Preparing Our Finances 4 Home Ownership

Over the last couple of months, we’ve been going through the process of buying our first home. It’s been both exhausting and exhilarating at the same time.

Apparently buying a house with no money down doesn’t mean it’s not going to cost you anything upfront, which we realized quickly. So I’m working on putting together a plan to save a lot of money before our first mortgage payment is due.

We have an emergency fund, but I don’t really want to use it if we don’t have to. So instead, I recently created a House Fund to save money for our mortgage payments and the various costs of buying our first home.

In addition to our initial costs, there are also some other things we would like (and need) to purchase and do to the house after we move in. The first step in creating my plan to save a lot of money is to prepare our finances for home ownership and then go from there.

Right now we’re staying with my parents for a month or two while we wait to close on our first house, so we aren’t currently paying rent. Also, I expect our monthly expenses to be higher than when we lived in apartments. We’ll likely need home owner’s insurance from a company like 21st Century now that we’re buying instead of renting

So by estimating our monthly mortgage and bills now, we can begin to adjust our budget and priorities to avoid a financial apocalypse later on.

Estimating Our Mortgage & Bills

Our lender seems to think our mortgage payments will end up being between $1,025 and $1,050 per month. So I’m going to use $1,100/mo. just to be on the safe side.

That means, since we get paid and budget our money bi-weekly…we need to put away $550 from each paycheck to cover our mortgage costs.

I can always adjust these figures later on, make extra payments on our mortgage or just put anything leftover into our House Fund.

The bills are going to be a little trickier since we’re using different service providers than before and having a house instead of an apartment.

Normally, I would imagine it would be best to ask the seller to see copies of their past bills to get a better idea of what to expect. But, since we’re buying the house from an investor who flipped it and never actually lived there, that’s not really going to paint an accurate picture for us.

My best estimates:

Electricity: $120 per month
Water & Sewer & Garbage: $80 per month
Internet Service: $60 per month
Cell phone: $65 per month
Netflix (or something similar): $10 per month
Mystery Bills or Services: $165 per month (better safe than sorry)

Total Bills: $500 ($250 bi-weekly)
Total Mortgage: $1,100 ($550 bi-weekly)

Total Mortgage & Bills: $1,600 ($800 bi-weekly)

My plan is to start pretending that we’re paying all this now and just shove the money into our House Fund so that we have money saved for our 1st payment and the other expenses listed above.

I still want to save money aside from that, but it will help us get into the habit of not having that money. Right now, we’re living rent-free so our only bill right now is the cell phone. Other than that, all the pretend mortgage and bill money will go into the house fund.

Sorry 401k

Don’t worry, we’re not taking any money out of our 401k or anything rash like that. Well, maybe a little rash, but not too awful. We were contributing 8% before taxes to our 401k and I recently dropped it down to 1% while we’re trying to save money for the house expenses.

We don’t get any sort of match on our 401k contributions, so it’s not going to be as bad. Sure we’ll be missing out on some compounding, but not too much. We’re still doing the 1% and plan to get right back to where we before. Although, I’m not sure if we’ll continue contributing to the 401k the same as before.

I need to do a review of our investments and make some decisions about our retirement saving. I’m considering maybe putting 4% into the 401k and the other 4% into our Roth IRA. It’s going to take me a while to figure it out, since I suck with this stuff.

I was hoping that we would get our retirement contributions up to 10% this year, so thankfully there’s still time.

Honey got another raise

This last month, my honey got another raise. Woohoo! Good job, Honey. 😀 Normally what I prefer to do when he gets a raise, to avoid lifestyle inflation, is to increase our 401k contributions. The raise seemed to happen at the same time I decreased our contributions, so that didn’t happen.

When I go back to putting more away for retirement, it should be much easier to bump things up to 10% because of the raise. I don’t want to get used to having this much money because it’ll probably just get wasted and we’ll expect it.

He got the raise because he’s been doing awesome since his new promotion (earlier this year) to supervisor and will be taking his boss’s place while he’s on medical leave for a few months or more.

How did you prepare your finances for home ownership?

About Jen Perkins

Likes: saving money, being debt free (aside from our house), zombies, travel, getting money, blogging and dogs. Dislikes: debt, being broke, bunnies, wasting money, not having enough money to travel the world and paying interest. Facebook  ♥  Twitter  ♥  Google+  ♥  RSS


Preparing Our Finances 4 Home Ownership — 31 Comments

  1. I don’t think we actually made any plans. We just found out what the mortgage payment would be and plugged it into the budget. We definitely made the mistake of not finding out what the utility bills would be…whoops. We won’t make that mistake again the next time we buy!
    Jason @ WSL recently posted..How We Create an Irregular Income BudgetMy Profile

  2. First of all, congratulations ! Buying a new home is a great thing. My BF and I also recently bought one, and I could not believe all of the closing costs associated. It sounds like you are on the right track and getting prepared well for it. Enjoy the new home!
    Gillian @ Money After Graduation recently posted..Coping With StressMy Profile

  3. I like your category for mystery bills. When we were about to move into our house, (it was new construction) our neighbor’s house got hit by lightning and he lost all his electronics and appliances. Our house is higher than his, so we chose to install a lightning rod to prevent this. We have lots of thunderstorms! You never know what might pop up.
    Kim recently posted..Does Credit Card Debt Have You Stuck?My Profile

    • I thought it would be a good idea to add the mystery bills for a couple of reasons:

      1) We’re going from a lifetime of apartments to a house.
      2) We’re moving to a different city and county—who knows how different things are there.
      3) All the other times I’ve planned new living expenses, I’ve been way off.

      Hopefully it will be enough of a buffer to keep things under control.

      I LOVE thunderstorms. :-)
      Jen recently posted..July 2012 Goals—ReviewMy Profile

    • The estimated mortgage payment our lender gave us includes home insurance and property taxes. Just the mortgage itself is supposed to be around $800 a month…I believe.

      We also have to get flood insurance since the house is in a high-risk flood zone, so that sucks. I’m not sure if our lender included that or not, so we’ll see how that goes.
      Jen recently posted..August 2012 GoalsMy Profile

  4. I’ll bet your “mystery bills” will come in handy when it comes to home maintenance. That’s a reality my girlfriend just had in her newly purchased home – when her basement flooded, she missed renting and being able to call and complain to her landlord. It was a whole new reality to have to solve the flooded basement on her own.

    I’m loving your journey. Since we’re further behind in our home buying process compared to you, this is super exciting for me. Thanks for sharing it all!

    • One of the things we hated about renting was that my husband (who’s really great at fixing stuff) wasn’t allowed to fix things when they broke. Then the apartment people would come in and either not fix things right or make them worse than before.

      Thanks Daphne. :-) Have you guys found a house you like yet?
      Jen recently posted..Buying Our First House—Price & Other CostsMy Profile

    • I think I’m just so freaked about by all the costs that making a plan helps ease some of the financial stress. :-)

      I handle all of our money, so I think I’m way happier than he is about the raise. Still, I’m so proud of him for doing such a great job—he is a really hard worker.
      Jen recently posted..Happy 2nd Blogiversary 2 Me & A Giveaway 4 YouMy Profile

  5. Sounds like an awesome plan! I’m sure you will get into the groove of having a house payment in no time.

    We lowered our 401k contribution temporarily both times I was on maternity leave. It made sense for us to do that and then we just bumped our contributions back up once I went back to work!
    Holly@ClubThrifty recently posted..Farewell London, Thanks for the MemoriesMy Profile

  6. Wow. That’s a lot! Good thing your hubby got a raise just before starting your mortgage.:)

    As for me.. I bought an empty lot 7 years ago. Since then, I was cutting 40% from my weekly income to save for the costs of house construction. Now (after 5 years of having a frugal lifestyle), my family and I are already living in our dream house.:)
    home builders springfield mo recently posted..Harvard University Study Predicts Strong Growth in RemodelingMy Profile

  7. Before buying any materials, always ask for quotes from your contractors about what materials are needed. You can also ask your architects and engineers on what brand of material you should look out for and what brands are best.