The down-payment chronicles (© Creatas/SuperStock)

© Creatas/SuperStock

Once you decide to buy a home, one of your biggest obstacles is likely to be saving for a down payment. Given the competition from all of life's other financial demands, it's no easy job.

Some lucky buyers get help from family or friends. Seattle real-estate agent Ardell DellaLoggia recently helped a young couple who received, as a wedding gift, enough cash to cover their entire down payment. (Bing: How to ask for money as a wedding gift?)

Few are so lucky. Here are three stories of first-time homebuyers and how they did it.

1. Ryan Ferrell, Chicago
Ryan Ferrell moved to Beijing after graduating with a degree in neurobiology from the University of California, San Diego, in 2008. He had attended a college summer program there and won a Chinese government grant to return for another year, to study Mandarin. 

Living in China transformed his thinking about money. Coming from an affluent home, it was humbling, he says, to see "how different life can be when you're in a lower income."

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Among his friends were poor, thrifty migrant farmers. He started imitating them, bargaining at stores and markets, at first to broaden his language skills but soon to get the same prices that locals were paying. "I bargained for pretty much every purchase," he says. Everything — clothes, groceries, rent, even restaurant meals — was negotiable, he found.

Returning to the States at 22, he decided it was time to save for a home. His mother had purchased her first house, a fixer-upper in San Jose, Calif., at 26.

"I'm not wealthy, by any means," he says, but now, working in public relations for biotech companies, he was earning enough to choose between investing in the stock market or a home.

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After a job move took him to Chicago, he squirrelled away emergency savings equal to 18 months of his living expenses, so he could feel safe and independent no matter what comes. "People don't think through how much can go wrong," he says.

Then, he saved a down payment, continuing all the while to contribute to his retirement plan. His nest egg got its biggest boost from two tactics:

  • He banks half of each month's income.
  • He earned three double-digit raises in three years and banks those salary bumps while maintaining a frugal lifestyle. (Savings: $20,000 in three years.)

Two more windfalls helped. He invested other savings "aggressively" in the stock market, reaping $5,000 for his down payment Selling his car added $4,250.

Ferrell’s frugal strategies
In all, he has amassed nearly $70,000 toward his down payment, including savings from college jobs. He does it by keeping monthly expenses -- including utilities but not rent -- under $500, and often under $375.

His frugal tactics include:

  • Trimming restaurant meals on evenings and weekends from as many as six a week to two and sticking with "cheap joints" and eateries offering coupons (savings: around $50 week or $5,200 in the two years).
  • Brown-bagging lunches (savings: $7 a day or $1,750 a year).
  • Bargaining still helps occasionally, although he misses the days of haggling for 50% or 60% off list prices in China.
  • Holding off purchasing clothing until traveling in Third World countries (savings: about $700 in three years).
  • Walking to work (savings: around $300 in two years).
  • Moving to a smaller room in the rental apartment he shared with friends (savings: $4,800 in two years).
  • Applying frugality even in the quest for love: In Chicago, he found a partner, Tai, who also enjoys inexpensive entertainment such as public festivals, weekend hikes and board-game evenings with friends over pricey clubs and concerts. (Savings: roughly $200 a month, or $2,400 a year -- "not to mention the savings from co-habitation," Ferrell says.)

Having a savings goal has forced him to decide what matters most, he says. Experiences — travel and relationships, for example — trump things. When he splurged on travel to Turkey recently, it was a budget trip and he was able to pick up some expenses for a traveling companion who is still in school.

"My generation is so focused on consumerism," he says. "They have to be seen at this bar, in this brand of clothes. It completely misses the point. They are wasting their money when they could be setting themselves and their family up."

In May, he made an offer on a $200,000 loft condominium in Chicago's South Loop neighborhood. "If all goes well," he says, "I should close in November." He'll put 25% down — roughly $50,000.

Buying a short-sale property entails waiting and uncertainty, he knew, but when he saw the loft he knew it was "home." It's a 1,250-square-foot open design without lots of storage — a plus, in his view, since there's little room for new furniture and possessions.

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He's learned a lot, he says. For one thing, he had not realized that his down payment would be just one of several out-of-pocket expenses. "Closing costs and immediate repairs are about $6,500, not including new furniture or tax escrow," he says. "I didn't realize getting into the house hunt how much the other costs can add up."