If you think buying a house on minimum wage is impossible think again. Tips for saving money to buy your own home while making a low wage.
Many people insist that it is impossible to live on minimum wage, much less save up to buy a house. I not only saved up enough to buy a house, but to have mortgage payments that are lower than rent.
When my daughter was born my first husband (he has since passed away) and I decided that home ownership was an important goal. We scrimped and saved, with a little luck, we eventually did manage to buy a three bed room home in a decent area of a good city (in other words we did not buy a dump in the bad part of a bad town). He worked full time for minimum wage, I worked part time for minimum wage, buying a home while making only minimum wage is possible.
Get Cheap Rent
Find whatever accommodations you can at low rent. One of the best situations to get into is one where you are looking after a property for somebody who is away for an extended period of time, such as somebody who will be living abroad for a while but does not want to sell their home, nor leave it vacant, or rent to strangers. In my situation I was lucky enough an elderly relative was going to live in a senior's home but did not want to sell their house. I still paid rent, but it was not terribly high.
This was a lucky situation, but there are many like it, such as if you can get a position managing an apartment building and act as a live in landlord (at reduced, or free rent). Some camp grounds also have live in care takers.
Other jobs, such as live in nannies, and people in the military, provide rent free living (but the military is not minimum wage).
Rather than spending your money on things you do not need, save it. Get a bank account and put your money into term deposits. Not only do you get better interest but your money is held so you cannot get carried away spending it. You might want some term deposits at 90 days, but most should be for 1 -3 years.
Live Cheaply - Be Frugal
Being frugal is the best way to save money. My husbanded and I shared one car, it cost us $1, as such we had no ongoing car payments. I lived within walking distance of work and shopping, so really did not need to dive much. We never had coffee other than what we made at home (coffee, and other drinks have a huge mark up when it comes to buying it elsewhere), if we ate out we had often had water to drink. We ate a lot of homemade soup (added health benefits come from not eating out too!).
Be Your Own Child Care
If you are making $10 an hour, but paying $5 an hour for child care, how much money are you really making? My husband and I never put our daughter in any child care facility or left her with a baby sitter. Instead we both worked our shifts so that one of us was always home. Thus even though we made a low wage it was still more than somebody paying for childcare (and our daughter wasn't growing up calling other people 'mommy').
No Pets or Luxuries
Most people reading this online shouldn't be. If you are making a low wage – and want to save up for a house – the first thing to get rid of is... your Internet!
I love pets, and currently have several, but as a renter saving for a house they were an expense I could not afford. Of course I would never encourage anyone to get rid of a pet just to save for a house, but if you do not have a pet, wait until you get a house first. My husband and I did not have cell phones, Internet, or cable TV.
Getting a Mortgage
The trickiest part is actually getting the mortgage when your wage is so low. The bank might not think you can manage the payments. If you have done your job of saving after a few years you will have enough to make a large down payment, bringing your monthly mortgage payments to below what a monthly rent payment is. You may need a co-signer.
For my husband and I, we got a mortgage with expedited payments (payments every 2 weeks rather than 1 a month) of $220. That worked out to about $440 a month, with 2 months of the year having $660 in payments. This was way less than if we were renting the same house (rent would have been over $1000).
Remember, at that time he was working for minimum wage, I also was making minimum wage but only working part time (revolving around his schedule as per the childcare situation mentioned earlier).
Throughout many areas people think that homeownership is beyond them. It is not. If you make it a goal, it is reachable, even if you make only minimum wage. It will not happen over night. It took us a few years, but it is possible. If you can save $200 a month, you can certainly manage to save up for a down payment on a home. I managed to save more than $200 some months, while making less than $1000 a month. Believe it or not but our total income was less than a family of 3 on welfare would have received.
I also feel there is no excuse for home foreclosure if one is smart enough to make a large down payment so that their mortgage is lower than rent. The problem is people expect too much, too soon, and bite off more than they can chew, and soon are unable to meet the payments if things start going wrong for them.
Sacrifice for a few years, it is not the end of the world, set a goal and do not stop until you get it. There is no reason to be paying a landlord to get rich when you can be paying into your own future instead.
If house prices are high in your town, consider moving, if you are only making minimum wage, finding an equal, or better, job elsewhere should not be too difficult.
Since this article was written in 2010, many things have changed in the United States. The economy has gotten better and as this update is written, the U.S. is almost at full employment with an unemployment rate at 4.7% as of February 2018.
The bad news is that wages have hardly climbed during the economic recovery. Minimum wages have risen in numerous states, but for those making more than minimum wage; wages have not risen much at all for many people. The latest government report states that wages rose by an average of 6 cents in February 2018, and 5 cents in January.
Since 2010, in many parts of the country, house prices have gone up 100% and in some areas more than 100%. Some states like California, Oregon, Washington and Colorado, unemployment is even lower than 4.7% and many people are moving into these states, raising home prices even further.
Another problem is the lack of homes on the market. Some homes that are put up for sale are having many bids per day.
According to Zillow, the median value of a home in the United States as of early 2018 is $207,600, but much higher in other areas. The median price of homes currently listed is $257,990. That is quite a hefty amount of money to save up for a 20% down payment. But it can be done.
Along with higher home prices, rents have also gone up with the median rental price in the United States at $1,595 and higher in many areas. This high rental prices makes it that much harder to afford the down payment of buying a house.
This of course is making it harder to afford a home. Some realtors have stated that they believe the housing prices will start to cool off and come down sometime in 2019. Others state that will not happen with the housing shortage in many parts of the country, but there has been a great deal of building to make up for this shortage.
Either way, it is always great to save as much money as you can, when home prices drop again, you will be ready to buy a house.
Now for the good news. Some states have some great programs for first time home buyers. These programs include a grant program for first time home buyers that will give the home buyer up to $8,000 towards the down payment. This grant does not have to be paid back. Check with your state for these grant programs for first time home buyers.
Top Five Cheap and Easy Pets
Eat Local and Strenghten your Local Economy - and more
Considerations when Moving from the City to the Country