I am in the process of buying the house that you should see pictured to the left of this text. This was somewhat of an impulse decision. There have been several times in the past few years that I considered buying a house, but I decided not to try since I figured I wouldn’t be able to get a mortgage with only having seasonal employment. Now that I have a full-time job that isn’t seasonal that isn’t a problem anymore. I hadn’t really been planning on buying a house this year though. If I had been, I wouldn’t have paid so much towards my student loans and would have delayed contributing to my IRA and 401k. All of that money would have been helpful to have for the down payment and closing costs.
The house I’m buying cost $98,000 and I’m putting 5% down. Since I’m only putting 5% down, I will have to pay PMI and my mortgage rate is a little higher. Unfortunately, 5% is all I can afford to put down since I was paying down my student loan and putting money in retirement savings rather than saving up a down payment. I considered taking $10,000 out of my IRA since I’m allowed to take that amount out penalty free as a first-time homebuyer. I decided against it since I’m 50 years old and I don’t have that much in my retirement savings. I’d rather have a larger mortgage than deplete my retirement savings. Hopefully, this house purchase will prove to be a good financial decision.
I am taking out a 30-year mortgage on the house. That seems like an awfully long time considering I’ll be 80 years old (or more likely dead) by the end of the mortgage term. The lender seemed to think that the payment on a 15 year mortgage would be too high for my income. If rates stay low I’ll consider refinancing in a few years once I’ve built up some equity and/or have a higher income. My monthly payment will be about $660 with insurance and taxes. That is more than I pay for my apartment, but a lot cheaper than it would cost me to rent a house.
The house is rather small at 780 square feet. It has two bedrooms, one bath, living room, dining room, kitchen and an unfinished basement. The bedrooms are pretty small. The dining room is bigger than the bedrooms which seems backwards to me. Unfortunately, I can’t easily turn the dining room into a bedroom. Although the house is perfectly livable as is, there are a lot of things I want to change about it. I’ll worry about those after the home purchase is completed. I’ll be pretty broke once I’ve paid the down payment and closing costs so there won’t be any big changes for a while. Although a 780 square foot house is small, I’m living in a 180 square foot apartment so I’ll need to get some furniture for the house. I’ll probably be spending almost all my money on the house and house related purchases for the rest of the year. Spending all of that money is tough for a tight-fisted miser, but it will be worth it to have my own home.
Buying a house is a great investment as long as you plan to keep the house long term. How’s the neighborhood – is it convenient, with good schools? Could you easily rent it out if you move away or get tired of living there? These are the things I consider when buying. With two bedrooms you could always add a roommate to help with expenses. Congrats!
Jon – The neighborhood is okay, it is close to downtown and close to schools that are better than the Kansas City public schools. It is in the same city I already live in. This is a small suburb that has had a lot of development lately which I think will increase interest in the city and hopefully boost the real estate prices. Similar houses rent for about $850 to $900. If I had to rent it out I think I’d be able to at least break even. I’m considering doing an Airbnb rather than a roommate, that way I’d have privacy at least some of the time. I’d have to fix the place up a bit first though. I’ll figure that out once I have moved in. There are several projects I have in mind for the house.