Financial Freedumb and Brownie

My Home: A series about the home buying process through the eyes of a first time home buyer.

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Sometimes reality sucks doesn’t it? I’ve done some analysis on the real cost of ownership on my future home, and it hit me like a sledgehammer. Sorry Freedumb, try again. I got some great feedback (I was even told I’m “spoiled“). Before I go on, I’d like to refer to my post on why I want to live here in Hawaii. 

I realized I really needed to think about it again (an argument for blogging!). The most basic question I asked myself again, do I even really need to get a home right now? The answer? No. I’m not going to throw away my dreams of getting a home, rather I’m going to take a step back and change my requirements and my timeline. CityGirl has a great post about knowing thyself that would be worth checking out.

Originally, I was excited to get a home because, well, it’d be my own place, the American Dream, blah blah blah. My dog would have a yard to run around in. I’d have something to take care of and watch as my investment grows. Then reality hit, and I got great feedback. I realized how much it would really cost to own what I want. I don’t want to be living paycheck to paycheck, nor do I want to dig my own financial grave.

So, that being said, I’ve decided to put off my home purchase even beyond next summer for as long as I can wait. Why? Well, I’d like to save as much as I can to have a bigger down payment so that I don’t have to borrow too much. (Thanks NCN for making me think about credit a little more) I’d also like to observe the housing market longer.

I’ve decided to do a couple of things:
1. Create a designated “house fund” that will be for my down payment. This is so that I’ll have some extra cash for everything else. I can’t drop my whole savings into the house, that would be dumb. (Madame X made me think about this a little more)
2. Reduce my requirements for my house. See below.

Original requirements

My revised requirements:

~ 5000-10000 sqft lot size ~ 1200-1500 sqft living space - A decent sized yard, with a portion fenced off for Brownie to run around. - Early mail delivery. Yes, I like having my mail delivered early! - Hands free faucet in the kitchen. - Target price of around $500-650K - Off major streets - Level lot - 2 car garage - Fairly up to date electrical system, if not then the ability to upgrade easily. - 10′ ceilings - 4 Bedrooms (Maybe a split, two level house, so I can rent one and live in another) - Wired for CAT 6E. I’m pretty sure this is something I’ll have to setup myself. - I would like a location about 15 mins from town. - Friendly neighbors…who wouldn’t want that! - Decent amount of street parking - Breezy and cool location - Fairly close to freeway

~ 4000-6000 sqft lot size ~ 800-1200 sqft living space - Target price of around $450-600K - Off major streets - Level lot - 2 car garage - Fairly up to date electrical system, if not then the ability to upgrade easily. - 2 Bedrooms - I would like a location about 15 mins from town. - Decent amount of street parking - Breezy and cool location - Fairly close to freeway

Originally, I wrote:

So, my monthly mortgage? @ 6.85% 30 yr loan would be $2,621.00/month. Now, to estimate everything else. I’m going to estimate on the high side.

Home Owners Insurance – Assuming .5% per $100,000 in home value = $2,750.00/year

Property Taxes – Assuming 1% per $100,000 in home value = $5,500.00/year
Maintenance – Assuming larger than average maintenance costs for first year = $10,000 for 1st year, $5,000 there after. This includes a lawn that might need some care…or new flooring…things I think I’ll probably change out when I move in.

Utilities – Cable, Phone, Electricity, Water – Based on how much my friend pays – $3600/year.

Initial Purchases: Equipment, furniture, appliances – $5,000 for first year, $2,500 there after.

1st year total without mortgage = $26,850.00 (or $2,237.50 / month)
Thereafter = $19,350.00 (or $1,612.50 / month)
1st year monthly costs with mortgage = $4,858.50 per month
Monthly thereafter = $4,233.50 per month

I’m going to adjust costs to more realistic levels based on feedback received and comments from friends and family. With the same monthly mortgage @ 6.85% 30 yr loan = $2,621.00/month.

Home Owners Insurance = $2,750.00/year

Property Taxes = $5,500.00/year

Maintenance = $5,000 for 1st year, $2,500 there after.

Utilities = $3600/year.

Initial Purchases: Equipment, furniture, appliances – $2,5000 for first year, $1,000 there after.

1st year total without mortgage = $19,350.00 (or $ 1,612.50 / month)
Thereafter = $15,350.00 (or $ 1,279.17/ month)

By the way, I am considering once a year fees as part of my monthly expenses just for a better picture of my total expenses.

1st year monthly costs with mortgage = $ 4,233.50 / month
Monthly thereafter = $ 3,900.17 / month

Hmmm, still a little high, so I’ve increased my down payment to $200k, which would reduce my mortgage loan to $350k. My new monthly mortgage @ 6.85% would be $2,293.00 / month.

With the same other expenses I wrote about before:

1st year monthly costs with mortgage = $3,905.50 / month
Monthly thereafter = $ 3,572.17 / month

Better. Still high, but at least that’s manageable considering my current income. I’ll keep trying to save even more for a down payment. The more the better. The journey continues…