I actually had a bunch of blog post ideas for today. A beltway baseball breakdown of the Nats and O’s…a discussion about whether Dwight Howard should be hit in the back of the head with a snow shovel or not…the ever-changing roster of the New York Knickerbockers. But I think I’ll stick with the topic that occupied most of Krissy and my Sunday afternoon: house hunting.
I don’t think I have mentioned our housing search on here much yet aside from a couple blurbs regarding how both saving money and being an adult stink. Most of everything I’m about to say will sound ridiculous to anyone over the age of 35, but for a home-buying newbie like myself it’s a little overwhelming.
The financial implications of buying a house can be pretty daunting. Buying a house isn’t like buying a loaf of bread at Shoprite. The 2 biggest purchases I’ve ever made were Krissy’s engagement ring and my pickup. Those required some paperwork and a quick credit check, but really not more than that. A house can be 1 or 2 or 3 orders of magnitude greater in cost than either of those, so it only stands to reason that the act of purchasing 1 should be that much more complicated. I guess at a certain point of wealthiness, this doesn’t matter all that much…if I am a wealthy oil tycoon, I walk up to the proverbial cash register and say, “I want this house with this much land in this kind of neighborhood with this kind of school system,” and bam, it’s done. If only it were that simple for the rest of us.
Along those same lines, I was always taught to put away as much money as you can so you can put a sizable down payment down for your house. The whole 20% down payment is something that was always hammered into my brain, but what I never really realized is that unless you have a crazy amount of bank stashed away it’s more about your month-to-month payments than anything else (cut to all homeowners rolling their eyes and calling me an idiot under their breath). If you have $150,000 in your savings account, good for you…please see the last few sentences in the previous paragraph. Otherwise, your down payment isn’t as important as you might have thought. In fact, putting 20% down on house is great, but it’s not the end all, be all either.
Let’s use a handy-dandy mortgage calculating website to test this out. Just for example, let’s use some nice round numbers and say we buy a house for $300K and put 20% ($60K) down. Assuming I have good credit, am guaranteed an interest rate of 3.75%, and property taxes are 1.25%, that comes out to about $1,425/month. Now, let’s say a few months go by, and we pocket $10K in savings. If we waited and used that towards the down payment with all the same parameters, our mortgage ends up being about $1,375 month. It probably seemed like a lot of work to save an extra 10 G’s, and all it did was chop 50 bucks off the monthly bill…every little bit helps, but f*** that!
Ok, great…now that we understand all that, we can actually go out and look for a house. Wait, we haven’t even done that yet? We were just figuring out what we can and can’t afford? So, does this mean we can’t get that half a million dollar home with the beautiful lawn and the swimming pool in the back just yet? S***…where’s a rich oil tycoon when you need him?
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