Monday, January 05, 2009

House Hunting

We have begun the hunt for new house. We've been looking online, checking out open houses and even working with a Realtor. It's been about three weeks or so now and we've learned a lot.

1. Don't go by what the bank says you can afford. Even with tighter lending practices the bank will let you borrow more than you really should borrow. We could buy a very nice house, move in ready, in a great neighborhood, but then the house would be our prison. We'd have little money for going out, vacationing, etc. The house would rule all. That's no fun at all.

2. Evaluate the whole cost of purchase. We have a decent amount of money in the bank for a down payment but once you factor in moving costs, closing costs (yes I know you can probably get the seller to pay those these days, but still...), breaking our apartment lease fees, and other unexpected initial move in expenses, we'd not have as much to put down on the house as we initially expected. That means save more or pay points/PMI. There is a point of diminishing returns with saving more money VS paying the points, especially with interest rates so low, but right now time is still on our side.
3. Buy a house for the right reasons. Sure it's nice to move into that nice neighborhood and show off to your friends and family but will they really think so little of you if you move into a neighborhood that is more realistic for your means? If you answer is yes, reconsider your friends. The family is more complicated but I say give them the finger and live your life as it makes sense for you. And give yourself the finger if you were trying to show off by buying into those more expensive neighborhoods.

4. Don't be ashamed of your price range. There are a lot of houses out there that are over-priced. A LOT of people bought into those homes for the wrong reasons and are now in trouble or have been foreclosed on. If they bought more realistically they wouldn't be there right now. There are a lot of great homes in the lower price points that have been neglected because everyone was buying 'up'. These houses are still great but need a bit of work. If you can buy a $150K house, put $20K (out of pocket, not credit) into it over a few years and end up with a $200K house, then you've done a LOT better than someone who bought the $200K house.

5. Buy a house that will not tank you financially if one of you looses your job. In our case we both make decent money and we have looked at a mortgage financed only by one of our jobs. If one of us looses our job, and in this economy it CAN happen, we can still afford to pay the mortgage. Sure we could have pooled our income and financing and probably buy a VERY nice house, but then what happens when one of us looses our job? That's when the bank starts knocking on the door that THEY own.

There is so much more that I'm still learning about myself and what I want VS what I need in a house. Sure we might have to remodel the kitchen and rip up some floors. The positive thing is that we'll end up with a nice house in the end, but still have enough money to do the things we enjoy in life. One's quality of life shouldn't be determined by "The Jones'".

No comments: