Over the last 8 months, my husband and I have been saving for a down payment. We had a nice little start and needed to place it somewhere safer than under the bed or in a boot. So the question came up, where should we put this extra money we saved? We couldn’t leave it in our checking account, it would be far too easy for us to ‘accidentally’ spend and it wouldn’t make us any money.

A savings account was obviously the better place for it. We searched Bankrate’s savings accounts by interest rate, and decided to place it in a Capital One high yield savings account. They don’t have the highest interest rate of all the possible banks, but at least I had heard of them and their rate wasn’t much lower, at 1.75%, than any of the unknown banks. Flashback for a moment, I remember when I was a teenager and rates were 6-8%, those were the days! Too bad I didn’t have much money then.

A month ago, while our savings account was slowly accruing a little interest, my husband had a brilliant plan for us to make more than the pitiful 1.75% interest, invest in stocks. Yes, this is slightly risky, however we decided to take a small mount from our savings (25% of our savings to be exact), now that we actually had a savings, and invest using an online broker. So far, my husband has made some good choices and has been consistently profiting 8-9% on his investments.

The goal is to continue profiting more than our 1.75% savings rate so that in the next 6-12 months, the stock investments will contribute toward our down payment. If we can stick to our savings plan, we might even be able to continue investing after purchasing our little house in the valley.

Getting back to my 3 step plan, I’ll elaborate more on our money saving goal and why that amount. But first, it’s important to understand how we came up with our house budget without going house-broke.

We originally set our house budget at $200,000. However, after numerous RedFin searches, we recognized this was not realistic. There weren’t any homes at this price. So, we revised our budget to $250,000, give or take $10,000. This is completely do-able if the plan goes down like this:

• Save at least $20,000
• Find a home for $250,000 that’s not completely falling down
• Finance $230,000 at no more than 6.2% interest rate
• Monthly mortgage = $1410
• Monthly property tax = $313 (1.5% of cost of house)
• Property insurance = $150 (this is an estimate)
• Total monthly cost = $1873 (only $73 more than our current rent)

I used Bankrate’s mortgage calculator to help figure out our mortgage amount:

Bankrate's Mortgage Affordability Calculator

Michael Bluejay’s calculator is a little more detailed, he estimates what you can afford:

Michael Bluejay's Mortgage Calculator

The down payment, or how much we can save, will affect how much of a house we can afford. The less we have saved, the less we can afford and there are not many houses available in the low $200,000’s.