Saving for a Down Payment

April 26, 2014

Jonathan and I sat down in August to have a conversation about where we were going financially. In the process, we reviewed the Total Money Makeover and we were technically in Baby Step 3B – time to save for a down payment. I was feeling like I needed more encouragement, as the Denver housing market is pretty intense.

So I called Dave Ramsey himself. In his own words:

“The Denver market is white-hot and you should scrape together a down payment as soon as possible.”

He also said that he could tell we were focused and intentional about our finances – how did he know?!?! πŸ™‚ I guess he has a sense about these things. It was the highest compliment we could get from Dave himself.

Into Baby Step 3B went we!

It’s not technically one of the “7 Baby Steps” but it’s between Baby Step 3 and 4.Β For those wanting a refresher on Dave’s Baby Steps:


We didn’t quite go back to beans-and-rice-gazelle-like intensity but we’ve been close. We have definitely lived like no one else so later we can live like no one else. As you can guess, we won’t be doing this home buying process like the average American.

Check out Dave’s home-buying standards:

  • Be completely debt-free and have a Fully Funded Emergency Fund of 3-6 months of expenses (otherwise Dave says Murphy will move into your spare bedroom and bring his cousins Broke, Desperate, and Stupid)
  • 100% down is preferred (OK being realistic, we are NOT doing this)
  • 10-20% down payment minimum (20% preferred to avoid PMI aka wasted mula)
  • Total payment <25% of your take home pay (most Americans qualify for a MUCH higher monthly payment…making them susceptible to being house poor)
  • 15-year fixed rate mortgage (Dave has studied how the 30-year mortgage hurts people long term. He also says if you think you will pay a 30-year mortgage like a 15-year mortgage, you are kidding yourself)

Pretty different approach to the typical American home-buying behaviors. Sure, Dave’s advice is fairly conservative but I know this – it will never lead to our harm. Will we follow ALL Dave’s recommendations? I really hope so but sometimes I get impatient and want to compromise…as there is so much to factor in. For now, things feel a little touch and go. Currently the Denver real-estate market is the 7th most overpriced in the nation. Ouch. There is talk of a “bubble” happening again. Maybe. Maybe not.

What do we do? Get in quick or wait? Buy a house (the most overpriced type of real-estate) or a town home (priced more appropriately)? Do we buy something we will have to move out of in 4-6 years as our family (PLEASE GOD) grows? Or do we buy the bigger house we could stay in for 10+ years that would require us to take a 30-year mortgage (at this point in time)? Or do we go for the cheaper fixer upper on a 15-year fixed mortgage but have to put $30K in updates/repairs during it’s first couple years? Or do we wait one more year, hope interest rates don’t climb and the market doesn’t keep inflating? What are the longterm affects of delaying retirement savings another entire year? So very many options. Enough to make ones head spin.

We will be using this mortgage vs buy calculator for many varying scenarios to calculate the smartest move possible. But there will always be risk we just can’t get rid of. Dave’s standards help minimize that risk, thankfully.

We are currently going through the “pre-qualification” process and from there, we will either begin looking at homes in there area or decide to wait and save longer. We are committed to that 10% down minimum but are going to shoot for as close to 20% as we’re able. Join us as we continue this home-buying journey! I will keep yall updated as we make various decisions.

Anyone out there have any advice? Regrets? Encouragement? I look forward to hearing from yall!

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  • Reply Emily April 28, 2014 at 9:38 am

    The “house” (or any home, really) hunt is so intimidating. My husband and I had this same talk in the fall…buy, continue to rent, buy on a smaller scale, ‘just go for it,’ etc. etc. Like you said, enough to make your head spin. We finally did buy this past February, after much hemming and hawing. It’s a starter home, but big enough to “grow our family a bit,” close to my family, close to the train (we are city commuters for work), etc. etc. Did we have 100% of our down payment? Nope. But we were able to put a sizable chunk down along with getting a manageable monthly payment worked out. There are SO MANY factors to consider, but for us, after 5 moves and countless packing/unpacking fiascos, to finally have a HOME…well, that was just priceless.

    Actually, it did have a pretty significant price tag attached to it if I’m being honest πŸ™‚ But it feels great to finally put our roots down!

    You guys are awesome for working so hard on your finances and, even more importantly, staying on the same page with everything (as much as any two people can)! Best of luck, and I can’t wait to see what you decide!

    • Reply Amanda April 28, 2014 at 9:11 pm

      Thanks for the encouragement! It’s good to know others struggle through this. Seems like some people just don’t think about it and next thing you know, they bought a house! WHOA. I just could never do that. I have to play out every scenario – cue head spinning. πŸ™‚ I am glad you found a place and feel at peace finally having a home. I so desire that. I’ve rented since college and just want to be somewhere I don’t have to move from every year or two. I agree with you in saying that is priceless!

  • Reply Mr. M April 28, 2014 at 10:23 am

    Wow! Great article. My wife and I are in the same spot as you and we are trying to figure all of this stuff out too. We would love to think this stuff through with you. Also sorry to make things even more complicated, but I would seriously put adoption into the equation too as step 3B or 3C (if you are considering that as an option in the next few years). This question of adoption is what is throwing us for a loop along with the home question. How do we save for both, maintain a fully funded emergency fund, do retirement savings (as we have an employee match that would be foolish to miss out on), and hit DR’s high standards? Anyways, my question would be have you thought of where to put adoption in to this process or are you not considering it in your savings plan yet? I ask as infertile because I am trying to figure it out.

    • Reply Amanda April 28, 2014 at 9:25 pm

      Glad to have others in a similar situation!! I have heard of people putting adoption into BS 3B or right along with post BS4 savings. We have thought about it this way – a home is something we know is a very good long term decision and it’s something we should get sooner than later. Now, we definitely WANT kids more than a house but we really don’t have hardly any control there. We plan to use our down payment currently saved towards a home that is appropriate to our state in life and income that could accommodate at least a small growing family. We are submitting our adoption application at the same time though. Our logic is that it will take months for the homestudy and then possibly YEARS to adopt. Who knows? Maybe we will have been able to re-save up the adoption funds by the time our kiddo comes along? In the chance the kiddo comes before we have enough saved – we plan to fill out every single grant application that is out there AND we read Julie Gumm’s book “Adopt without Debt” and it’s chock full of cool and meaningful fundraising ideas that so many couples have used to make ends meet with adoption. We are also realllllly praying God allows us to meet a birthmother without the agency having to introduce us, as this cuts the fees in 1/3 at most places.

      So in a nutshell – 1. buy home and stabilize housing costs/more appeal to some birthmoms to have a home 2. begin retirement funding 3. begin squirreling any extra dollars into an adoption fund 4. wait on God to bring us our kiddo in the right time and possibly fundraise/grants to supplement what we may not have saved 5. FINALLY get to move on to BS5 – kid’s college (the step I feared we would always have to skip over) and then 6. In a far off future, go gazelle on paying house off. 7. Use all prior house payment money to again squirrel away cash for future adoptions.

      Writing that out got me very excited. But then discouraged. How many people get pregnant without meaning too at the drop of a hat, only to go abort their child??? And here we sit plotting, researching, and praying about how we MIGHT SOMEDAY MAYBE POSSIBLY become parents to a child. Lord, have mercy and give us all strength for the journey!!!

      • Reply Mr. M April 29, 2014 at 2:50 pm

        Thanks for the information. It is good to think this financial stuff through with another couple. We are in a different situation because the current housing market where we live is insane. We live near Washington, D.C. and it and the surrounding area is currently the highest priced real state market in the country. Starter homes/Small town homes are going usually for $250,000-$300,000 here, which would mean a $50,000 or $60,000 for a 20% down payment. Not to mention our current income makes the mortgage payment impossible to stay at 25% of our income. So needless to say, we can’t pursue a home at all and have instead decided to move up adoption to 3B. Moreover, our hearts are so much wanting and aching to have a child as soon as possible so we figure if we try to buy a home that this will put us back another 2-3 years (again given the DC housing market – may be different than your area) as I am not sure we will be able to fundraise the full amount of an adoption (although I know you are experts in fundraising being focus missionaries). If you are interested, then I can share more details of our financial plan privately and why we came to this conclusion. Further, let me just reiterate that there are no right rules to a proper financial plan for adoption other than don’t go into debt. So please take what I am saying here with a grain of salt. What one couple is called to follow will be different from another (in regard to where to place adoption in Dave’s baby steps). It is here there will be legitimate divergence and the rule of prayerful discernment must be followed. One piece of advice in this regard: I recommend the book “Why Enough is Never Enough” by Greg Jeffrey if you want a great Catholic take on how to handle money spiritually too. It is a very different type of book than Dave’s. I think it really helps with spiritual discernment between two good options like the ones we are now considering. It is well worth the read.

        Thank you again for sharing your thoughts about all of this. I especially appreciated the refresher on Dave’s ideas on home buying and I also appreciated the fundraising/grants idea, the idea to meet the birth mom yourself, and Julie Grumm’s book. I hadn’t heard of Grumm’s book so I will put it down on our “to read” list!

        Finally from afar, I am really jealous you got to do your debt free scream in Nashville! So awesome! We thought about going, but decided against the costs. In any case, we are both so blessed to be debt free. Keep up the good work on that score. I know we all need encouraging on money decisions but it is truly freeing to be debt free; and being so makes adoption or whatever your financial goals may be seem that much closer.

        Blessings to you! And lets keep each other in prayer for these big financial decisions!

        • Reply Amanda April 29, 2014 at 3:31 pm

          Hello again! I would love to talk more offline – amanda.marie.teixeira@gmail dot com is where you can reach me. I absolutely agree that every couple will have a different path. Heck, I waffle with our own path like 1000 times a day. πŸ™‚ But the one I shared with you is what we’ve decided to go for. Denver is a HCOL area compared to the Midwest but it’s nothing compared to the coasts, let alone DC area. Do you see yourself there forever? If we lived out there we would likely be making the same choice and putting adoption first prior to the home buying. They say Denver could be in a mini bubble (last year house prices rose 13%!!!! which is INSANE) so I fear if we don’t get in now, we may not for many years as inflation could keep outpacing our down payment savings. Ugh. We can’t predict the future but we are filtering it through the lens of doing the wisest and most prudent actions we can to maximize our donor’s gifts they give to support our mission.

          I wouldn’t say we are “experts” in fundraising but definitely comfortable with the process. We also have met so many GOOD people that would just humble your socks off with their generosity and desire to bless others. It’s amazing to see God’s providence in this way. I hope the book by Julie Gumm will bring you some great usable ideas to experience this!

  • Reply Stephanie April 29, 2014 at 10:18 am

    No advice! Just prayers! What an exciting (yet a little bit scary and “grown up”) time for you guys!! πŸ˜€

  • Reply GraceofAdoption June 26, 2014 at 9:46 pm

    I’m having fun reading your blog, and excited that you found a townhome. It sounds like we are in a similar situation as you and Mr. M and his wife. Debt free, trying to pay/save for adoption, and trying to save for a house downpayment. After looking at the list, it looks like where we live, Chicago/Naperville/Joliet is the 5th most over-priced market in the nation…ugh…we can feel the pinch here, which is why for now we are just saving like crazy for adoption and for a house downpayment that praying that we will be able to do both in God’s timing. Hope you enjoy your new home!

  • Reply Life and Times of a Happy Wife February 23, 2016 at 5:37 pm

    I am in baby step 2 right now. It’s encouraging to read others experiences with Dave Ramsey and his baby steps. We have been working so hard to get out of debt but my husband and I are worried about trying to save for a down payment any time ever on one income of 37k a year. We are hoping that God gives us peace and answers our prayers in whatever way he seems fit. I’m adopted by my parents from the foster care system and they have blessed me so much. Just letting you know that I’m connecting with your post. πŸ™‚

  • Reply Amanda February 26, 2016 at 4:04 pm

    Welcome to the blog Life and Times of a Happy Wife πŸ™‚ You absolutely can and will get through your BS2 and work your way down the babysteps! That income is tough but all the more reason to budget and make your money work hard for you guys! Just focus on your current goal and when you arrive at the down payment phase, you will be old pros at saving and scraping money together. It is a hard phase because it feels slow and you can’t see any accounts getting paid off but keep reminding yourself of your WHY and you will stay motivated to keep going. Who knows, maybe income will improve over the years too! Have you read Money Making Mom? I loved it and felt it was a great place to brainstorm about how I could contribute more money to our family budget even while staying home with our daughter. Hope that helps!

  • Reply jacasti3 October 20, 2016 at 10:07 am

    I see this article is back from 2014 and I was wondering what did you ended up doing?
    At this point we are saving for a down payment and being in Mass it will likely be a 10% since starter homes are usually in the 270-320k range in our area. We are just over our full emergency fund now so about 5k towards down payment, however I am contributing to my retirement at work to not miss the match. I wonder if I should actually stop it for a year or so…it kinda scares me but it may boosts things a bit.
    Any advice is so welcomed plus I would love to hear your story and what you ended up doing since you initially posted this.

    • Reply Amanda October 21, 2016 at 12:45 pm

      Hi there! We did end up pausing retirement for 8 months to save up for a down payment. We bought a town home in the Denver market. Our retirement benefits at our employer at the time were phenomenal but even then, it was beneficial to us to pause for a time. It helped us go into gazelle mode and we were ALL IN on saving because we wanted to turn retirement back on as soon as humanly possible. The more you save now, the less you pay in interest on your loan later, so to us that was worth it to pause.

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