One Year of Home Ownership

by Kevin on September 26, 2008

It’s hard to believe, but during this week one year ago we purchased our first home. Over the coming days I’ll be telling you our story. I’ll include the steps of what we went through, how I remember it feeling, and how we got to where we are today.

I hope you will find it insightful and interesting. I’ll do my best to make it so. This was our first home, so I hope the steps I end up listing can be used as a guide for others looking to do the same. Of course these days it is more difficult to purchase a home due to the credit crisis, but the steps remain the same.

Stuff to look forward to:

  • how we didn’t pick the loan officer who went out of his way to meet us
  • how our emotions got the best of us when looking at homes
  • how we signed a contract without our realtor
  • how we maximized the benefit of a builder’s $5,000 credit

The best part of living on your own and in your own house? You can have dessert in bed while you watch TV. Ah, adulthood.

How many of you readers are homeowners? How many of you bought your home “right” with a downpayment, etc.? Leave a comment!

{ 9 comments }

[email protected] September 26, 2008 at 7:39 am

We bought our house almost two years ago. We put up the “minimum” cash (20%) and financed the rest, because we were simultaneously buying a separate 50-acre parcel of land, which would be financed at a higher interest rate. So we put as much of our cash towards the land as we could. We still had a mortgage on the land though. That gave us combined mortgages of about $375k. The land is now completely paid off, and we have about half that amount remaining on our home mortgage. My biggest financial goal right now is paying down the remaining principle on our mortgage. It’s my biggest motivator to conserve our money.

Homebuying can definitely be an emotional experience. We looked at well over 40 homes before we found the one we bought. Like many people, we initially asked to see homes in a lower range of prices than we ended up buying in. As our price range bumped up slightly, we knew we were in the right segment of the market for us. And we both pretty much knew the moment we stepped in the front door that we wanted the house we ended up buying. I think that’s a good rule of thumb – you’ll know the right place when you see it.

It’ll be interesting to hear your account of your purchase.

LAL September 26, 2008 at 10:35 am

The first condo we bought with 10% DP. Then we rolled the equity into our second townhouse and put down 20% DP. We are happy with it.

You will definitely know the house when you walk in.

Ricky September 26, 2008 at 10:48 am

We bought our house a little over 3 years ago and I guess we did it the “wrong” way. We financed 100% of the purchase price of our home. We bought our house at the peak of the crazy anyone with a pulse can have a mortgage era that our economy is paying for right now. I do regret to an extent not waiting to purchase a home with a down payment etc. Fortunately even though we did not have a clue what we were doing at the time we didn’t get taken advantge of. Through a program for first time home buyers we ended up with 2 mortgages with no PMI. The first was for 97% of our purchase price and it is a traditional 30 year mortgage with a low fixed rate. The second mortgage was for the remaining 3% of the purchase price. It has the same fixed rate but the term is only 10 years. If I had it to do all over again I would have taken a more traditional route, but thankfully we have ended up okay in terms of equity due to 3 years of payments combined with several improvements we have made to the house.

Steve in Denmark September 26, 2008 at 3:54 pm

We bought here in Denmark about 18 months ago. I’d owned houses – as a single person – over in the UK for 20 years before I moved over here and got married. I sold my last house in England and was left with £100,000 in my pocket when I moved over (don’t know what that might be in Dollars, sorry).

Lived the life of Riley for a couple of years, learning the language ostensibly, before putting around £40,000 in this place. It cost us just over 2,000,000 Kroner, but that was at the height of the house boom, and I reckon we’d struggle to get over 1.5 now. But we’re not looking to sell.

We’re on a fixed rate mortgage, so whilst it can be higher than the going rate, we at least can budget with certainty into the future and as we also pay off the loan, not just the interest (as my houses in the UK were), our payments come down bit by bit, year on year. As the Danish bank rate went up yesterday and while the National Bank has said cash is available to banks, should they need it – Danske Bank, Denmark’s biggest, is in to Leeman Bros for something like 4.5 Billion somethings – the rate will surely go on up for a while yet. Others will take a bath, but we’ll be as we were. Wouldn’t have it any other way.

Here, you go to your bank, show them how your finances are; what you’ve got, what your earnings should look like, etc, and if they like what they see, they’ll give you the go for buying a house, up to a figure they think you can afford. You then go looking and agree a price – as long as it’s under that the Bank have okayed – and sort it out with a credit company. I’m pretty sure that’s the deal.

Oh, and we pay 39% Tax. We’re the highest taxed people in the World. There was almost a sense of national pride when we recently overtook the Swedes. There is a (slight) tax reduction coming soon, but if you asked the average Dane in the street, a majority would be against it.

Sorry to go on.

Kevin September 26, 2008 at 11:12 pm

Some interesting stories. Thanks for sharing!

@Kate: Congrats! That’s a huge accomplishment. What sort of income are you working with to pay it down so quickly?

@LAL: Agreed, although it was still a very hard decision.

@Ricky: At least you can still afford the payments. If it’s a fixed mortgage, you’re golden. It’s the folks in the ARMs that reset to 8-10% that are out of luck.

@Steve: Very interesting comment — thanks for sharing with everyone. It sounds very similar to what we went through here. (Although obviously in the US some people bought houses without proving income — insanity.) But a traditional mortgage looks like that.

Russell September 28, 2008 at 8:40 pm

Steve, in the USA pre-qualifying for a mortgage at the bank is the same story, you review your financial situation, particularly your income and any other debts you’re paying, and the bank will give you an amount they would finance through mortgage.

I don’t know HOW they expect you would actually afford the amount they tell you, it’s always been two or three times what’s been acceptable TO ME as a purchase price.

My first house I put the minimum down payment (about 5% as I recall), when I moved to my second (current) house about the same, as the first one didn’t appreciate in value although I was there for 10 years. My current house is valued about double what I purchased for so I’ve gained equity that way. Both times a fixed rate mortgage (which I refinanced about a year ago so a very attractive rate.) I’ve been here 11 years if you are wondering.

Alison @ This Wasn't In The Plan October 1, 2008 at 10:51 pm

We didn’t buy our house the “right” way, but really I think it was the best choice at the time for us. We knew what monthly payment we could afford (and I include insurance and property tax with that amount) and wend from there for the most part. So, had we put money down, we would have most likely the same monthly payment, just a house in a more desirable area of town because we could have looked at a higher price point. Our interest rate is fixed, so that’s a plus. Sure there are benefits to having some equity in your house upfront, and sometimes I wish we would have waited longer and gone with a down payment, but overall, I do think we made a decent choice.

Kevin October 3, 2008 at 9:28 pm

@Russell: Thanks for clarifying that for everyone.

@Alison: Gotcha. The only thing you might run into would be if your house value becomes less than the value of the loan, and you have to move for whatever reason (relocation of job, etc.). Finding yourself upside down on a loan whether it be home or car is never a good situation to be in.

Are you putting any extra payments in to help build up equity faster?

Alison @ This Wasn't In The Plan October 3, 2008 at 11:17 pm

We have definitely thought of that. The area we live in is full of brand new houses that are not selling. If we had to move being upside down on our loan would be not so much of a problem since selling our house would be really difficult! But it is something we do think about, and a risk we knowingly took on when we purchased the home. To combat it, we are trying to build up an emergency fund as well as a large buffer in our checking account and yes, we are occasionally putting extra money towards the principle. If things keep up as planned, we should be able to send in extra each month starting at the beginning of the year.

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