Count Down to the Brown's First Home

Jesse and I started discussions about buying a home about a year and a half ago.
It seemed like the logical next step since we had started our family and secured careers we both enjoyed and felt could provide a solid financial future. The problem is that from taking the first step of dreaming about a home, to having papers signed and keys in hand is a ridiculously stressful and time consuming process. One that we were naive about until our first homebuyers workshop.

For anyone who is curious, here is how two young hardheaded financially oblivious adults got it together in a year so they could provide a future for themselves and a family:

1. Learn how to budget. December 2011 was the first time I had EVER wrote a budget, and actually stuck with it. I'm practically a budgeting pro now- with complete knowledge of every bill, every due date either memorized or written down. I know our weekly pay average, our monthly debt to income ratios, the percentage we save, how much we spend eating out, and I literally plan for or make adjustments for everything. I spend about 30 minutes once a week reviewing our finances for the week and making sure that my preplanned budget actually matches up with our checks. 

Here is an example of the way I now keep track of the weeks bills. Each week has its own budget. I used to need a whole page in a binder, now I use a small pocket size note pad and simply write down the major things I need to make sure we pay that week along with the allotted amount for the recurring necessities like food, gas, savings and tithes.

This is a far cry from how we use to survive, if you can even call it that. From avoiding opening the mail to avoiding telephone calls. We didn't have a clue how much money we had coming in versus what we had going out. The thought of having a budget was wonderful but I had no idea of actually how to go about making one that was feasible for our current financial situation.

Here is an old monthly budget I used to use to calculate the months bills.

 I mean we literally had thousands of dollars in student loans, credit card debt, medical bills, a car payment and regular monthly bills sucking up ever dollar we made. Finally I bought a binder, learned about Mint.com and over the next twelve months I started the difficult task of being disciplined and dedicated with our spending habits. The hardest part was not learning how to budget,there are so many resources out there that will teach the basics, to more advanced and long-term planning techniques. Nope, the hard part was not in the budgeting it was being real with myself and facing the facts. The first fact was that we didn't have enough money for everything we wanted to do. We had to learn to cut down our expenses and prioritize.We also had some months where we literally had to deprive ourselves of some luxuries in life, and this often took some convincing because my spouse and I did not always see eye to eye. It wasn't until we mastered budgeting the bills that we had to pay were we able to make room for saving for a home. Finally this past summer we determined that we had enough in our budget to save for a home but we wanted to maximize our savings by seeing what privileges we could take advantage of as first time buyers.

2. Start a down payment savings account. We learned about IDA programs and found out that the Portland Housing Bureau had partnered with different nonprofit organizations to make home buying affordable and obtainable for different communities. The African American Alliance for Homeownership was one such organization and we soon applied and were accepted into their savings match program.

 I consider this the first of many blessings that have come our way in this whole process. When we applied we barely made the cut off income wise and had we waited another 6 months we would have been over the income requirement. Remember, we had both started new jobs, Jesse was going from part time to full time and I received my first raise after 3 months. This program is great because it not only matches our savings three times over, but we have a counselor who actually sits down with us and reviews our credit, and helps us to plan and prepare for the process home buying process and understanding what we can expect from start to finish.

Our last car payment!

3. Start a 2nd savings account. Despite what a blessing it is to have the IDA match for our savings, it only matches up to a certain point. The IDA will total $8,000 of our down payment, part of it being our savings and the other being our match, but our initial goal was to save $40,000. Now, since our timeline was pushed up a bit (more details below) our new goal is $20,000. That leaves us with an additional $12,000 to come up with. We determined that by January 2013 we would have all the bad debt in other words pretty much everything except for our students loans, paid off. So in 2012 we paid off our car, over $10,000 in debt and got our student loans down to a manageable monthly payment. We then started an online savings account. We set it up online so we couldn't touch the account, we don't have a debit card attached to it so it is completely off limits. Another thing I like about the online account is the higher interest rate that it has versus the traditional bank savings account. This account is where we currently make our weekly deposits for the remainder of our down payment savings.

4. Pay all bills on time. This is sometimes the hardest thing to do. It was initially difficult because we had to get all bills set up on a payment schedule that worked with our pay dates. Considering we have close to if not more than 15 bills we pay each and every month, this took some major effort. Now, most bills are set to be deducted from our checking account automatically, but at first, we did not always have the month to allow for this uncontrolled debiting, as I like to call it. Nowadays if a check ends up shorter than I anticipated then I usually have a few days to call in and adjust a date if need be. I should comment here that if were we not saving for a home we would have the extra money and not have to monitor so closely the cyclical bill schedule and how it aligns with our pay dates but since we save (retirement, emergency fund, house) practically ever dollar we don't use on bills or in the budget somehow I keep a tight watch on where the money is going and when.

5. Save! and Enjoy it! Pretty much this is where we are now, we go to work so we can save for our house and on the weekends and in the evenings try not to blow the budget with too much eating out, activities or entertainment.

I mentioned earlier that our timeline was shortened a bit. Initially we had planned to move into a house around December of 2013 or the beginning of 2014, however this fall we attended a homeowners fair and won $1,000 grand prize to put towards our down payment. This was the 2nd blessing of 2012 that was absolutely God looking out for us. The catch was that we have to use the money by October 2013, which means we need to close on a house by then. This was good and bad. It gave us a definite deadline for when we could expect to be in a home but it meant that we could not afford to save an additional $32,000 in 8-10 months.

So here is what our current plan looks like:

Between January 2013- September 2013 that's 9 months we need to save $11,000.

That's approximately $1,300 each month.
I determined in October 2012 that we could pay all of our bills and live off of 2 paychecks a month, while saving the other 2/3 depending on whether it is a 4 or 5 week month.

That will give us a grand total of:
$11,000 savings account
$8,000 IDA program
$1,000 Grand prize grant for down payment
$20,000!!!

We determined that $200,000 for our first home is well within our level of comfort. Our rationale is that if and when we decide to expand our family and/or if one of us loses a job we can always afford the mortgage for that amount of home on one income.

Right now we are on track, I'll keep you posted each month as to whether any unexpected circumstances happen and if we need to make any other changes.

Downton Abbey time, peace out!