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| There is grass in this picture. Therefore, it was not taken at our house. |
We've been feeling buy-our-own-home fever for a little while now, but trying to resist it. I think we're still not quite ready, financially. But we've been in this rental house for almost two years now, and a few things are just starting to get to me. Foremost among them, the fact that we don't have a yard. Not at all. Not even a single blade of grass. We're a corner house on a city street that directly abuts the sidewalk on both sides. I hate to watch my kids grow up, pretty much never playing outside (Yes, I could be better about this and take them to parks more, but...I don't). Also, we have eleven foot ceilings and three stories (plus the basement). I feel like I carry laundry baskets and children and vacuum cleaners and countless other items up and down four flights of extra-long stairs ALL DAY LONG. I long for a house where the living areas (kitchen, dining room, living room) are all on one floor, and the bedrooms are all on another.
For a little while, Tom and I had gotten into the habit of "just checking" a real estate website every day or so to get a feel for what was out there. We had to make ourselves stop, because we were just torturing ourselves. But we were able to confirm what a number of sources had told us - there are some good deals to be had in Pittsburgh! We both want a big old house in an old neighborhood. There are some real beauties to be had at almost a steal, if we don't need to live in a high-profile part of town (which we don't), and especially if we're willing to do some cosmetic fix-ups on our own (which we are).
As of April, when our tax refund came in, we have finally paid off all our debt (car loan and student loans). We've been working hard to do this since we were married, and it feels awesome beyond words to be there. Now, any extra money in our budget goes towards our "house fund." It's only been growing for a few months now, but we're getting there, slowly. Our credit is good. Really, I think we're on a good path here. It's just that our income is rather small. I can't figure out whether there's a "catch", but I've been hearing about FHA loans, which only require a very doable 3.5% downpayment, and it's something we'll have to look into. If we wait for 20% down, it's gonna be awhile...
We visited the in-laws over the Labor Day weekend, and my mother-in-law brought up the house question. Our parents, of course, would love to see us in our own house as well. Both Tom's parents and my dad have offered to lend us money for a downpayment. Very generous of them, and to be honest, I would be happy to take them up on the offer. Tom wants to wait, though, and try to do it all ourselves. And there's pretty much no way he would ever accept money from my dad (it's a pride thing. I understand.). So for now, we have to just keep waiting it out, living frugally, building up a little downpayment. And praying that we don't have any unexpected costly emergencies spring up on us (but at least we don't own a house yet, so any necessary household repairs are on the landlord!)
If you have any advice for us about saving for or buying a house, I'd be happy to hear it! :-)
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ReplyDeleteKeep dong what your doing! We are doing the same thing, and to steal a mentality from Dave Ramsey, I'm okay being weird without debt, and saving for things to do them on our own. Thanksgiving Dinner tastes funny when there is a debtor and lien holder at the same table, and you will never regret waiting until it isn't stressful. It seems like 99% of people who buy a house, especially an old house, have unexpected expenses shortly after moving in. Keep that savings account! Debt free, 20% down, 15 year mortgage!
ReplyDeleteBut you asked for advice: Keep looking for success stories, and people of the same mindset! That has helped me tremendously!
Definitely take your parents up on the offer of money for the downpayment when the time comes, BUT, one thing we discovered is that a certain percentage of that downpayment *has* to come from you and you alone, not as a gift or loan from anyone else. I think because they want to be sure you're able to make mortgage payments for two months or something like that in case anything happens ...?
ReplyDeleteIf your dads love language is gifts, then you may try to reconsider him giving you the money. thats how my dad is. and it took years for my husband i to understand and agree on the fact that he is just showing his love that way. he often reminds my husband that someday he will have the same opportunity to shower gifts upon his adult kids and grandkids. We take it as a blessing that he is able to help us with things right now. I cant help on the loan aspect because we have a VA loan. the joys of military service! no down payment! good luck mama!!!!
ReplyDeleteWe just had an offer accepted on a house (it fell through because the inspection showed MAJOR issues). An FHA loans requires 3.5% down and they don't care where the money comes from as long as it's from your account. So, Brian's mom sold her house and gave us a very generous gift. We put it in our account and that can be used as a down payment, no questions asked. If you do take money from someone else to put toward a down payment, just deposit it alone (no other checks or cash) into your account and keep the deposit slip. If a bank has questions, you can simply say, that money was a gift to us. And that's the end of it. What can't happen would be Brian's mom writing a check or closing costs to the bank. That wouldn't fly. An FHA loan also comes with a fee of almost $2000. It's set by the government. So, if you don't have the upfront cash to pay that, it gets rolled into your loan. Also, when you close, you will need to pay closing costs (on average $6000) PLUS open escrow for taxes and home owners insurance. Opening escrow is not cheap. This usually requires you to pay a year of property taxes up front so that way if you default on the loan, there's enough in escrow to cover the taxes while you default. (Not saying you will default. That's the bank's logic.) So when we were looking at closing, we would have needed about $9000 in cash. We asked for seller's assist and got a lot of that paid, but still would have had to show up with $4500 including our very small down payment. My advice would be to talk to a lender and see what kind of monthly payment you want to be at. Then work backward from there to see how much of a house you can afford. The mortgage payments get bigger faster than you think because with an FHA loan, you have to have mortgage insurance (and honestly we would anyways), home owners insurance, and the FHA fee, plus the property taxes. It really helps us that Brian has a real estate license and is pretty well versed in all of this. Also, call a few lender's. Banks want you to take a loan from them instead of the next guy. Some banks have programs for first time home buyers and can help you get grants to put toward closing costs. What I have learned in the past month is that buying a house is WAY more expensive than I ever imagined. And I sincerely hope that the Spring market brings some more choices in the South Hills for us to choose from. Good luck!
ReplyDeleteWow. I knew it was complicated, but I didn't realize there were so many extra fees on top of just the down payment that you need to have upfront. So even if we did FHA, we will still definitely need to build up a decent chunk of change first.
DeleteYes, and that's the hardest part, in my opinion. Before the market crash in 2008, you used to be able to roll those closing costs and escrow costs into your loan, but after so many people lost homes, the government changed those rules. You also used to be able to take out a loan worth more than what you bought the house for and use the extra to fix up the house. That is also now not allowed by the government which is why our house fell through. Had we been able to take out extra money, we could've fixed the issues. I know the rules are there to protect us, but sometimes I feel like they are out to hurt us. It's frustrating.
DeleteWhew, home ownership sounds complicated. We are still in the paying off student loans phase. Then we'll probably be in the buying/paying off a second car phase before we even start saving for a down payment. And then that down payment will have to be very, very large if we end up staying in Seattle. It will be a quite a while, but I'm okay with that. I don't think we'd want to accept a loan from our parents, but they also don't have a $100,000 to give us, so it's not really an issue!
ReplyDeleteWe bought an old large house almost 2 years ago and it has really been a money suck. Last week we spent almost $6 thousand on supplies for a new roof (labor will be an additional 4). Before that we needed $3,500 for a new furnace and more then you could even imagine when our kitchen needs became more extensive then we thought; we knew we needed to update the antique appliances, but since they were built in instead of stand alone it turned out we needed to redo cabinets as well, which also meant new coutertop. Windows will be next. This is all before we even begin the cosmetic changes which would really bring our personal style to the home. Most of this we knew about when we bought the house, so we had factored that into the cost of the house and decided it was worth it, but like Danielle mentioned you can't get loans on renovations the same way you can get them for the house itself, so you really do need some sort of extra monthly cash flow or a large amount of savings built up for this sort of thing.
ReplyDeleteJust make sure that before you buy you consider how you will pay for all the updates the house will need. I know that sounds obvious but it wasn't something we had really planned out. Even with all the money we've spent these past 2 years, our home has cost less then we had budgeted for when we first set out to buy, it's just that needing all this cash upfront has been a challenge for us and could have been really really hard if we had budgeted tightly to begin with.
Good luck! Planning for a new home really is such an exciting time, even if it takes a while and seems overwhelming sometimes. I hope you find something that works well for your family.
Thanks, Anna. That's really useful advice. I'll be sure to pass it on to my husband.
DeleteChristine, have you considered a USDA loan? We bought our home with one back in 2010. It is different from the FHA in many ways, but the best perk is that the inspection process is less strict (the bank inspection that is - you should still hire someone to inspect for your own sake). Its also no money down. While its nice to have a down payment, you don't absolutely need one. We put no money down because at the time we bought we scored a very excellent interest rate and figured it was worth it to keep our cash. Homeownership has been awesome for us! Even the projects and improvements have been manageable and even fun. Good luck!
ReplyDeleteI'm late to the party, but Danielle's comment was super. See if there is any assistance available through Tom's company. This sort of thing is probably getting much rarer, but it is worth checking out. Ryan discovered that P&G would cover all our closing costs and the realtor, but we had to take advantage of it by a certain date after Ryan started working there. As it turns out we just made it! This might be obvious, but first-time homebuyer tax credit would be good for fix-up money.
ReplyDeleteWhen you do get to the house hunting stage, do the St. Joseph novena! Seriously. Don't wait until you're getting stressed out, just do it right off.
When buying a house, set a definite budget; one that will fit your financial status and will not turn out to be a monthly burden. Anyway, if you lack enough funds, feel free to consult a broker for possible mortgage loan. Find yourself a trustworthy one to land on the best possible loan that you can afford to pay.
ReplyDelete-Nannie Toller @ Utah-Mortgage-Lenders