How soon should I start saving for a down payment?
Posted on November 5th, 2011
Here’s a question for all the readers and PF bloggers out there: If you know you want to buy a house / condo with 20% down, but you won’t be able to buy for at least 5 years, would you start saving for a down payment right now? What if you have other goals in the mean time? How do you even begin the process of saving for a down payment if the total figure is so intimidating?
Given the rash of home purchases in the PF blogosphere lately (Krystal from Give Me Back My Five Bucks, Beantown Happy Homeower, Retire by Forty, Me in Millions, etc.), and my penchant for wandering into every IKEA within 50 miles of our apartment, I am getting the feeling that gee, I want to become a homeowner too!
In my corner of metropolitan Southern California, real estate prices show no signs of abating. Good homes, priced appropriately, get competitive bids and are sold within days. It would cost $250,000+ for a 2-bedroom condo and $400,000+ for a single family home unless I want to move very far from the city center. Assuming that we will eventually look at a home in the $300,000s, a 20% down payment would cost at least $60,000. Probably closer to $80,000.
In the mean time, we will be going to graduate school, paying off the related loans. Our incomes will likely – hopefully - increase, but most if not all of the increases will be eaten by loan payments (how poetic!) for at least several years. If we decide to have a child, the costs jump up again. We still want to continue to save for retirement. In fact, my goals would be for us to both max out our Roth IRA – what we are doing now- and contribute at least 15% of income to our 401Ks, ideally maxing those out too. Also, we have to maintain a healthy emergency fund and would like to fulfill our big travel dreams.
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Tags: Saving, Start Saving
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