Last week my husband Alex and I celebrated our first Houseiversary*! Now that we have a full year of home ownership under our belts, and I wrote about my top 5 tips for buying a home last September, I thought it’d be fun to revisit the information I shared back then, and update it with the new things we’ve learned this year:
Last year I said:
Have 25% of the purchase price saved in cash before you go shopping.
This generally enables you to cover a 20% down payment (so you’re not paying PMI) as well as closing costs and anything unexpected. I mentioned last year that I think it should be illegal for lenders to offer “financing tricks” that allow potential homebuyers to put less than 20% down, and I still feel that way. I’m sure in some (very rare) cases it works out fine, but most of the time I see it as preying on people who are not always entirely clear what they’re signing up for, and they can quickly become overwhelmed and unhappy. Don’t get me wrong – if you buy a house with less than 20% down and are totally comfortable with how much extra money you’re paying for that opportunity, and it’s working well for you and you’re happy, I’m happy. This is coming not from a place of judgement but from a sense of general protectiveness over first-time homebuyers, and wanting to advocate for financial transparency, which is often lacking in real estate and credit card lending. At the end of the day, the discipline required to save for a 20% down payment on a house while still paying rent ultimately puts consumers in a much better position to weather the financial ups and downs of home ownership, in my opinion. I recently heard about a lender that is offering mortgages with only 1% down. I just … I can’t. I already put my soapbox away, so we’ll just move on.
Now I say:
Have 28-30% of the purchase price saved in cash before you go shopping.
I know this seems really aggressive, and it is. But the bottom line is that after a year of home ownership, I can safely say that there will (gasp!) almost definitely be near-term expenses you cannot anticipate, and I get really grouchy if my lifestyle is disrupted, so I try to avoid it. Our air conditioner broke, one of our dogs had emergency surgery (she’s fine!), my Jeep needed a bunch of random repairs, we went on an extravagant vacation, and so on. Aside from the A/C, those extra expenses were not directly related to the purchase of the house. But if we had spent ALL of our money on the house, I would have been sitting in a lawn chair eating ramen and wondering if I could afford life-saving surgery for my dog. I don’t want anyone to ever have to wonder if they can afford that. Because we spent significantly less on our house than we could reasonably afford, we had plenty of money to cover all of those expenses, including the most recent discovery of a leaky drainage pipe and malfunctioning HVAC wreaking havoc in our basement. There might be some major renovations in the works, but I didn’t even flinch when I found out, because we have the money saved already in an emergency fund. An emergency fund that exists primarily because we didn’t max out our budget buying a house in the first place. It’s way less stressful overall to just leave yourself some breathing room, I promise! To be honest, my immediate simultaneous thoughts were “OMG new kitchen maybe?!” (best case scenario) and “OMG excellent material for future blog post!” (worst case scenario). Because I’m not under financial strain, I can quickly identify the positives in otherwise very disruptive situations. So, stay tuned for whether I have a new kitchen, a new blog post, or both 🙂 The plumber will be here tomorrow!
Last year I said:
Take advantage of free money.
Between using Redfin, shopping aggressively for mortgage lenders and requesting reasonable credits for repairs coming out of the home inspection, we shaved thousands of dollars off of our final purchase price.
Now I say:
YES, all of that, AND one more free money situation I’ve noted below.
Make biweekly mortgage payments! Maybe it’s not truly free money, but it’s less spent money. Let’s say someone takes out a 30-year mortgage for $270K at an interest rate of 4% (more or less the current going rate, per the internet). Over 30 years with monthly payments, that individual will pay almost $195K in interest. YOU GUYS THAT’S ALMOST AS MUCH AS THE HOUSE COSTS. If they make biweekly payments instead, over the same period, they’ll pay about $163K in interest. That’s still a lot, but it’s $32K less than they would have paid if they stuck with the monthly schedule. Why does this happen? For starters, biweekly payments mean every year you’ll make 26 smaller payments, instead of 12 larger ones. By shaving off the principal balance more frequently, you’re reducing the overall balance to which interest is applied. Over 30 years, this ends up being tens of thousands of dollars in many cases, depending on the size of the loan. Some lenders will not allow automatic biweekly payments, but it is so worth calling your mortgage lender if you already own a home, to find out what your options are for early payment. In our house we also round up the payments so we’re paying a little extra, and that helps to reduce the balance and its corresponding interest even more quickly.
Last year I said:
Don’t settle for something “close enough” to what you want.
Alex insisted that any home we bought needed to be ON a lake, where he could swim, go fishing or do SUP/kayaking anytime. At the time I didn’t know where we would find that along with all the things I wanted, so I quickly discounted his request as unattainable – sorry husband! :-* However, after a thoughtful, patient search (LOL no, I was a complete psycho and I don’t know why Alex stayed married to me TBH), what we ultimately found was a house that we both love so much, AND it’s on a lake! We have two SUPs in our garage and we can get out on the water any time we want. We go to the lake almost every day, and we love the community we live in. You guys, we freaking LOVE our house, our neighbors, our community, everything. So we’re infinitely grateful that neither of us was willing to budge on what we wanted, because now we have something much better than either of us anticipated.
Now I say:
Don’t ever ever EVER settle for “close enough” when it’s something that’s truly important to you.
I settle for “close enough” with my hair (I legitimately lose my mind trying to sit still that long in salons, so I cut it myself now – a story for another day) but I was and am completely against settling for “close enough” on something I’m investing hundreds of thousands of dollars in. I would also offer that we should not settle for “close enough” in our relationships or our health, either.
Last year I said:
Trust your instincts.
I signed in to Redfin on a lark after a 6-month self-imposed real estate-shopping ban, and I saw our home at the very top of the screen – it had just been listed. I wasn’t even looking for a house – I was still mad that Alex hadn’t wanted to budge on the lake factor and had blocked my motion to go the way-too-expensive new construction route for a home that wasn’t even exactly what I wanted anyway. I admired the hardwood floors throughout this newly-listed house in the pictures (I hate carpeting) and ultimately closed the app and went about my day…but after a week, I was still thinking about it. My gut said to make an appointment to walk through it “just for fun” and when we did, we made an offer that very night.
Now I say:
Definitely trust your instincts – you have them for a reason.
I cannot believe no one else bought this house in the week it was listed before we got to it, but I really believe we were meant to live here. Not to get all woo-woo, but if your gut says it’s the right house AND it checks all the responsible adult-ing financial boxes, it’s worth paying attention to the message. I can’t say it enough – we love our house and plan to be here for a very long time! Similarly, if I’m honest with myself, my instincts told me that the new construction home I had an eye on for so long was not actually the best move for us, but I ignored it because I just wanted to get a house and I was being a brat. Fortunately Alex was more on track with instinct-trusting, and now we have the perfect house.
Last year I said:
Buy a property as though you earn half of what you actually do.
This suggestion puts a lot of people on the defensive, and I get it. It can be challenging to transition to one salary when you’re partnered and are used to spending the entirety of both incomes. It is also challenging to live on half of what you earn, especially if you have no roadmap whatsoever for making that happen. But there are tons of personal finance blogs (like this one!) that provide free advice for reducing expenses and increasing income, and it’s especially important to take note if you aspire to retire early and enjoy financial independence. When Alex and I got married, we transitioned to living on only one salary. It was absolutely bumpy at times, but now we’re in a place where we save about 70% of our combined income and we can take pride in our DIY triumphs and laugh about the mistakes we made (and will continue to make, I’m sure) without feeling pressured financially. We started with 50% and knew it wouldn’t be easy but that it was possible, and as we got used to it, we were able to bump up our savings rate in ways that didn’t compromise our desired lifestyle. We know ourselves and each other much better now, and can team up to make magic happen with our money, which is awesome. And, we enjoy our jobs a lot more because we know we’re there because we’re interested, not because we’re slaves to the paycheck.
Now I say:
Still absolutely advocate for this – buy a property as though you earn half of what you actually do.
I think this is the best financial decision we ever made as a couple, and it would be just as valuable for a single homebuyer. The original idea was that if one of us wanted to leave our job to be a stay-at-home parent, we could do so with no lifestyle disruption. In addition to that, one of us could leave our job for any reason at all, children or no children, and we’d still be very happy with our financial position. We have hilarious stories about our “fancy frugal” lifestyle, and we’re not worried about money when things go wrong. We’re not worried about money period, actually. So while it might seem like a herculean task to live on half of what you make and ultimately buy a home in a price range as if your salary was cut in half, it’s certainly possible for the majority of people, and can create greater ease and joy in your life.
Now, I’d love to hear from you if there is anything else you’ve experienced in buying (or considering buying) a home, that we haven’t touched on here! Let me know in the comments below.
*I periodically invent holidays to justify drinking champagne on weeknights
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