Just a few weeks ago, I came up with a plan to start a whole bunch of ING sub-accounts to help me save for irregular expenses such as presents, vacations, clothing purchases, etc. It seemed like a great idea and I even opened the accounts and set up the automatic withdrawals. But over this past weekend, Cute Man and I had a great talk about what we really want to do in terms of housing. We’ve lived together in our 1BR basement apartment for 5 years now. We love it and we love our landlady but it does lack a bit of privacy and space, especially for when we have a kid (no immediate plans, don’t get overexcited, Mom). So, we think it’s time to get serious about buying something.
Since our budget is small and we are both committed to avoiding consumer debt and long commutes, we’re thinking condo in DC. We don’t mind smaller spaces and I, for one, would rather pay a condo fee than deal with mowing the lawn, doing landscaping, etc. My ideal: 2 BR 2 BA close to a Metro with a parking spot. And I think I’d prefer a small building with just a few units over a large one, but we’ll see. I don’t necessarily need/want fancy amenities like fitness rooms, pools, etc. What is important is to have an updated kitchen and bathrooms. I’m NOT all about the home improvement projects.
The reason I think this is at all feasible anytime soon is that we’ll probably go through the NACA Program. They help low-moderate income people find homes and offer lots of counseling, assistance, etc. They also offer below market loan rates and no closing costs. The first step is to go to a workshop and we’ll do that next month. This will not be a quick process but a thorough one. I am very excited and can’t wait to get started.
One of the many important things they will require is that we save the difference between what we pay in rent now and our expected condo monthly cost (mortgage plus insurance, condo fee, and taxes – the complete monthly cost of ownership). This brings me to the main point of this post: how I’m adjusting my savings strategy.
First off, I’ve changed my 401k contribution back down to the minimum amount to get my employer’s match. That frees up a bit more funds to go into my savings strategy. Right now, my share of the rent is $470 per month. We’d like to keep our condo monthly cost to no more than $2000/month (my share = $1000). So, I need to up my monthly savings to at least $530. To do this, I’ve rearrange my biweekly contributions to go to these accounts:
Emergency Fund = $75
House Fund = $100
Family Fund* = $100
That brings me to $275 per check or $550 per month. I will also have a Trainer Fund to save up for that irregular expense that I pay quarterly as well as a Slush Fund that exists for fun stuff – that will be snowflaked rather than auto-deducted. But those two won’t “count” towards what I’m actually saving.
The great thing about the NACA plan is that we won’t necessarily have to put much if any money down or pay closing costs. Therefore, this money we’ve saved will all be there as backup as we start down the road of condo ownership. It will be a great hedge against our good friend Murphy, who I know likes to visit new homeowners all too frequently.
Since this is our first foray into the world of home buying, any and all advice is welcome! Have you recently bought a home in this market? Is there something we should really know before embarking on this plan? I am missing anything vital? Please share in the comments.
*This will be there to pad our budget if/when I ever need to take maternity leave, not all of which will necessarily be paid, depending on how long I take off.