My house plan

March 8, 2012

For quite a while (probably about a year now) I have been rolling around the idea of possibly buying a house. Now, mind you, I ALREADY own a house. It is about 2 hours south, in the “country”. I bought it 8 years ago in 2004 just after I graduated from college. It seemed like a good idea at the time, and it has turned out to be a fantastic investment that I have not regretted for a second. I am so glad I bought it when I did. The house is a good little house but the job market within commuting distance kinda dried up as I grew up and moved up in my career. 2 years ago I left the house behind, found trustworthy faithful long-term renters to take care of it, and moved north, back into an apartment.

I like my apartment. I LOVE the location in a small waterfront town just north of Seattle and only 20 minutes or so from my job. My windows overlook a treeline and burbling creek (drainage stream). I am one door down from the lovely city park. I am 4 blocks off of the quaint downtown area, and only 6 blocks from the waterfront. This town buried in surburbia only steps away from the big city has a small artsy community feel to it. I have fallen in love.

Affordable houses are not easy to come by There are plenty of aparmtents, and condos in all price ranges. But houses? They tend to be more spendy….in the 200,000-500,000 range. I can’t afford a 200,000 mortgage….or the 20-40,000 for a downpayment on one. I wasn’t totally sure that I could either afford to buy a house here, would want to save that hard and long for a downpayment, or even REALLY wanted to buy a 2nd house. I had already decided I wouldn’t sell my 1st house. I love it too much and plan to “retire” there eventually.

But my circumstances have changed for the better recently. I got $3/hr in raises this fall. I am refinancing my 1st house into a lower interest rate, saving ~$80/mo. I upped my tenant’s rent. I have areas where I can cut spending. My business is well grounded and has some level of reliable minimum income. I no longer HAVE to take extra shifts to meet my budget. So there is suddenly some flexibility that allows for more substantial savings with less extra work and less time required than just a year ago.

So I have started on the steps towards buying a house. I want it within about a mile radius of where I am now, which is a quite small area to be searching. I want it for $150,000 or less, which means I will not be buying a fair market value house. I will definitely be buying a bank-owned, foreclosed, auctioned, or short sale. So I will have to be very very careful with inspections and what I am willing and not willing to put up with. It will likely take several months to even find a handful of possibles. It may easily be a year or more before I find the right house. Which is fine because it gives me more time to save for the downpayment. The longer it takes to find the house, the more money I will have saved, the larger downpayment I can put down, so the higher priced house I can buy, leading to more houses in my price range. On the other hand, I do have enough existing savings that I could put down a 10% downpayment (if I finangle that approval-wise) on a 130,000 house right now. If the perfect one appeared.

In making my estimates and assessments, I took a 10 month timeline into account. This is when my lease is up at my apartment and when I would likely start looking quite in earnest if something hasn’t appeared before then. I was actually quite surprised at how much I would be able to put aside in savings in that amount of time — and for not that much more effort! Here is my House Downpayment Savings Plan:

Estimated Home Loan: $150,000

Estimated Downpayment Required: 10-20% ($15,000-$30,000)

Goal Timeframe: 10 months (January 2013)

Current Savings:  $5,000-$10,000

Goal Additional Savings:  $10,000-$20,000

Savings Plan

(With below numbers = $15,630-$18,630 saved)

1. Refinance Yelm house: ~$80/mo + 1 month no payment = $1836

2. Use ING direct checking account, accruing interest: @0.2%*3800 = $0.63/mo = $7

3. Roll interest from ING savings accounts: $77 in 2011, est. $160 in 2012 = $237

4. Roll rewards from Discover: $380 in 2012, est. $100 in 2012 = $480

5. Put all PAH income into downpayment fund: est. $3000 in 2012

6. Take 1-2 relief shifts/mo: $200-250/shift = $200-500/mo = $2,000-$5,000 in 2012

7. Analyze grocery/household spending, cut by at least $50/mo = $600 in savings/2012

8. Put all couponing rebates into downpayment fund: average $15/mo = $180 in 2012

8. Maintain current savings of $1,000/mo, moving it to $600/mo in downpayment fund = $7,200 in 2012

Total Estimated Savings by Jan 2013: $20,630-$28,630

Estimated loan potential:

Home purchase price: $133,000-$150,000

Downpayment %: 15-20%

Downpayment amount: $20,000-$30,000

Closing costs: $3,000-$5,000

Loan amount: $116,000-$123,000

Est. property taxes: $1500/yr

Est. home insurance: $1000/yr

Est. monthly payment: $900/mo

So this thing is completely doable! I am very excited about the possibilities. I have a real estate agent keeping an eye on the listings. My next step is to contact a mortgage broker about financing pre-approval to see what deals I can swing. Now that I have made this decision and researched its feasibility, I am REALLY looking forward to getting into my own home…..with a washer/dryer…..and no carpets….and a yard. But I am in no hurry and I realize that with my location and price specifications, it could be quite awhile before the right opportunity comes along. I can wait. Like I said, I like my apartment just fine. 🙂

 

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