In the previous two posts I discussed where we were at when we decided to take the necessary steps in order for us to buy a homestead. I outlined the debt that I had at the time and how we overcame that. Now we’ll move on and focus on step #2 which is saving for a down payment.
Using the same strategies that helped me pay off my debt would ultimately allow me to save for our down payment. However, there were two new wrinkles in this situation. First of all, I had no idea how much I had to save as I didn’t know how much land was going to cost. In order to save my sanity, I had (mostly) refrained from looking for parcels until my debt was paid off. According to our master plan, once the debt was gone we could start looking for land while we saved. This way we could gauge how much would be required for a down payment.
Secondly, I found that at times it was difficult to save. It was one thing to be paying off debt; once I had that ball rolling it was actually fun to see my debt reduced month after month. Now that it was gone and I was saving however, I started to revert back to my old spending habits. Not to the same extent, but in principle. We started going out to eat more often, I bought some new things, and I wasn’t quite as diligent when it came to saving. That is to say, I wasn’t saving as much as I could have been. That changed once we started pricing out some properties.
I’ll get into the details further in another post, but we were shocked once we first started looking at land. 25 years ago my father bought 40 acres for $18,000. I thought, conservatively, we could get land for around $1,000 an acre. I just ASSUMED that we would also buy 40 acres because if you’re going to buy land, who wouldn’t want 40 acres? Once we started looking a little harder at specific parcels in our area, we quickly found out that the price was anywhere from $5,000-$10,000 per acre. Now, since we had ASSUMED we would be purchasing 40 acres, we were now looking at $200,000-$400,000!! And that was just for the land. We’d still have to pay to construct a driveway, build the dwelling and any outbuildings, run electric, put in a septic and well, and on and on. I remember thinking “Isn’t building a house supposed to be cheaper than buying a house?” That’s what I was always told growing up, but since the prices of land had skyrocketed, it appeared that was no longer the case.
Now since most lenders require anywhere from 15%-40% down payment for a land loan, we were looking at needing $30,000-$160,000 – for a down payment! Obviously, this was disheartening. We had to change our tactics a little bit when it came to searching for property which, again I’ll get into in the next post. I guess disheartening is an understatement. We were crushed. Our dream had just evaporated overnight, and seemingly, there was nothing we could do about it. However, as we were in a state of flux at that time, and we didn’t really know what we should do or how to do it, we knew one thing – we had to keep saving. Regardless of our dream, we knew that we didn’t want to live where we were for much longer, and the only way out was to keep saving, so that’s what we did. I don’t want to spoil the surprise in this post, but we ultimately ended up saving for around 8 months I believe, and we got a little help at the end from an unexpected resource.
In the next post I’ll discuss what we went through when searching for our ideal homestead location, as well as some parameters of our search.