There's No Place Like Home

Hello again! As you are probably aware by now, we are officially homeowners! On January 15, 2019, we purchased our very first house. This was a huge step for us (and would be for anyone), but I feel like I should share the steps (and the long road) we took to get to there.

JuJu holding the house keys!

Mr. Pennies and I have been married for 7.5 years and together for almost 10. There were many times where we felt pressured from others to purchase a home. And boy, did we hear it all! 

"You're wasting your money on rent! You could be building up equity!"

"Your rent is just as much as a mortgage! It makes no sense to rent!"

"You better hurry and buy something before the market increases anymore!"

Even through all this "advice", we stayed the course. We knew that making such a big purchase in a rush wouldn't be wise. There were times when I doubted that we would find anything (and times when I caught "the house fever"), but we finally bought our home when the time was just right! If we hadn't been thoroughly prepared to be homeowners, this process would have been a curse and not a blessing.  

These are the steps we took to home ownership:  

1. Get rid of all consumer debt and student loans

Most Americans have some form of consumer debt or loans (car, student, or personal) while owning a home. I've written before about how frugality and paying off our debt gave us more options for our future. Clearly, many out there make it somehow work to repay debt AND a mortgage, but that is not the road I would ever feel comfortable traveling. That is the road of living pay check to pay check without planning for a future because you're too busy being worried about the present. 

2. Establish an emergency fund of 3-6 months of expenses 

Things happen when you own anything. Think about the number of times you needed work done on your car. Now imagine having to replace or repair a roof, remodel a kitchen, purchase new appliances, refinish floors, etc. And yes, that was OUR list of things we achieved when we bought our house! Not only that but once a new dishwasher, microwave, and oven were purchased, it was soon discovered that our refrigerator also needed replacing. If we didn't have our savings account, we couldn't have gotten these projects completed. And yes, they were needs, not wants.  

3. Don't pay more than 25% of take home pay towards mortgage and other related housing expenses

You can find calculators out there that will tell you how much house you can "afford". Most of these calculators look at your yearly income and calculate your monthly payment to be around 40 - 50% of your take home pay. Say what? That's too much house! Those who buy too much house then become what's known as "house poor". So combine way too much mortgage along with other debt repayments that are being made, and that is a recipe for disaster!  

4. Save up a sizable down payment 

If you haven't been able to save up money for a down payment yet, then you're probably not ready to purchase a home. The more money you can put down upfront, the less your mortgage will be. As you know by now, I am a Dave Ramsey enthusiast. Dave recommends to aim for at least 20% down (if not 100%) because that way you'll avoid private mortgage insurance (PMI). Dave also recommends delaying your retirement investing for 2-3 years while saving for a down payment. This is what we did to save up enough for a down payment for our house. 

Why home ownership matters:

There are many out there in the FIRE (financially independent, retired early) community that think owning a home is a terrible return on their investment. And just looking at numbers, they may have a point. Studies have shown that it's not uncommon to overspend on renovations and never see the full return on that money. Not to mention that if something needs to be repaired or replaced (and something will always need to be repaired or replaced), the homeowner is on the hook. However, I would argue that you could treat your home like a giant savings account. As you pay your mortgage down, that's money in your name. You are building up equity and increasing your overall net worth. When you rent, that just doesn't happen.

There's also something about home ownership that says "stability" and "permanence". You're investing in your future and putting down fairly serious roots with a home purchase. And that, to me, is a wonderful thought. 

Owning a home is a lifetime of projects and a lifetime of responsibility. It isn't something to just wander into, but if you're prepared and patient, it can be a wonderful thing!

Thanks again for stopping by!