Buying my 1st House: 4 Lessons + Real Numbers!

One of my biggest pet peeves about humans and money is that our anchors are all different. What is expensive to you may not be expensive to me and vice versa. I’ve run into this issue a million times as I enter the world of home ownership.

So many people have said to me “Home ownership is expensive.” What the heck does that even mean? I’m going to try shine a little light on the cost of home ownership.

I walked into home ownership with a vague idea of how much things cost. I’m hoping by sharing my numbers I can give others a little more insight on what they are getting into when they buy a house.

Aggressive Disclaimer: These are my numbers, true to my house. Obviously, your numbers will differ. But hopefully this can be a plot on the graph of what a homeowner can expect.

How much does it cost to buy a house?

The big goal is 20%. That’s what I was originally shooting for. I wanted to avoid PMI like the plague so I knew I needed to get to a 20% down payment.

But what is 20%? We didn’t know how much house we were going to buy. Our goal was to find something between $200k and $250k. That put our down payment goal between $40k and $50k.

Lesson 1: Save high! 

We didn’t know where in that range we were going to fall. The natural inclination is to spend $250k, so we waited until we had $50k to put down before we actively searched for a house. Things sell fast here, so we wanted to be ready when we were ready. Thankfully, we fought the urge to spend $250k and we ended up spending $215k, which took $43k for a down payment.

Having $7k+ to spend on life, moving and the house was a huge blessing. We were able to paint and update all the flooring before we moved in. We also had the financial flexibility to have a 2 month overlap of our apartment and closing on the house.

Lesson 2: Closing Costs Add Up!

Closing costs are the great unknown. They are another great reason to save high! In our case, the closing costs were paid by the seller. We only had to bring the down payment to closing. To give a little insight on what it costs to close a house in a MCOL area, the seller paid over $7000, including:

  • $3331 in loan fees,
  • $493 in taxes and other government fees,
  • $713 in administrative fees,
  • $1074 to fund the initial escrow, and
  • $1442 in for a year of home insurance and property taxes to finish the year.

Make sure to keep closing costs in mind if you have an itch to buy a house you don’t plan to keep for that long. $7000 was over 5 months in rent for us. If we had been on the hook for the closing costs and then had to sell the house in the short term, it would be very difficult to recoup the cost.

Lesson 3: Emergencies Happen!

We’ve been lucky in our first year of home ownership that we haven’t had too many emergencies. Thankfully, they’ve been relatively cheap. So far, we’ve spent $532 on house emergencies, including:

  • Ants! Everywhere! Then Fruit flies, Everywhere! ($12)
  • Broken Garage Door Spring (OMG SO LOUD!) ($330)
  • Damp Basement – read: De-humidifier, Now! Must Have! ($150)
  • Stupid Drainage ($40) – I am nearly fluent in PVC these days.

In preparation for other emergencies, we’ve beefed up our emergency fund. Thankfully, with our emergency expenses this low, we’ve been able to cash flow everything, but a strong emergency fund helps me sleep at night.

Lesson 4: You’ll need stuff to manage the outdoors

Equipping our first house was a much bigger deal that I expected. I’d lived on my own for 8 years in an apartment, so I had the interior stuff covered. I could feed myself and keep the place clean with the stuff I already had. What I didn’t have was EVERYTHING for the outside. Want to cut down the black berry tree/bush thing that is staining your driveway and the inside of your car purplish? You’ll need a saw or some snips for that. Mow the lawn? Get the edges? Sweep out the garage? Rake the leaves? Move the snow? Oh, you both want to move snow at the same time? You’ll need to acquire tools to accomplish these things.

For one time or random tasks, I’ve done everything I can to borrow. However, most of these tasks aren’t one time things. I’ve made the extra (sometimes awkward) effort to ask long time home owners for their cast offs. All of our rakes, shovels and brooms came second hand. It seems each house has one or two extra the homeowner is happy to get out of the shed. Even with all of our second hand goods, we’ve still spent a pretty penny at the home improvement store.

In addition to all the things I needed to acquire (or borrow), the outdoors also asks you to get rid of stuff. I hadn’t planned for this. I used to live in the woods. Now I live in the city. I don’t have woods to toss my brush into. I don’t have a thicket that will absorb all my leaves. In the city, I have to bag this stuff up and take it somewhere. Twice, I’ve had to take it somewhere in my little Civic! (My poor Civic.)

I have no idea how much I’ve spent over the last year on outdoor stuff. $500? 1000? It feels like all my time and money. Hopefully, this will be my only major year equipping my arsenal of tools.

 

Overall, I’ve been happy with where we are 1 year into home ownership. It has come with surprises, but thankfully, it has been pretty easy financially. Here’s to year 2!

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Do you have the Vision? Buying a House that needs love.

When Hubs and I set out to buy our first house, I had strict criteria. The most important of them was NOT UPDATED.

If I could write that on my list 3 times, I would bold the first, underline the second and italicize the third. I might even throw it on there a fourth time so I could make sure it really was NOT UPDATED!

This was critical for my home search because I didn’t want to overpay for my house. I didn’t want to pay for someone to throw some sloppy cosmetic updates that look nice today, but will completely fall apart before too long. Sure, cosmetic updates are nice when you walk into a home, but in my hot selling market, these updates were done on the cheap to exponentially increase the asking price. I also didn’t want to pay for updates that I may want to change. In the name of efficiency, I didn’t want to update twice.

I didn’t want to play the update game. I’ve been a renter for a long time and I knew I couldn’t tell the difference between cheap and quality craftsmanship. I stuck to what I knew I could rely on: Good bones. How is the foundation? How is the layout (reasonably speaking)? How is the construction? How is the house holding up?

We found what we were looking for.

The house we bought needs love. It was a single owner 1960s house. We got a deal on it because they needed to sell it and they didn’t want to update it. I’m being kind when I say it was ugly. I bought Grandma’s house with its green carpet throughout, 1 blue bathroom and 1 green bathroom! So much tile!

The best thing about this house is that it didn’t show well at all. Grandma died and the house hadn’t been cleaned in a long time. There were cobwebs everywhere. The cabinets were grimy. I’m thankful I didn’t have to take my shoes off when we entered.

This all sounds horrible to someone without vision. Those without a vision are overwhelmed by it all. One visitor (who may have visited too soon) could barely hold back their distaste. “You have a lot of projects ahead of you.” Others, I specifically told not to visit because I knew they wouldn’t be able to handle it. These are the people that buy move-in ready houses and pay the premium for it.  Move-in ready houses are fine for other people to buy, but this was my house and I didn’t want that.

I had the vision.

I could see beyond the house today and imagine it as the house it would be.

The house has a lot going for it. The layout is great. The location is even better. The neighborhood is established, quiet and safe. The house is on a dead end street. The bones of the house are solid. There is so much potential.

In only 3 short months, Hubs and I have made incredible progress. We cleaned, cleaned and cleaned some more. Then we:

  •  Installed new toilet seats
  •  Painted the ceilings
  •  Painted the walls
  •  Replaced most of the flooring ($$$) – Carpet for the main living areas, hard surface in the kitchen and family room.
  •  Replaced all the outlets, changing them to white (and some to USB!)
  •  Rejuvenated the shower experience! New shower head, fixtures, and a curved shower curtain rod.
  •  Replaced the vertical blinds with double rod curtains.
  •  Painted the bathroom cabinet, replaced the hardware.
  •  Replaced our front and garage entry door. Both were non-compliant. ($)

This house has been a team effort for us. Hubs and I shed equal blood, sweat and tears during this labor of love.  I wouldn’t recommend this to everyone, but if you have the vision, buying a house that needs love can be incredibly rewarding.

After 3 short months, you don’t need a vision to love this house anymore. The house looks great. I can’t wait to start inviting people over.

… Maybe I should get a living room couch first.

House Hunting – GND Style

We bought a house!

After 6.5 years of renting, it was time. Going into the process we built out our must have list.

3 Bedrooms

The plan was 1 bedroom for us plus an office for each of us.  Work from home FTW!

2 Bathrooms

When you gotta go, you gotta go. We’ve been incredibly spoiled with 2 bathrooms for 6 years and it wasn’t something we were willing to compromise on.

2 car garage

We live in the tundra and we both drive to work. I flirted with the idea of going to a 1 car household but Hubs brought me back to reality. We don’t live in a walkeable area and our schedules are completely incompatible.  2 cars it is!

Low Maintenance (read: Short driveway, small lawn)

We wanted to minimize the impact of the outside on our lives. As I said before, we’ve been incredibly spoiled by apartment living for the last 6 years. We love not having to mow or shovel and wanted to keep as much of that as possible.

TV Room

We don’t watch a ton of TV, but when we do, we don’t mess around. Hubs is a movie buff and having a good room for cinematic adventures was key.  I also enjoy the dark loud room as an excellent place to fall asleep 17 minutes into a flick J

A little bit more space

Our apartment is 1100 sq ft. Our storage unit (free – calm down don’t worry) is an extra 25 feet. Our living spaces are relatively clutter free, but the storage spaces are jammed packed. We wanted enough space to spread out and give our things a home.  We set our sights on 1500-2000 sq feet.  We were hoping for the smaller side, but the layouts for the smaller homes in our area weren’t good uses of space. We stayed relatively open when it came to square footage.

Same Neighborhood

We happened into our neighborhood 6 years ago and we completely fell in love. The town is great, the proximity to everything we could ever want is fantastic and magically we are just far enough from everything that most people forget the town exists. We initially set out looking outside of our town, but it wasn’t working. When we re-focused our search, we focused in on our town and only our town. We were prepared to wait for a property within our price range, even if that took a while.

Not Updated

We also didn’t want to pay for someone to update the house for us. In so many of the homes we’ve toured, sellers claim a room or a house is updated, but they used the crappiest materials. Even if they don’t install crap, people make these updates because they can charge more for the house than the upgrades cost to install. I wanted to buy an outdated home and do the updates myself. Even if we hire out the jobs, it should be net positive in the long run. That allows us to make the house our own and not pay an extra premium for it!

Right Price

We’ve been told for years that you make money on a house when you buy it. We wanted a deal. This sounds horrible, but we were hoping to capitalize on a little desperation.

In addition, we didn’t want to over extend ourselves. I drafted up a comparison between what we are paying currently for everything it takes to sustain us (rent, insurance, utilities not covered by our rent) and what we would need to pay for with a house (mortgage, taxes, insurance, all the utilities – electric, gas, trash, water). We wanted to maintain our current outflow.  My rough estimate: $215,000 was just the right price for us to pay the same on housing.

What did we buy?

  •  3 bedrooms
  •  2 bathrooms
  •  2 car garage
  •  Short, concrete driveway
  •  < 0.25 acre flat lot, while not on top of our neighbors.
  •  1800 sq ft
  •  2 blocks outside of our town proper, 6 minutes from where we rent.
  •  Outdated, but completely functional.
  •  Cheapest house in the neighborhood
  •  Seller was handling the estate for his late ex-wife. It was priced competitively and we asked for a discount.
  •  Final price: $215,000 on the nose.

 

Jordan fades back, SWISH! And that’s the game!