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Some Things to Consider When Purchasing a Home

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I’m apologizing in advance for such a long-winded post. I generally try to keep it short and sweet but this topic demands many more words than my usual. 
Before I  start, I’m going to give you a little bit of back story so that you understand where my experience with this subject comes from.  In September 2007 my husband (then age 25) and I (then age 22) decided it was time to buy our first place. We totally rushed into it because we were already comparing ourselves to other couples that had been married less time than we had and were already buying their first houses. 

Plus, buying a home was supposed to be a smart financial decision right? Well, little did we know that we bought nearly at the peak of the housing bubble (only one couple that we know of bought higher than we did) and ended up being stuck there until FINALLY the stars aligned and we were able to sell about a month ago.  It’s a mistake that we are are still going to be paying for for the next several years as we had to take out
two decent sized personal loans, in order to pay down our principal balance, to make this move even happen. I’m giving you this advise as someone that was never late or behind on paying their mortgage for six years and still doesn’t know what it feels like to have even a penny of equity. Please take this seriously, these are things that I wish that I had thought about or had the life experience (maturity) to even consider before we bought our first place. 
 
Anyway, here goes:

NEVER EVER make the decision to buy a home because you are comparing yourself to someone else. Everyone starts out with different financial backgrounds and goals, so really there is no accurate way to to compare yourself anyway. Just remember that many people don’t actually own the nice things they have, they just want to look like they are well off, when really they are drowning in debt.
Equity is NOT a guaranteed thing (sometimes even with many improvements to the place) so don’t get into a home with dollar-signs in your eyes because you are going to have all this money to put down on your next place. I remember that one of our big motivating factors for buying and it being “a smart financial decision” is because my co-worker, at the time, had bought her condo and then six months later sold it with $9,000 in profits. Wow, we are going to have like 70k to put down on our next place…or so I thought, when in reality we have 24k in debt from the whole ordeal.
(I’m not complaining, it is what it is…we’ll just feel super rich when we get the loans paid off and are back to only having a mortgage for debt.) 
 
Don’t let anyone rush you into buying a home. Our first Realtor was a piece of work. He would always say things like “you better hurry, home prices are going up quick” or “pretty soon it’s going to be harder to get into a home, so you better buy soon”… We were naive and bought into that mind set, not knowing that he was just after a commission check. Go at your own pace and pray about your decision. Also try to find a realtor that isn’t a total tool;).
Your home needs to be somewhere that you will be happy, feel safe, and  have room to grow in case the housing market falters again and you get stuck there. We planned on having one child in our condo but ended up with three, so it was a pretty tight fit there at the end. Luckily, we were in a pretty safe area, but it had never crossed my mind when we first bought to check the national sex offender registry. This was a must for our new house since we now have three little girls, I didn’t want to unknowingly be placing them in danger because we moved right next door to a pedophile… so do some research.   
 
The Bank / Mortgage Adviser is going to tell you that you are pre-approved for a certain amount, but it is YOUR RESPONSIBILITY to calculate how much home you can actually afford. Sit down with a calculator and decide how big of a house payment you can realistically handle when you take into consideration all of the what-if’s. Thankfully, when we bought our first place we thought about this a little and only borrowed 82% of the amount that the bank was offering us. Even then, some months it was way way too tight and we never want to put ourselves in a position that would make us late on paying any of our bills. This time around we opted to go with a little more wiggle room and only borrowed 61% of the amount that the bank/ mortgage adviser told us we were pre-approved for. Are you ready to buy? Ask yourself the following questions:
 
  • Can I still afford this payment when setting aside enough money for both savings and emergencies? 
  • If gas prices go up will I still be able to afford this payment(especially if there is a commute involved)?
  •  If we decide to have a baby (or in our case, get surprised with our first baby) and I cut back my hours or quit altogether, will I still be able to afford this payment (or can I afford this payment & childcare plus all the added expenses that come with having a baby)?
  •  If my car breaks down or needs to be replaced am I going to be able to afford this payment?
  •  If something major in the home breaks or needs to be replaced will I be able to afford the payment AND fix/replace it?
  • If you like to have the A/C or heater cranked, ask yourself: Can I still afford my utility payments AND the mortgage?
  • If making a charitable contribution to your church or any other organization is important to you, remember to calculate it because the bank certainly won’t… In our case this question is: Will I still be able to pay my tithing and our mortgage?
  • If I got a pay-cut or laid off for a couple of months could I still make this house payment? 
  • Will I ever be able to afford the occasional vacation and pay the mortgage?
 
If you’ve answered no to any of those questions (that apply to you) you may not quite be ready to buy a house yet…or you may need to adjust your sights a bit lower to a more affordable home or save up a large enough down payment until you can say yes to all of them.
I offer this advise to save you from some hardship in the future. We tried to take all of these things into account before we put an offer in on our new home and hopefully it will provide us even more financial stability in the future. I also wanted to get a fresh viewpoint out there because 
I hate it when older people try to offer financial advise when they are completely clueless as to how things are currently. I thought this could be useful to some other young couples out there so please share it with anyone that may need a little guidance. 
 
** Remember, the bank won’t calculate your financial goals. For instance, we want to buy some recreational property in the next few years and eventually build a little cabin on it…the bank sure isn’t going to take that into account.
 
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