The following is a guest post from Wayne at Young Family Finance, where he writes about the financial challenges for young couples and families, like choosing between daycare or stay at home parenting.

Are you at the point where you want to buy your first home? The middle class strive to own their own homes. Building wealth in real estate is one of the easiest ways to set up an easy retirement. I know that my parents followed this route and will retire in 5 years with a mortgage that is paid off. Think about how much less your expenses will be in retirement with a paid-off mortgage. It all starts with getting into a house at an early age.

When you are considering buying a house, many people will point out to you the hidden fees that come when purchasing your new home. It is great to know what you are getting yourself into, but without a down payment, buying a house isn’t an option. So, how should one save up a down payment? Here are some creative ways to save the 20% required for a home.

Set Your Goal

Before you set about the task of saving for your down payment on your house, you first need to establish your goal. How much do you need to save? Traditional advice recommends that you save 20% down when purchasing a home. You may be able to qualify for a loan that requires less, but the more you save means a lower mortgage payment. Figure out how much you are wanting to spend on a house and calculate what that means for your down payment. Having this concrete figure in mind when you start saving will help speed up the process. It keeps you moving towards this goal.

Reduce Your Spending

One of the first things that you can do to actually start working towards this goal is to reduce your spending. Many people often fail to save up for a house because they do not want to make any sacrifices. They want to have the benefits of home ownership without putting in the hard work to save extra money. If owning a home means that much to you, you should be willing to give up certain things. Can you give up eating out for a couple years to save for that down payment? Or perhaps you can give up cable and going to the movie theaters for a certain time. If you cut your spending, you will be surprised at how much faster your down payment builds up.

Increase Your Income

If you are looking to speed up the process even more, why not work to earn extra money? A few extra dollars here and there may not seem like a lot, but it adds up in the same way that cutting back on your expenses does. Try to think of ways that you can bring in a few extra dollars. Can you sell unused items or perhaps help out your neighbors in some way (for example: baby/pet sitting)?

If home ownership is your ultimate goal, starting with these three steps will help anyone reach this goal. Find creative ways to reach your goal and celebrate your progress as you go along. Before you know it, you will be living in your own house.

What things can you do to save for your down payment? Or what did you do to save for your first down payment?

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 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?

It’s a lifelong dream of many people to own their own house, but in today’s economic climate, many opt to rent instead. It seems to be a lot cheaper than owning a house, considering the purchase price, taxes, upkeep and maintenance. Actually, this might be an excellent time to buy a house and it could be cheaper than renting.

It’s A Buyer’s Market

Right now, it’s a buyer’s market. This is a real estate term meaning it’s the buyer who has the best opportunities. Home prices have dropped dramatically, which is bad news for people who already own homes but good news for people looking to buy a house. It is possible to find and purchase a house with payments at or below the rent you are currently paying.

How Buying Is Cheaper Than Renting

You might think between a mortgage, interest, taxes and maintenance a home would be more expensive than renting, and in the short term, this might be correct. Keep in mind you’re looking at a much bigger picture here. By buying a home, you aren’t subject to someone else’s rules and you don’t run the risk of your place of residence is sold out from underneath you. You don’t have to deal with a lease or the whims of a landlord, and you don’t have the struggles to get something fixed should something go wrong or break. Buying a home is also an investment in the future. If you get a good enough price on the home and it is well within your budget, the chances are good if you decide to sell in the future you will recoup your investment.

What You Need To Buy A House

First of all, you are going to need a good credit score. Before you even consider buying a home, it is best to implement a credit plan to get your credit in good shape. Evaluate your credit debt, and do what you can to get it under control. Remember every credit card application will ding your credit score, so try to keep those to a minimum. Evaluate the best credit card deals, and choose a credit card which offers the best benefits with the lowest interest rates. Make regular payments, and don’t charge more than you can pay back in a billing cycle to save yourself paying interest fees or late charges.

Next, you will need a down payment and financing from a bank. With a large down payment, you will be able to take advantage of a low interest rate for the loan and achieve a low monthly payment which can be much cheaper than rent. The upside to this is also with a low mortgage, you may be able to pay off your home a lot quicker by doubling payments when you can.

Owning a home is not for everyone, but in some instances it is a prudent and advantageous investment which may be very beneficial to your overall financial picture. Don’t buy more than you can afford, and you could save a lot of money in rent over the years with something definite to show for it.