Saving for a Down Payment

Usually folks spend years saving for a down payment on a house, but these days it can be very discouraging. It almost seems that housing prices are going up so fast that you can never catch up.  Times are tough, but here are three stories of some folks who were able to achieve that goal and how they did it.

Emily and Peter are a young couple with modest jobs and big dreams.  She’s a teacher and he works in an IT department.  They dream of having a large family some day, but have been postponing those plans until they can afford a house in which to raise a family. Although they’ve been saving every spare penny, they didn’t seem to be making much headway. Despite the advice of their parents, they were even considering buying a house with only a 3% down payment. They changed their mind when they found out that they’d have to pay PMI (Private Mortgage Insurance) and that the cost of PMI increases significantly the less you put down.

They were receptive to another idea - working second jobs, just until they had a down payment saved. By getting part-time work in their own field, rather than minimum wage jobs (Emily as a tutor, and Peter as a PC repairman), they were able to add substantially to their nest egg much faster. There were even some unexpected benefits.  As a self employed person Emily was able to take additional tax deductions.  Peter was able to take some of his income without paying Social Security tax since his new income put him over the income threshold.  By saving all of their extra income, they were able to comfortably buy a house a year later.  And Emily was so satisfied with her tutoring work that she expects to continue while the children are young, since the hours are flexible.

Sally presented a completely different situation.  She is a divorced woman with a very good salary through her job as a marketing manager for a high tech company.  Unfortunately, with all her traveling and her self-described ‘no head for math’, she has never taken the time to organize her finances. She hasn’t been able to save and isn’t sure why. But she would really like to move out of her apartment that she’s been in since the divorce, and move into an upscale condo. So she was pleased to be shown how she could take advantage of her Employee Stock Purchase Program, not only as enforced savings, but also as a safe way to achieve a minimum of 15% return on her investment.  As result, she expects to move into that condo complex in another 6 months and is looking forward to the improved dating opportunities.

The last case is about Ruth, an older widow, whose only sister passed away recently, leaving her a modest inheritance.  Ruth wanted to move closer to her son’s family but didn’t want to move in with them.  Finding a good compromise, Ruth was able to build a small home on a portion of her son’s land. By not having to pay for the land, and using the inheritance to put a large down payment on an inexpensive pre-fab home, she ended up with a very affordable mortgage that was half her former rent. Since the home was mostly built in a factory, once she had arranged for a foundation, it could be delivered and put together within a week.  She can now visit the grandkids whenever she wants, but still maintain her own life in her own home.

There are as many solutions to finding a down payment as there are problems.