Hoping to have ourselves in our own home by 2030. My husband and myself are in our mid 30s, and relatively low income.
Between both of us, we bring in about 80k pre tax a year. We're downsizing to increase our savings towards getting a house. Currently I plan to put 80k towards a down payment (have 60k already set aside for that).
I read about people being house poor, and experienced it myself when I bought a condo in my early 20s (sold it a few years ago, which is where that 60k came from). So I want to make sure we have enough set aside if something breaks. I think we'd be able to set aside 10k a year, and I want to be sure that is enough for our projected time line.
Is 20k typically enough to deal with most house disasters? Roof repair, plumbing replacements, rewiring, etc. we're pretty handy for any basic repairs, but we ofc won't be able to fix everything ourselves. I have perfect credit, so a loan for such things wouldn't be out of the question either.
We are looking at older row houses in Philly, ~1,200 sq ft. If that makes a difference.
How much of an emergency fund should we have set aside before we start house shopping?
byu/Grass-is-dead inpersonalfinance
Posted by Grass-is-dead
6 Comments
3-12 months of expenses is recommended.
House repairs are much more about managing money and managing time as opposed to just having the cash. For example a roof can be 100% failed and leak a bit during rain. In this case you know you absolutely need a new roof but even a $1000 repair and tarp could buy you a year if your absolutely shot for cash. I personally think $20,000 is plenty for a 1200 sqft home.
3-6 months of expenses. Just redo the calculations with the new mortgage (use a mortgage calc). The purpose of an efund is to avoid debt. Don’t bank on loans to get you out of a pinch.
Emergency fund for homeowners is typically 2-5%of the homes value. This has nothing to do with an emergency fund for losing a job. I’ve seen too many people underestimate what prices are like as a homeowner and was can arise. This rule has saved me so much headache. Edit
You want **two buckets**, not one:
|Bucket|Target|Purpose|
|:-|:-|:-|
|Down payment|$80k|20% down avoids PMI|
|Emergency fund|3-6 months expenses|Job loss, medical, car, life stuff|
|Home repair reserve|$10-20k|The “something breaks” fund|
$20k repair reserve is adequate but lean for older rowhouses. Your timeline and math work. Get the sewer scoped, check the wiring, and budget flat roof replacement into year 5-7 of ownership.
my requirement was to have one year of expenses + one year of mortgage payments.