Military Families Saving For a First Home

July 16,2007
Courtesy of USAA

Homeownership has long been a sought-after status among military families, and no matter where you are in life, saving for a first home can seem like an impossible feat. But around 2.5 million homes sell to first-time buyers each year, so it is doable. USAA members Angela and Brian Kargus worked hard, saved hard, and shopped hard for a new home and, for now, they’re still renting. Angela, a 27-year-old trade association manager, and Brian, a 26-year-old Army captain attending law school, have socked away enough to put down 7 percent even in pricey Williamsburg, Va., where three-bedroom homes cost $270,000 to $310,000. “But it’s not just the down payment,” Angela says. “It’s closing costs, homeowners insurance, title insurance — the extra things people don’t think about. That made us think maybe we shouldn’t be buying a house just yet.” Renting isn’t always a bad idea, at least for a while. Among other things, the Karguses expect Brian’s first duty station following law school to be somewhere with lower home prices. Meanwhile, here are tips they — and you — can follow to make saving for a first home a dream within reach.

Know what you want.
Decide on location, price, time frame, and other variables of the dream before pursuing it in earnest. If you’re married, before anything else, discuss home buying hopes with your spouse.

Know your target.
Buyers can put down anywhere from 0 percent to 100 percent of a home’s purchase price. Costs from title fees to interest rates are also negotiable. But nothing is free. Talk to brokers and lenders to develop realistic totals for down payment, closing costs, renovation expenses, and contingencies. Then you’ll have a specific savings goal.

Track expenses.
Use personal finance software — or just a piece of paper — to track all your expenses for a few months. Scrutinize categories like dining out, clothing, and entertainment to spot opportunities for savings. This exercise will help confirm that your dream home fits into your monthly budget.

Pinpoint priorities.
Are you willing to give up movies but not takeout? Can you forgo some things for a specific period of time? If you’re married, you and your spouse must be willing to compromise on wants and needs that drain your budget. The bottom line: You may be able to turn a few wants into additional savings for your new home.

Prepare a budget.
Once you’ve tracked expenses, you’ve done the hard part. It’ll go even easier if you keep spending targets psychologically and emotionally realistic — will you really restrict yourself to one meal out a week? — as well as financially sound.

Pay yourself first.
Before paying bills, set aside some cash for savings. Don’t let the lights get cut off, of course. But it’s easier to find money for saving if you do it before paying everybody else.

Make it automatic.
Set up an automatic deposit into your savings account. Your employer or bank may do this, or you can set up personal finance software to transfer funds from checking to savings after every payday. After awhile, it’ll happen almost without your noticing it, and one day, you’ll wake up and see you have what it takes to buy that first home of your dreams.

Courtesy of USAA
USAA, a diversified financial services company, is the leading provider of competitively priced financial planning, insurance, investments, and banking products to members of the U.S. military and their families. Named by BusinessWeek as 2007’s Customer Service Champion, USAA provides convenient and accessible financial products to its 6 million members. For more information about USAA, or to learn more about membership, visit usaa.com.