Monday, July 17, 2006

My Home: Feedback From Readers Convinced Me To Make Some Changes...New Housing Requirements and Saving More For the Down.

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

    4 comments:

    Lisa said...

    Freedumb, this is what I actually love about blogging! I think it is great to be able to put your thoughts out there and to see what comes back. It's awesome that the blogging community had some insight and especially cool that you found it so valuable!

    I am curious how you changed from 4 bedrooms all the way down to 2 bedrooms. I don't know what the Hawaii market is, but my gut tells me that 2 bedrooms might be a tougher house to unload (waaaay in the future), compared to a 3 bedroom house. Perhaps you don't need all the space, but it's always great to have a guest room AND an office.

    Great analysis! I love seeing the thought you put into your decision!

    Rhea said...

    When you are able to get that house of yours you will love it. Keep plugging away!

    mapgirl said...

    Great post. I think it's good for a first time homebuyer to realize just what they are getting into in terms of the post-purchase expenditures for furniture, little fixes, maintenance on the property, etc. No one wants to live out of cardboard boxes their first year.

    freedumb said...

    Lisa, That's a good question...It is a min requirement, I would still like to have 3 bedrooms...but it's not a must now.

    rhea, Thanks! I will...

    Mapgirl...it'd be an expensive cardboard box...hey I could get used to reusing plastic utensils and paper plates...okay, maybe not...