Comments on: Personal Financial Planning: Putting Home Ownership Within Your Reach

By: Kristin

Kristin — Sat, 07 Jun 2008 01:16:24 +0000

I know, first hand, how stressful it is to save for a home. I’m saving for a down payment, too. Now is the time to buy, right? I work for FNBO Direct and wanted to share the Pay Yourself First Challenge. I sure wish I could enter. Check it out: http://www.pyfchallenge.com/

You could earn an extra $5,000 for your down payment.

By: Donna Wells

Donna Wells — Wed, 21 Nov 2007 19:08:03 +0000

Gates VP, thanks for the feedback. You’re right that the average family is going to “feel the pain” of saving that downpayment. So much so that we thought it was important to highlight that getting the whole family’s commitment is an important factor in success. The impact of canceling annual vacations or delaying big purchases will be felt throughout the household. “Barely feel a thing” was a poor choice of words and we’ll change it.

By: Gates VP

Gates VP — Wed, 21 Nov 2007 06:57:19 +0000

Lastly, setup direct deposit with your employer so that a portion of your paycheck is automatically transferred into a separate “home fund.” You’ll barely feel a thing, and before you know it, you’ll be glad you did.

I’m sorry but this statement is just pleasant BS. This isn’t MSN Money, you’re not Weston or Dunleavy here trying to coddle us. If you have any clue about where your money goes (maybe b/c you’ve been using Quicken or Money or Wesabe or Mint), then you will feel the crunch.

The average home purchase price was 220k last year! That means that the average family (starting from scratch) will need to save 44k, given that the median household family income is just a hair over 48k, that 44k is a long ways off. To put this into perspective, that’s ~$900/month for four years or $450/month for 8 years.

Even if you’re in the top 20% of income earners with a household income of 88k, you’re going to notice the missing 11k every year (that’s 12.5%!)

Except for the statement quoted above, all of the advice in this column is correct (if trivially so). But what’s also true is that the cost of saving for a down-payment this decade will hit your pocketbook unless you plan on some lifestyle changes.

So don’t just goal plan, life plan. Draw up your budget with and without the downpayment and balance that against your actual wants. Renting is almost universally cheaper (and if you’re saving for a downpayment, you’re probably renting right now) so it’s quite likely that the money you’re “saving for your down payment” will pretty much be gone every month ad infinitum. Once you’ve made the down payment, that money will just be redirected to maintenance, repairs, upgrades, property taxes and the higher cost of the mortgage.

So if you’re running about even every month right now, then saving for the down payment is going to put a dent in your lifestyle. Acknowledge that you now have significantly less disposable income and learn to accept the new lifestyle (and make sure the deposit is automatic b/c you will be tempted back to the dark side).

By: Viet

Viet — Wed, 21 Nov 2007 05:55:15 +0000

Janna: Actually because the article mentioned credit score and not just credit report only, we referenced FreeCreditReport.com from Experian, as it is one of the only credit reporting agency that provides a free score trial. Another place where you can get a reputable credit score will be myFICO.com, which runs about $16 for each score. There’s currently a discount code for 25% off if anyone’s interested: HOLIDAY25.

AnnualCreditReport.com is owned by the three credit reporting agency, created due to the recent FACT ACT. It allows for the request of a credit report every 12 months, but unfortunately doesn’t currently provide for a free credit score. Thanks for the reminder, as we’ve made reference to AnnualCreditReport numerous time on mint.edu. I’ll update the post.

By: Janna

Janna — Wed, 21 Nov 2007 05:16:51 +0000

What the hell? FreeCreditReport.com? I realize that you’re probably getting paid for that little reference, but saying that FreeCreditReport gives you a “free credit report and score” is completely wrong. You’re required to enroll in a service and provide your CC number (big warning sign) in order to get your “free” products. Encouraging your personal finance customers to give in to misleading advertising is not exactly a healthy step on the road to buying a home.

If you want a REAL free credit report, visit the government-run AnnualCreditReport.com.