Hi everyone! Sorry for the radio silence for like…a month. Things have been incredibly busy around here and I haven’t had time to sit down and write anything. But fear not! I will be back with an audit of December spending (something I definitely would rather NOT share with all of you this month, but accountability and whatnot…) and more regular content going forward.
In the last month, we’ve had company and activities fairly nonstop. And some very very frigid temperatures, which have sucked away my motivation to do anything except sit on the couch like a lump and try not to freeze. I am TERRIBLE at dealing with cold weather and every winter I ask myself why I live in the Midwest. WHY? I lived in Minneapolis for a few years and I think the secret to enjoying winter is to just embrace the cold and everything about it. I have never met a group of people so eager to spend time outside in the snowy cold than native Minnesotans. Despite living there for a number of years, I was never able to truly embrace the cold.
Cousins, enjoying each other’s company
Finally, life has been busy because…we bought a house!! 😀 Now that B is back and we’re fairly set on staying here long-term, we decided to invest in a house here. Renting is nice, but the rental market here is quite expensive, so our mortgage is actually comparable (or a little bit less) than rent. Alas, no pictures at the moment, but once we actually close, I’ll make sure to provide some.
This isn’t our first round through the home-buying process, but I was definitely more financially aware of the process this time around. We’ve consciously tried to balance our wants and needs in a house with our desire for frugality and I believe we’ve achieved that. However, I do have a few frugality-related observations on the whole process.
It’s no wonder people end up buying way more house than they can afford.
We didn’t spend a lot of time picking a mortgage broker- we had a mortgage (and VA loan) previously with Wells Fargo and had zero problems so we decided to go with Wells Fargo again. The pre-approval process was stunningly eye-opening. On the positive side, rather than telling us how much house we could afford, our mortgage broker instead asked us what we wanted to spend each month on our mortgage. I really liked this approach, because we knew that a) we could already afford what we’ve been paying in rent and b) we didn’t want to spend much more than that. That way, we were only pre-approved for a loan amount that made sense with our monthly budget. This seems small, but this approach just blew me away.
We did find out that with a mortgage at the type of our monthly budget, our debt to income ratio was about 25%, meaning that our mortgage and student loans together made up about 25% of our monthly income. I am very comfortable with this- if one of us unexpectedly lost our job, the house would be safe. We would not be homeless. I was less fine when our mortgage broker told us that the VA loan would allow us to purchase up to a 50% debt to income ratio. This right here is how people end up purchasing more house than they can afford. 50% is absolutely ridiculous, especially if you depend on having two stable incomes to make that work. If your house is 50% of your income, and someone loses a job, all of sudden you can afford your house and nothing else. That’s way too much of a financial risk for me. Once we have student loans paid off, our mortgage will be approximately 12% of our monthly income. I am much more comfortable with that number.
Having a plan helped us keep to the frugal side of our house budget
Let me tell you a little secret about realtors (from my experience)- if you name $200,000 as the top of your budget, you’ll see a lot of houses in the $200,000-$225,000 range. I don’t blame them at all- they want to maximize commission. But B. and I saw a lot of houses that were $10,000-$25,000 above our budget. Some of them were really nice houses- they had more square footage, they had three finished bedrooms, they had master suites, and they had big kitchens.
But we ended up picking a smaller, two-bedroom house on 1.5 acres of land. Why, you may ask? Well, a few reasons!
- We knew we could easily afford it (it was $25,000 under our max budget).
- It has a great big space for a garden! Growing your own food is delightful and we can’t wait to start.
- We’re disconnected from most public utilities. The house is definitely out in the country and comes with a well, a septic tank and a propane tank. Though all of these things require maintenance, it works out to less money than we currently spend on utilities.
- We loved the house. I’m a fairly intuitive person and I trust my gut feelings about pretty much everything (the last time I didn’t, we ended up with a horrid lemon of a car). I love this house. It felt warm and cozy and homey.
- It has great potential. The house has lots of room for us to grow (and a lot of unfinished space) but we’re committed to no renovations until we finish paying off our student loan debt in the next 3-4 years.
We’re planning only minimum renovations in the next 3-4 years.
I mean very minimal work here. We plan to paint the walls (all the same color, because we’re boring and having one touch-up can of paint is much less work than four or five) and rip up the carpet and lay down some durable wood floors (or a nice laminate- undecided at the moment). The latter may not seem particularly frugal, but I have insane dust allergies, so getting rid of the carpet will help me stay healthy (plus it’s easier to lay flooring BEFORE moving in). We might try to finish a space downstairs for guests to stay (the basement is partially finished and could easily be finished into an open-concept “bedroom”). But beyond that, we plan to do exactly nothing for the next 3-4 years, for a couple of reasons. First and foremost, any money put toward house projects is money not going toward debt. Our primary goal is to continue aggressively paying down debt, so all renovations are going to take a backseat to that goal. Second, I’m a big fan of living in a house for awhile before deciding what needs renovated.
So there you have it! Our house-buying journey. Stay tuned for more house-related posts as we head into the moving process… And pictures to come!