Buying a home in 2018 is a challenge, as rising mortgage rates have started to climb. I can't even describe to you the level of frustration it is for a buyer who is competing with a 5% interest rate, when just two years ago they were around 3.5%. Now if you are a seller in the market, it's a wonderful time. My husband and I had been on the look out for a home to call our own for at least the next 5-7 years and honestly depending on where we land on the market after that, we could stay longer.
This is like the first real step in any financial commitment I've made to my job I would like to point out. After all when you take on a mortgage that's when ish gets real and having a steady job is like super important. Either way I had to ask myself, "Are we doing the right thing by purchasing a home now?" After all the market is pretty much peaking based on history there is sure to be a downturn in the near future. Mortgage rates have steadily climbed to 5%, which is quite high from almost a decade ago when the whole mortgage crisis rocked the real estate industry.
It's funny thinking about the financial crisis this time. 10 years ago, I was in London studying abroad my junior year and our British pound started at a whopping 1.8X compared to $1 bill. By the time the semester was over, it was down to 1.2X to $1 and I took advantage by shopping more towards the end. It's crazy to think that was then and this is now. I was too young and too immature in finance to look for the signs or trends that led to the financial crisis during that time. Now at three decades old, I can see the writings on the wall and buying a home during this time puts us in a tight financial spot of deciding whether would should continue with rising rent or lock in a mortgage with the possibility of buying property at a premium.
Things We Considered when Buying
I started asking myself questions on what type of home could I see myself in. Having points of discussions with my husband.
Having a Reasonable Mortgage
We wanted our mortgage in a reasonable price range that left us room for savings, investing and all the travel we would like in the world. I hate the thought of living paycheck to paycheck and would never purchase a home if it meant sacrificing our savings. I also love the fact that we have wiggle room in our budget in case anything major comes up. I was talking to a guy at work and he confided in me his mortgage was $2600/month. He and his now-ex wife could afford it then, but since the divorce it's been a pretty steep payment since he got the house. He ended up getting a room mate which was the smart thing to do for sure, but it left me wondering what me or my husband would do if one of us simply couldn't work because of job loss or a medical emergency.
Great Neighborhood and School
When you become a parent, where you raise your children somehow finds itself on your priority list. Believe it or not,it also means an appreciating neighborhood becomes a priority too. What you would want is for your home to move up in value. Now this process is really new to me, as my husband and I are first time home buyers. However looking at the neighborhood and the cost of rent across the metro, I would bet my money, we are nowhere near the cap of our home. Which of course is a good thing, because that means are house isn't such a premium after all.
Work and location
Prior to us getting into the home buying process, we were living south of the metro. When they city decided to close down a major highway for the next three years due to intermittent construction, the same drive across town that took 20 minutes doubled in time and sometime tripled if there was traffic. I would never subject myself to that type of driving again. Everyday I'm literally driving 60-75 miles to and fro from work. Not to mention, my poor car is getting mileage that it never has seen before. The point is when purchasing a home, always think about where your family, friends, church or most of your time is going to be. After they closed down I-35, it literally made our commute to the northwest side of the metro extremely difficult. Also, people definitely thought twice before trying to visit us, because of the distance.
Space to Grow Into
My husband and I agreed we wanted to have a second child, just not anytime soon. I wanted all my kids both present and future on the same floor as me. My husband wanted a nice space he could host people over for Sunday afternoon football games. I also like the thought of my son, having a play place where he can have all his assortment of toys in one spot. I can't tell you how many times, I've tripped on a lego. Having a home that accommodates our needs made the most sense, so we don't feel squeezed too tight in our new home. Also, because of where my husband and I are at in our lives, we felt this home was not a starter for us, but a home we could definitely see ourselves raising a family for the next 7-10 years and possibly beyond. I would say unless you are a single person, make sure to have a home that you and your significant other can grow into. Even animals take up space, so make sure you have room to accommodate all growth to your family.
Buying a home proved to be a little bit of challenging process in the beginning because of the lack of inventory, however, I can proudly say that my husband and I got through it and bought our first house a few weeks ago. Now we are in the middle of the process and just finished our appraisal and looking to close at the middle of next month. I would say for the most part, it has been a smooth process. As first time homeowners, we qualified for some nice benefits, one of them being able to buy down our interest rates. Our payment every month is 23% of our income, which they say your cost of living shouldn't be more than 30% of your income. We are way below that and aiming to make that percentage even smaller as we grow our passive income. Also saving and investing helped us be able to come up a down payment for our new home so I will continue to stand by that and promote it. I'm excited about this next journey of home ownership in our lives, but even more excited to own our first real property. My husband and I plan to customize our home and make it truly our own this summer. Have you bought a home yet? If so, what are the things you learned a long the way?
The Lioness is a financial blogger based in the Twin Cities. After spending most of her career in accounting, she decided to leap into the world of small business, investing and savings. As she is on this journey of juggling both her career and small business, she wants to share what she is learning along the way, as she builds her passive income with her husband and family.