This is a guest post from Erika at Newlyweds on a Budget. She writes about managing finances, being a newlywed, and frugal living.

I am currently 27 and live in a shack with my husband of a year and a half. We have paid off credit card debt, paid off our car loan, have survived living on one income for four months, and are planning on starting 2012 with a bang to save up for a house down payment.

We hope to own a home in five years. This is our plan.

1. Pay off remaining $2,000 credit card debt.

We paid off our car last month, which brought down our total debt down to a $2,000 credit card, and a little under $20,000 left in student loans. We plan on paying off the card within the first few months of 2012 (which is currently at 0% interest until April 2012). We will continue to tackle the student loans by increasing our payments.

2. Save, save, save

This past year, with both of us working, we were able to save $8,000 in eight months as a back-up/survival fund for when my husband would stop working for four months to enter the fire academy full-time. Now that he is going to start working again at the end of December and we’ve managed to live fine off my income, we hope to save all of his income for as long as possible.

3. Upgrade

When we found out that Eric wouldn’t be working for four months, we downsized from a one-bedroom apartment to a guesthouse/loft in someone’s backyard. It’s not the ideal living space, but it’s managed to save us a ton of money (and probably is the reason we were able to stay afloat these past four months on one income). I think we’ve paid our dues though–and while we would love to continue saving a ton of money, the reality is that our sanity is more important. And so is a nicer place. I’m thinking one with a dishwasher, a bedroom door, and heating that doesn’t come out of a portable heater? Is that too much to ask?

4. Get a raise, contribute toward down payment

Within the next five years, I definitely plan on getting a promotion with a substantial raise at work. We will probably increase our means of living a bit with this new raise, but I also hope we can contribute a good chunk to our down payment. I know my husband expects to be hired as a full-time firefighter within the next five years as well (it’s tough competition for firefighter positions in southern California), and that will increase our income substantially.

5. Still manage to have fun

I want to own our own home. I still plan on living frugally. But I don’t want to forget to have fun, and that includes traveling. I want to travel as much as possible before we have kids. And even though we’ve been married a year and a half and we still haven’t gone on our honeymoon, we will one day. I also want to go to Europe. I want to try and fund our travels through a separate “extra” fund. Meaning, any extra income we earn that doesn’t come from our immediate income, such as mileage reimbursement checks from work, mystery shopping money, blog advertising, and tax returns.

What are your steps to buying a home? Any tips for us?

*Little House says: This is an awesome plan. I really like how you downsized when your income situation changed. I think people can learn from this. Thanks so much for sharing!

For the past two years, my goal has been to purchase a small-ish house in the near future. My “near future” has changed a bit over time from 18-months to more like 2-3 years mostly because I really would like to save an ample down payment on a house. But with all my research on the price of homes in my neighborhood or a neighborhood in which I’d like to purchase a home, it really comes down to “What can I afford realistically?”

During the housing boom, many people forgot to ask themselves this question. Historically, the financial sweet spot has been to purchase a home within 3-times your annual salary range. For example, if you gross $80,000 annually, you can comfortably afford a $240,000 home. Of course, in Southern California this limits me greatly with houses still averaging over $320,000. But all is not lost. There are places throughout California where I can still find a home for under $250,000. Of course the questions comes down to “Do I want to live there?”

I digress. Guiding home affordability, besides the simple 3-times your salary financial rule, are mortgage calculators. There are some terrific calculators (like emortgagecalculator) out there that factor in your down payment, home owners insurance, and property taxes, calculate your monthly payment and how much you will pay in interest over the span of the loan. The amortization charts are always scary to analyze, but paying off your mortgage early can alleviate some of that anguish by lowering your total interest payments. Just because you agreed to a 30-year mortgage doesn’t mean you can’t pay it off earlier.

Once you’ve worked the numbers out and have found a price you can comfortably afford, it’s time to get the rest of your ducks in a row. That means, making sure you have little or no consumer debt, your credit score is closer to stellar than subordinate, and you have saved a decent down payment (as close as possible to 20% or more.) Don’t forget that you’ll need some money for closing costs, so factor that into your savings as well. You might also want to factor in repairs and maintenance money as well.

As I prepare to purchase a house in the next two years, my goal is to save about $60,000. A lofty goal, but with dedication and determination, I should be able to make it!

How did you prepare to purchase your first house? Any tips or guidelines you’d like to share?

This post was originally published on February 16th, 2001. However, it’s still very timely. Enjoy a past post.

Depending on which area of the US you live in, short sales seem to be increasing in neighborhoods; especially in the Southwest. No matter what the reason for the short sale is, i.e. job loss, increased mortgage payment, or underwater home loan, this seems to be a growing trend in the housing market. I personally know someone who is in the middle of a short sale, or strategic default as lenders like to refer to it as.

And a burning question among these home owners seem to be; When can I buy my next home?


For people who have never experienced this problem, or who sat on the side lines during the housing boom and were just fine renting, the idea of buying a house after a short sale seems a bit rash and irresponsible. I’m not usually one to judge people for their actions, but if you’re in the middle of short selling your house and are already talking about buying a bigger, nicer home within the year, it just seems a bit…well, wrong. It’s hard for me to believe that a bank would be eager to lend money to a person who just shorted another bank hundred’s of thousands of dollars. But what the heck do I know? I’m just a renter.

My curiosity on this subject prompted me to research this topic and find out just how soon a person could obtain a mortgage after a short sale. After some research, the answer isn’t very cut and dry; it depends on where the new loan will originate:

• Fannie Mae and Freddie Mac - With a decent credit score and a 20 percent down payment, a person is eligible for a mortgage two years after a short sale. Of course, the key here is maintaining a good credit score and making sure you have a down payment. After four years, you only need a 10 percent down payment. Though I wouldn’t bank on Fannie and Freddie four years from now since the Obama administration just presented a plan to dissolve these two entities over the next several years. Update: Scratch that. I’m pretty sure they’ll still be around, but you better make sure you have some sort of down payment.
• Federal Housing Administration - With a good credit score a person is eligible for a mortgage through FHA within three years (or longer) of a short sale. However, there are some extenuating circumstances that would allow you to purchase a home right away, but this is difficult to prove and you have to have been current on your house payments for 12 months up to the short sale (almost impossible because most banks won’t short sell your home  until you default on a payment, making this a bit of a catch-22).
• Conventional Loan – I’ve found varying answers to this one, anywhere from 1 year to many years. Again, most banks will want to see a decent credit score and a down payment.

There are some situations out there that warrant short selling a home such as becoming unemployed and/or being offered a job position in another city or state, or health issues or a death in the family. All of these circumstances are understandable since they are out of the control of any one person. Actually, the FHA will grant a home loan right after a short sale for exactly these reasons.

But if you’re trying to take advantage of the market, as in you are no longer happy with the price you paid for your home and now want to purchase a bigger, nicer home for half the price, you’ll have to wait a little while.

Are you in the process of short selling your home? Are you doing so because you have to, or you just want to (very different reasons)? Is it fair to ask for a wait period and a down payment?

This post was originally published on October 21, 2009. However, some of my best posts were written within the first few months of blogging when I had only a handful of readers. Enjoy a blast from the past… (can you tell I’m swamped this week!)

My husband and I love watching movies at night, thanks in part to Netflix, it’s really easy for us to download a new or older flick. However, we have noticed a disturbing trend in movies, even those that are 20 years old or more. The characters in films, whether they are broke, middle-class, or wealthy, have beautiful homes. It doesn’t matter if the character in the film has a high paying job, or a minimum-wage salary, or is out of work, they somehow own a substantially-sized home. How can this be? Basically, as my husband so eloquently put it, the film industry is selling us the lie of the American Dream.

Whorush: 5 sites by this AdSense ID

Whorush: 5 sites by this AdSense ID

Let me begin by saying that I know a few years ago, with the whole mortgage fiasco, many people were able to purchase a home well above their financial means. So, perhaps 20 years ago, it was a similar situation, which is why we also see this trend in older films as well as newer ones. I know films also exaggerate life, and films only want to show us what we want to see. According to tinsel-town, the American public wants to see all families living in large, beautiful houses. So, the lie perpetuates because we want it to.

Yet, it got me thinking, is this American Dream something that is a reality for most people? Does the film industry take the majority of the population’s living situation and just expand it for all it’s characters? I did a little homework on BestPlaces.net to check the percentages of home ownership across the nation in a few different cities and this is what I found:

• First, I took a look at Los Angeles, CA, since this is the county I live in. The home ownership rate here is 37%, compared to the national average in the United States of 64%. Okay, so this makes sense considering the high cost of property. What doesn’t make sense is the recently released movie, Smother, (a really bad movie, by the way) showing a young couple owning a beautiful Craftsman-Style home in Los Angeles on a beautiful tree-lined street. In this movie, the character’s include a wife, that is a teacher (we all know that teacher’s aren’t wealthy by most standards), and a recently laid-off husband, who goes back to selling carpet. My take: Selling the American Dream by Lying. (Two other movies off the top of my head with similar scenarios that take place in LA: I Love You, Man and Big Trouble : outrageous homes on a small income).
  
• I then compared Fargo, ND, whose home ownership rate is 45%, to the national average of 64%. One of my favorite, slightly older, movies is Fargo. According to BestPlaces.net, less than half of the people in this city are homeowners, so again the reality of all the movie’s character’s living in a terrific home is off. My take: Selling the American Dream, though the freezing cold winter’s may keep some people from settling down permanently.
• A more realistic view from a film that I like would be Singles, a movie about single people living in Seattle (again a film from the early 1990′s). The characters in this film all rent apartments and struggle to meet a life partner and pay the rent. According to Bestplaces.net, this is a more realistic view with the home ownership percentage at 45%. My take: A realistic perspective of young 20-somethings and early 30-somethings trying to keep their heads above water and get their life figured out.
• Another city I compared is Albuquerque, NM, with a home ownership rate of 56%. You could almost call it Americas Home Place since more than half the residents own homes. I recently watched Sunshine Cleaning, set in Albuquerque, NM. The film stars the lovely Amy Adams (from Enchanted). The house the main character owned was quite a fixer upper, but it made sense considering she was a single mom who cleaned houses for a living. My Take: a much more realistic version of life, which is refreshing in a film.

Sunshine Cleaning - a more realistic life view coming from the film industry.

Of course, I’m not quite sure where Bestplaces.net came up with the national average figure of 64%. Each city I researched, and there were quite a few others that I didn’t list, kept coming up around the 50% range. There must be one state in which the majority of the population owns homes, but I didn’t find it.

Do any of you notice this in films you like? Do you ever find yourself sneering at the characters saying, “How did you afford that lifestyle and that house on your meager income?” Do you think the film industry is purposely selling the American Dream or just trying to lift our spirits and give hope to those that haven’t achieved it yet? I’m I being too cynical, or obessing over this topic?

Earlier in the week, a guest post from Mr. Frugal highlighted the benefits to living in a small space. Many people mentioned the novelty of the small demo spaces at Ikea in their comments. I’ve been thinking about this myself; do the demos at Ikea really work? What does it look like with people living in such a small space? (Since viewing them empty gives the illusion of more space).

A quick search revealed that Ikea has a section on their website dedicated to small space ideas. They highlight how the room was organized maximizing the space and offer photos of families “living” in the room. The rooms used in the videos and photos are still the model rooms, but seeing pictures of people in the room, “living” in that small space, gives a better idea of its functionality.

Ikea Small Space Ideas

In my opinion, the photos of many of the rooms are a bit cramped once you add a  family of 3 or 4, but one or two people could definitely live somewhat comfortably within the small square footage. Yet,  most of the ideas Ikea offers for maximizing space can be used in any size of a room. For example, using glass-front cabinets that extend up to the ceiling allows for more storage, but still keeps an airy, open feeling through the use of glass. Or using two chaise lounges that you can move around the living room for more or less space is a great idea.

However, some ideas seem a bit ridiculous like having a bunk bed in the living room with only a curtain to pull around an adult couple. It might work for a single couple, but throw in a couple of kids and I’m not sure how comfortable I’d feel about that. In my defense, I don’t have kids so maybe I don’t understand that privacy goes out the window. (Any parents want to comment on this?)

Their small space website really cemented the idea that creatively utilizing all areas of a room (floor to ceiling, loft sleeping for guests, cubbies and cabinets) saves floor space, hides toys effectively and items which are rarely used, and allows more room to move around. Ikea’s space saving ideas can come in handy in any household.

How do you effectively utilize your space?