Pinching Pennies To Save Up for a Down Payment
This week’s cover story in the New York Times real estate section is about people who’ve scrimped and sacrificed— sometimes for years— to save up enough money for the down payment on their first home. One guy survived for an entire year on a daily diet of a $2.95 chicken special and a 99-cent coke;…
This week’s cover story in the New York Times real estate section is about people who’ve scrimped and sacrificed— sometimes for years— to save up enough money for the down payment on their first home. One guy survived for an entire year on a daily diet of a $2.95 chicken special and a 99-cent coke; another woman started drinking only at happy hours. It’s notoriously hard to save from paycheck to paycheck in New York City; we were lucky that a real estate deal we worked on back in 1999 paid off well enough a few years later to enable us to come up with the downpayment on our house. (That, and we had the good fortune to flip a couple of one-bedrooms in Manhattan between 1997 and 2000, when we cashed out thinking the market had peaked! Got that one wrong, huh?) There must be lots of tales of self-deprivation in the name of nest-egg building. Anyone care to share?
Every Penny Counts [NY Times]
I bought my first place in Clinton Hill back in 2001 – right after 9/11. Back then, I found a place that I pretty much knew I wouldn’t want to stay in long term – but it was cheap – 115k – and they accepted %15 down – which made a huge difference. With down payment, lawyers, closing costs, etc, it all added up to about $25k to purchase – and between cash I’d saved because I had cheap rent at the time (a crappy place, but it was only $500 a month – another BIG help) and credit cards, I was able to do it on my own, without help from the parents.
I sold that place for 3x what I paid for it last year, and was able to move up. It does seem like it’s much harder now since I NEVER see places for under $200k.
All I know is that it’s getting harder and harder. My wife and I bought a 2 bedroom in Clinton Hill (we closed the day of the MTA strike). The ammount of money we had to put down (32%) in order to feel comfortable with the monthly payments on our mortgage was almost the same (only $38K less) than what my parent payed for their 4 story townhouse in 94 (just over 11 years later) Ridiculous!!! They ended up with a 15 yr mortgage at $1600 a month vs ours $2100 for 30 yrs. Theirs included taxes, we have an additional $900/month for maintenance and taxes.
I bought my first place in a far away land called 1991. It was at 24th and 10th — a pretty sketchy area. I wonder if that area ever got any better?
I bought it with the tuition money I got back when I quit law school after the first week. Thank God. Thank. God.
I read that article. Helps to be a couple.
One guy saved all of his earnings from an extra job while living off his wife’s salary. The other couple had enough money to shove from their $45K wedding(!) to a down payment.
One single woman put $7000 for a down payment on a credit card.
One single guy already had 50K saved.
Are these typical people? As a single woman with an art job and no money saved, I’ll never be able buy (but from my experience reading this blog, I think renting is the better option anyway, to have what you want in the city)…
I sold both my kidneys to put a down-payment down for these new condos that are going up on 1st Place in Carroll Gardens. I can’t wait to move in!
We saved for the downpayment for 8 yrs, paid down all our debt as well. Now own a house we love. We first saved for a buffer of 3 mortgage payments, Now we are saving aggressively the 3-6mo os emergency family savings 9:37am mentioned. After we have that we’ll start saving for major projects like the kitchen renovation. I stopped getting manicure/pedicure, stopped ordering food in, stopped shopping for expensive chees & bread etc.
We saved a 40% downpayment, plus money for renovations. It helped that we knew we were in a housing bubble, and thus had to wait eight years for prices to return to normal, buyable levels.
It also helped that we married relatively young, and knew we really could only afford to spend one salary.
The other salary? Well, it’s lower net due to the higher marginal tax rate to begin with. At first the second salary was for the downpayment. Then it disappeared for a few years, as we both worked part time while parenting. Then there is college savings, retirement, charity. Se we set out to be semi-independently wealthy.
Self-deprivation? Not by historical standards, or the standards of our parents AT THE SAME AGE, or the standards of the rest of the world.
With no need for a car and lots of free things to do, NYC would be cheap were it not for the cost of housing. And when credit standards adjust and downpayments are again required, those who have them will be in a powerful position in the housing market. The market will have to come to such people.
We watched all of our friends move to swank apartments in Manhattan, while we suffered in NJ for four years in an $800/month apartment to save for our first place. It really paid off in the end though, so we’re glad we did it.
It just takes patience and discipline, people. My wife and I brought our lunches to work for years, cooked at home, skipped vacations and finally saved up the downpayment to get our piece of the rock in Park Slope even though we were both working low-paid jobs for nonprofits.
Oh, also, it was 1997. So also, you should go to 1997. They have bargains there.