Home ownership is something that feels like a benchmark for citizenship for many Americans. It is like a rite of passage for us and something that we look forward to the opportunity to experience. However, buying a home comes with inherent responsibilities and risks. We have purchased a few homes in our time; some wins, some losses. We even had one very lucky break that kept us out of a disaster! Here is the “not totally comprehensive list” of our home buying experiences for your benefit:
A Near Miss
Our first example comes in the form of a rural home that was quite old but was cheap. I’m all about cheap! The home we were looking at did not have heat or central air, and our lender would not consider a loan on a property without it.
Our local HVAC (Heating, Ventilation, and Air Conditioning) expert looked at the house and said that the duct system under the house would be challenging because the house sat so low. We were serious about buying the house and had already put down earnest money for it, so this was not welcome news.
As we were preparing to leave our potential new home, a friend who had accompanied us said casually, “What are you going to do about that wall?” That wall, as it turned out, was leaning like the Tower of Pisa! In my youthful enthusiasm to become a homeowner, I had not even noticed it. Fortunately, I was able to get our earnest money, a whopping $200, back and escape what could have been a major headache.
The lesson to be learned from this experience is this: Get help when looking at a house before you consider it seriously. Someone who does not have a dog in the fight and who has proven to be on your side is critical. Also, they need to know what they are talking about. Just because your brother-in-law built a doghouse in 4-H does not mean he is qualified to advise you on the condition of a home.
Right Place, Wrong Time
Our second adventure into home buying was a new stick-built home. We had it built and it was a nice house for what we needed. However, a job change just two years after building it required us to move. As a result, we lost money on the purchase.
In this case, there was not something inherently wrong with the home we purchased. The issue was with our timing. When you buy a house the idea is to make it a well thought out investment. Sometimes regardless of the planning, things do not turn out that way. The only thing you can do in those cases is to move on and learn from the experience.
Be Prepared
The last example is the home we bought and have lived in since 1988. A year before actually purchasing the home we had looked at it. Due to water coming in the basement wall we did not seriously consider buying it. A local real estate agent asked us to give it another look when we took up our search again later.
The house was part of an estate sale and had motivated sellers. We weren’t financially ready to buy a house because of some poor financial moves we had previously made. After giving the house a second look we decided to buy it.
Our bank required a 20% down payment and that meant we needed $7,600 in addition to the closing cost. That made it a perfect fit for us, giving us payments of around $350 monthly. That is well within the percentage of our income that we use today in our coaching. There was just one little problem. We did not have $7,600.
This is where it is beneficial to live in a small Midwest town. Our realtor talked to the sellers and convinced them to rent us the house for a year. They would apply the rent payments toward our purchase. Then we would have to make monthly payments of $350 for 12 months. Additionally, we would have to make two larger balloon payments. One would be up front and one at the end of the 12 months. With that agreed, the local bank would give us the loan and set us up on payments of $350 each month for 15 years.
I had acquired a bass boat and was able to sell it to get the first $1700 balloon payment. Over the course of that year, we were able to sell a lawn tractor and a couple cars to make the extra $1700 payment at the end of that year. Several times throughout the process it looked like the deal was not going to work, but being a bit headstrong, we made it through due to perseverance and providential help.
While we have called this place home since that time, better preparation would have been a big help. We did not have the needed down payment. We were fortunate to have the help of caring individuals to make things work, as well as putting forth a strong effort to meet those payments required.
Conclusions
Getting ready to buy a home requires having lived on a budget. It is about knowing your cash flow and planning for where every dollar will go. When you have done that you can really prepare yourself for those things like down payments and unexpected maintenance that will certainly occur upon purchase. Purchasing a home is an exciting thing, but sometimes can be a stressful one if you spend less time preparing and more time dreaming. Dreaming of what could be is a great thing because it can help you achieve big things, but at some point, dreams have to meet hard work to become a reality.