Sandy the Doorman advises: Don't buy a home until you're too old to live in it

I read somewhere that a well-known financial advisor to the people, I think her name was Sandy the Doorman, has made some pronouncements about how you should sculpt your lifestyle.  It seems that she believes you need ay least 20% of the price of a new home, even your first one, for a down payment.  She also has cautioned that you need almost a year of living expenses in the bank before you buy a home.

If a family with an income of $80,000 wanted to buy a home and they followed the Doorman's rules, they would have a hard time buying a home until near the time they no longer needed it.  Let's say that they are able to save 8% of their income on a regular basis.  That's about 10% before taxes are paid, and it's an ambitious but realistic goal. Let's estimate that their new home will cost about two and a half times their annual income, or about $200,000.

They would save $6,400 a year toward their new home, and they would have enough for a 20% down payment in a little over six years.  The Doorman also says that you need somewhere between a half year's and a year's worth of living expenses in reserve before you buy a house.  Add another six to ten years to save the reserve.  That comes out to something between twelve and sixteen years before they can buy their starter home. 

Ok, so following those guidelines would make a starter home a reality before the first child graduates from high school.  That is, if there are no emergencies that alter the savings regimen.  In the meantime, the ever-increasing rent payment is almost as high as a mortgage payment, and their kids are living in an apartment, probably with no backyard.  They will be approaching or maybe have just crossed forty years of age, and they may finally be able to choose their wall colors and finally have that dog they've been wanting for a dozen years.

The Doorman does not understand the time value of time.  Fact is that you can take a calculated risk to improve your lifestyle in a couple years, or you can guarantee yourself a life of diminished enjoyment for most of the kids' life at home.  The idea that you should save until your family life is in its twilight may need a reality check. 

You can own your own home for not much more than renting, and with a down payment that is considerably less that 20%. Careful planning does not mean that you have to be halfway to social security before you buy a home.

If you're thinking about improving your lifestyle with a new home, call me.  I offer a free, no obligation, strategy session and real estate orientation.  It takes about an hour and most folks seem to have a good time while sorting out their future.  Call me now.