is much different than most places. It's not unusual to pay more than 1/2 your monthly income for rent.
That said, I only pay about 35%, which I guess is good.
@hotchild - Chicago's the same. :/
R and I have already realized that after we graduate, we have to move out. Right now we afford rent because we share a 2 bedroom with one other couple.
But when I'm paying student loans and he has vet school tuition, and I'm the only one with a job? Bye bye, Chicago.
I'm with ejs on this, Budget!
After college I lived in a really crappy apartment to save money. We had to borrow 100% of the price of our house with an 80/20 mortgage. All our savings were needed for the closing costs! The 20% mortgage has a really high interest rate so we've been paying 400-500 extra on the per month to get that paid off. We lived with roommates for 3 years in our house and that helped a lot. It's not something I would want to do now, but at the time it wasn't bad b/c we'd been living with roommates all through college.
Now that we don't have roommates, we have to be really careful. We keep the heat at 68-69, we saran wrap our windows in the winter (it's a kit you buy). We rarely eat out. We usually invite friends over instead of going out to bars. Every time something breaks we try to fix it ourselves. I don't go shopping. Most of our furniture is from craigslist.
It's SO hard at first! When we started cooking every night instead of getting take out or going out, I hated it. Once you get used to it though, its really not that bad.
My rent in a city outside of San Francisco is more than my dad's mortgage for his house in San Francisco. Rents are crazy here! Most people who live here, like in NY, spend close to 50% of their income on rent. It's just *that* expensive, unfortunately.
I finally feel like a house is something I can handle, so I decided to redo our budget (which we're still working out the kinks on) to try to save towards the down payment. I'm also researching first-time buyer programs, and tryting to learn as much as I can about this process, so that I'm informed. I do think it's possible to buy now, but you just have to know exactly what and how to do it.
For us, it's likely that buying a house in a neighboorign suburb will end up being better for us financially, but, it's not always the case that buying is better than renting. I read a blog, Millionaire Mommy Nextdoor and she has a post about why renting may be a better financial decision for some people.
I think budgeting is just like watching your diet. You don't realize where it all goes unless you write it all down.
You have to ask yourself some questions, such as: is cable tv really worth it? If you pay $20/month, after a year it's $240 (not to mention the extra taxes & fees). Is it worth it to have a house for that? If you're just watching movies, couldn't you just rent a $1 movie from Redbox instead? That would be 240 movies--one for every work day! Can you brew your own coffee instead of going to Starbucks?
Sure, you'll feel really poor and trapped at the beginning, but once you buy your house, it's pretty empowering! Good luck!
We were really lucky with our first house that we had insurance money to use as a downpayment. But now we can't sell the house even though we don't live there anymore so we are saving a large chunk of husband's income every month. Once I start working again, we are going to try and save most of that money too in order to try and build up a new downpayment for a place where we live now.
It is good to write down all your expenses so you can see if there are things that you can cut back on in order to save some money. We cut back on eating out and buying things that we don't need right now in order to have money left over to save.
san diego, lady - that's the issue. You can really buy a fantastic house in other places in the country for so little right now. It's just whether or not the location is more important than the house.
We save everything. We don't go out. We don't go on vacation. We don't eat great food (its kraft all the way) and we save $600 a month. And this is on very small salaries. Now granted it's going to take us awhile, but we will get there.
This is a great thread, I've been wondering this myself. Thanks for sharing your stories and how you save, ladies. I need to hear this.
I already own a house and am not sure that I can swing buying a new one when we sell this one. Requirements for loans are so tight right now!
It totally depends on your location!
In the past year and a half my FI purchased a few rental properties for peanuts (around 50k each): he lives in Kentucky. All his properties combined don't even equal the price of my condo in BC. For the price of my condo: I can buy a mansion in his KY city. A small 60 year old home in Vancouver costs close to 1 million dollars!
1) Saved/gifted down payments
2) Living in LCOL areas
3) Mortgage = Rent prices
We moved from EHCOL area (Westside of Los Angeles) to a MCOL area (Sacramento). Our mortgage and taxes for a 3000 sqft house are about $200 more than our rent for a 2 bedroom apartment on the westside. We saved one salary for an entire year for our 10% downpayment as well.
I cry when I see people buying homes for $200k - let alone $100k - it's not just you. :)
Miss Burgundy -- it's a GREAT time to buy -- prices are super low and so are interest rates on mortgages. If you've got a good credit history/rating and decent employment histories plus steady incomes, you're basically set. Put down what you can, ALL you can, basically, to offset too high a mortgage. Crunch the numbers... talk to a realtor in your area to figure out the median price for a place you might be interested in, then subtract what you could reasonably put down, and then figure out what your mortgage payments would be -- bet they'd be better than or maybe equal to your rent -- but you'd OWN. You'll get it all back and then some when you sell. Yes!
To HotChildInTheCity -- I'm in Manhattan too! So I know. I own and yep -- bet my maintenance on my two-bedrm co-op is more than most bee's rent and believe it or not, it's even more than my own mortgage payments. It's insane here. Plain and simple. But this is my third place as an owner; i'll never rent again, God willing. If I thought I could sell at a good price, I would, so I could take advantage of the great prices myself right now, buy something else, oh and take advantage of the great interest rates. Go for it girls. Keep your credit good. Otherwise, all that glitters turns to garbage. no kidding.
I'll be totally honest: we have a budget, and we stick to it pretty well. We sit there looking at our spreadsheet and wondering what we can eliminate when the answer is really...not much at all!
Neither of us have savings- my parents are paying for the wedding so I couldn't ask them to help with a down payment- and we're both pretty young (meaning that our employment histories are good, but we've both been employed for a very short length of time- myself a year and a half, FI probably about 6 months). Because the job market sucks so bad, we don't want to move. I have a great job that I love with a competitive salary and I could not do it if I moved.
Unfortunately, San Diego is a brutally expensive area- the homes we are looking at are around $400,000 (and mind you, these are not the ultra nice houses. These are smallish middle class houses in a decent enough neighborhood).
Rent here is also expensive. Our monthly rent is a little under $2k and that's actually considered pretty good...we shopped around for it.
Mrs. Spring had some great advice- I will look into types of loans where we can put less down, and rent to own options. We're also looking into foreclosures...
I'm still going to squirrel away what money I can, and talk to someone so I can find out realistically what our options are and what we would have to do to go where we want to go. There have to be ways to do it...people buy houses on lower salaries than mine!!
Thanks for the advice and encouragement girls, and keep it coming! I feel your pain for everyone else trying to do this...
@Burgundy: I think part of the reason you are so frustrated about saving is because you are spending too much on rent. All the finance books I've read say that you should spend no more than 1/3 of your gross income on ALL housing expenses, (including mortgage, insurance, house bills), and only 25% if renting. I know that seems impossible in southern california but I live it LA and although it took a while to find, we did manage to find an apartment that was within that guideline and it's allowing us to save so much each month. I highly encourage picking up Personal finance in your 20s and 30s for dummies. It was a great book that really broke things down for me and made getting our finances in order seem possible.
I totally understand Miss Burgundy, because we're in a pretty similar place. Here, small homes (like 2-3 bedrooms) in ok shape (i.e. livable right now) in a good neighborhood were $550-$600,000 when we moved here last summer. Market prices are now around $400-$450,000, which is still out of our price range. We were paying $1800/month for decent townhouse up until this September, when we bought our house. We really thought we weren't going to be able to buy a house up here for about 4 years, until we had moved up in our jobs and could save a little money.
We were super lucky to find a foreclosure. The house we bought this fall was appraised at $448,000 and we only paid $231,000 (and our mortgage, inlcuding escrow for taxes and PMI payments is only a little over $1600/month!). It was an incredible deal for a 3 bedroom, needs a little work but in a nice area, house. We also did an FHA loan and asked the sellers (in our case, it was a bank) to pay all closing costs. My best advice is to just keep looking. There are some incredible deals out there right now, you just have to keep looking until you find them! Good luck!
the only way for us to buy a house right now, is to find one that the mortgage is close to what we pay for rent. being first time home buyers, there are tons of great loan options with incredibly low interest rates and zero down.
Miss Burgundy -- I understand everything you've said now. I hadn't realized you guys were just starting out with everything. Hang in there. So don't look to buy right away; sounds like you can't without a downpayment cause banks aren't too keen to finance all right now. As for the one-third rule of rent thumb -- I thought that went out the window long ago -- most folks in the urban jungles in the US of A are paying closer to half for rent or mortgage/housing. Sounds like you did some good shopping around and prob have a cute place. So stay a while... then, too, rents have dropped so depending on when you found your place, maybe.... ?
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