How Long Will It Take to Save to Buy a Home

Is There a Way To Buy a Home Without Having to Save as Much Money?

The Atlantic Cities website recently put out an article on “How Long Will You Need to Save to Buy a Home in Your City” and the results were enough to keep you renting for a long period of time. Most people who rent don’t understand how long it would actually take to save the necessary amount of money to buy a home. The two charts below that were provided in the article are based on local average wage information from the Bureau of labor Statistics and housing prices from Trulia.com and show the least affordable and the most affordable metropolitan areas. These are based on someone putting 10% of their pre-tax income away with that earning a 1.5% annual return and they are assuming that you would put 20% down. At the end of this article I will tell you why most of this is actually irrelevant because most new buyers should go with a different program when buying a home. The most expensive/least affordable list certainly makes sense but the second chart with the least expensive/most affordable is very interesting. Atlanta, Houston, Dallas, Indianapolis you would think would be so affordable but it looks like the wages in those markets are relatively high compared to housing prices making these areas affordable.

The following chart, which has the most affordable Metropolitan Areas, has some great areas and because the housing prices are low and wages reasonable the time to save is significantly less in these areas.

So while this is all great information, what they fail to mention in any great detail is that for an FHA mortgage the down-payment is significantly different. You can put down as little as 3.5% when you are purchasing a home. An FHA mortgage also had some more relaxed guidelines than traditional mortgage such as allowing for lower credit scores. It was always conventional wisdom to put down as much money as possible when purchasing a home. However after recent financial crisis that argument no longer holds as much validity. Many homeowners put down significant money to purchase a home in the mid 2000’s and lost all of it in the housing downturn with many being forced to do short sales. Everyone looking to purchase a home has a different financial situation. If you are thinking about purchasing a home in the future contact your local bank and find out what the guidelines are for mortgage in general and then compare it to an FHA so you can determine which is better for you.