One of the coolest experiences I will ever have was when Katie and I got to build our house. Well, we didn’t build it, we watched it being built; but it was a new construction in a new neighborhood and we got to watch the whole thing go up.
We had being married two years and were excited about buying our first home. Our area of Houston was growing so fast, there were new neighborhoods all over the place. We found a neighborhood that we loved and it didn’t take us long to commit to building a new home.
What was so cool about building our house was getting to select all of our finishes and being able to customize many aspects of the house. I’m so glad that Katie was paying attention to Pinterest as much as she was, because she was able to guide us through the selection process and we have finishes that we still love today.
It became our weekly weekend ritual to pick up breakfast on the way out to our neighborhood and to watch the progress week after week. I took a million pictures along the way, and it was so fun to dream about what life would be like once we moved in.
Now that we’ve been in our home for almost 6 years now, my opinions on home ownership have developed some more from those days when we were just married getting into our first home.
The first is that I no longer believe that there is such thing as a dream home. We love so many things about our house, but then I look at other houses with different designs and I think there are other cool ways to do it as well. If we were to build another house today, it would look different than the one we’re in.
That’s not to say that we are unhappy in our house. We actually are happy in it, but I don’t know that we’d design the same one. And just for the record, I think that would be true no matter what house you get into. I just think that dreams change, we change.
I think especially when people reach a little too deep in their pockets because they think they have to have their dream home they don’t realize that house won’t be perfect forever, and it’s not worth overextending yourself financially to make it happen.
So if you’re wondering if buying a house makes sense, I want to give you a few more things to consider today.
What do you need to consider?
There’s a lot of aspects to home ownership and I want to bring up a few things that you might not have considered yet.
Taxes, Interest, and Insurance
In Texas, we have a big property tax on our homes. Now in your state, if you have a state income tax and low property taxes, this might not be as big of a deal for you.
In Texas, it’s really expensive.
You know how everyone likes to say that you’re throwing your money away on rent?
Well I throw hundreds of dollars away each month on taxes, interest, and insurance.
It’s so much money, that it’s almost as much as I was paying in rent before we bought.
It just doesn’t make sense to make a home purchase because you think you’re throwing your money away on rent.
You need to crunch the numbers here. It’s really easy to download an app like Zillow and play around with the calculators on there to see what your payment might be. Take a look at what other people are paying in your area, and compare that to what you’re paying now in rent.
The true Cost
The true cost of home ownership may be a little different from what you imagine.
How much are you going to pay in interest over the life of the loan?
I’m a big believer in the 15 year mortgage over the 30 year. Those are the two most popular time frames for how long you’ll take your loan out to repay it back.
On reason I like the 15 year is because you end up paying way less than if you take the 30 year. When you’re paying interest on your house for 15 years less, you end up saving way more money.
But that isn’t even the biggest reason I like the 15 year.
The biggest reason is that you’re out of debt 15 years earlier. How nice would that be? If you have a house payment right now, consider how awesome it would be to be completely debt free including not having that house payment. It would seriously be amazing. That’s why we’re on a 15 year. Yes, it’s just a little more per month, but we’re saving thousands of dollars in interest and we’re going to be done so much sooner.
You also need to consider all of the little things that add up to big things over the course of living in your house. Whenever maintenance issues come up, which always seem to happen at the most inconvenient time, you’re going to want to take care of it.
Allow too many of those little issues to add up, and then you have a lot of problems on your hand that need a lot of money to clean up.
You will have issues that happen with your house that will cost you thousands of dollars. It’s not a matter of if, but of when.
The Right Reasons to Buy
There’s many right reasons for you to buy a house. I know Katie and I would rather be homeowners. We just would. We love our home.
If you want to own a home, you absolutely should buy.
How do you know if you’re ready?
1. Spend under 25% of your take home pay on your house payment
Well, If I were to start over, I would make sure to keep our house payment under 25% of our take home pay. Ours is a little more at around 32%. That’s a really big chunk of change and to be honest, it feels like a lot. Now if Katie and I had decided that we didn’t want kids, I think that it’d be perfect. But since we purchased before kids, life was a little different back then from how it is now. We’re paying a whole lot for daycare right now and with the house payment it feels like a lot.
Please do not trick yourself into believing that you are buying your dream house. That house may be amazing, but it won’t be long after you move in that things settle in to being exactly the same way they were before you bought.
So make sure that you aren’t making things harder by overspending. Find something that will cost 25% of your take home pay or under.
2. Invest for retirement first
Second, make sure that you’re investing 15% of your income into retirement each month.
Your savings needs to come before home buying. If you’re saving into your retirement 401k or Roth IRA, then you’re good to go. But if you aren’t saving, then that’s a sign you probably aren’t ready to get into a home yet.
Saving for your future is more important that buying your house. In retirement, you house won’t be able to provide you an income. It will really stink if you have this awesome house but can’t even afford to live.
The Wrong Reasons to Buy
Listen, there’s so many bad reasons out there to buy. Our culture really drives home the dream of owning your own home and there’s a lot of lies out there that surround the idea of homeownership.
1. Throwing your money away on Rent
First, you are not throwing your money away on rent. It just isn’t true. Run the numbers, but in most cases, it just doesn’t hurt you to continue renting. Like I said earlier, I throw hundreds and hundreds of dollars away each month spent on interest, taxes, HOA fees, and insurance. Not to mention big bills and repairs that come up that I wouldn’t be responsible for if I wasn’t the owner.
So continue to rent with assurance that it’s completely fine that you’re renting.
2. Fear of Missing Out
Hey, I’m going to tell you right now that you won’t be missing out if you don’t buy a house. When we were buying our house, there was a lot of talk about how home prices were going to be skyrocketing and we were going to ride that wave to the top.
It just never really happened.
Sure, prices in the area are a little higher, but not by a lot.
So don’t feel like you have a small window of time to get into a house and that you’re blowing it if you miss it. There will always be time later and there’s no reason to rush.
Owning a home just isn’t really going to change your life or your baseline level of happiness. And you certainly aren’t missing out on anything if you don’t buy.
3. You think it’s an investment
Your home that you live in isn’t really a good investment.
Let’s think about this-you’re paying taxes on something that isn’t really going up in value that much, especially when you consider that you could make a lot more from investments in other things like an index fund in your retirement account.
Your house can’t really provide any sort of income for you in your retirement. So people think that’s it’s this awesome investment, and it just isn’t really.
Now, if you save up and get into investing into rental properties, we’re talking about something a little different. Because rents from tenants provide an actual income. So rental properties would be a good investment.
But I’m just talking about your own home.
You want to buy because you want to own your own place, not because you think it’s such a good investment.
Crunch the Numbers
Make sure and look at the numbers before buying. If you’re wanting to buy for the right reasons, I can attest to that owning my own home is totally worth it. We love our house, and we definitely fit into the category of people who want to be home owners for the right reasons.
But don’t get in a hurry, and don’t be fooled into thinking if you don’t buy that you’re missing out.
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