Thankful—Because We Didn’t Purchase Something

29 Jul

My husband and I have been looking for our “dream home” for a few months now. To be honest, I have been scouting homes for over a year but we have been seriously looking at homes for the past two months.

I put dream home in quotes because my dream home is not here. Nope. I cannot afford a house here so our “dream home” has really been limited to co-ops and, if we were lucky, a cheap condo. We were pre-approved and one of the first co-ops we saw—well, we loved it. It was a two-bedroom co-op that needed some work here or there but overall, it was nice. It had a terrace, which I was practically dying for and the only catch was that there was no washer/dryer unit on-site. It was at the top of our price range and we both really liked it. But after consulting with a plumber, we decided it was not worth it at all and we sadly let go of our “dream home.”

I would say that a few weeks after that, my perception completely changed. And I am glad we did not pursue that co-op!

Our current rent is probably right on average for what we would pay in our neighborhood. I started thinking to myself, “If I don’t plan on living here forever and these are not places that I absolutely love, why do I intend on paying more every month to live there?” Our rent is somewhere between 26-27% of our net income, which is actually a pretty good number considering a recent article I read talked about how much rent eats up the budget of those who live in my city.

So I thought up a new plan which is as follows:

  1. We began looking at one bedroom places instead of more expensive, two-bedroom places. We also stopped looking at expensive one-bedroom units. This not only saves us money on the down payment and mortgage but it also saves us money on the maintenance.
  2. I decided that our cut-off was now going to be $220,000 instead of the $350,000 we had started at and had been pre-approved for, since we can, in actuality, make those payments every month. I also decided to focus on places where the maintenance was on the lower-end of the scale, which for us is $600 or less.

I am incredibly interested in a place we looked at the other day. It’s listed for $199,000 and the maintenance is $473.55. I am hoping to get that price down by at least $10,000, though I’m not sure yet how negotiable the seller is since he is also willing to rent it out at the same price that I pay for rent now, which is $1,300/month. Doing a little big of math, I figured:

  • Purchasing the property for $190,000 would allow me to put down 25% or $47,500. The mortgage would be $670.09 at a rate of 3.875% (co-ops do not get rates as good as houses.) With the maintenance at $473.55, my total payment every month would be $1143.64, saving me more than $200 every month in rent. At least 50% of the maintenance every month is tax deductible, as well as the mortgage interest.
  • Purchasing the property for $190,000 would allow me to put down 30% or $57,000. The mortgage would be $625.42 at a rate of 3.875%. With the maintenance at $473.55, my total payment every month would be $1098.97, and everything else mentioned above also applies here obviously.

My thinking, for now, is that inevitably, I will get the money back that I used as a down payment when I sell the property in the future. In the meanwhile, I can pay for a mortgage and maintenance that is not only less than my rent but that will provide me with $2500-$3000 per year in tax deductions. In the meanwhile, I can save more money toward something else. Most housing did not experience any depreciation in my neighborhood so that is not of any concern to me.

So overall, this house hunting experience, which has left me largely frustrated, has also allowed me to reevaluate what I really want and what I am willing to settle for at this time. I think that going with a smarter decision, even if we don’t like it as much, will work out better for us in the end.

And really, I should thank the realtor from the first property—she was so obnoxious that she completely turned us off from the property all together!

4 Responses to “Thankful—Because We Didn’t Purchase Something”

  1. Michelle August 1, 2012 at 4:23 am #

    I have to say this article is really timely for me. (My husband & I have started talking about buying a house within the next year or two.) We’re in the early stages of trying to decide what we want. It’s good to hear from someone who’s decided to really look at the financial side of things and to scale back to something that is less ideal (in terms of what you get for your dream home), but more practical for a variety of reasons. I suspect our situation will be similar. Thanks!

    • the thrifty spendthrift August 3, 2012 at 10:57 am #

      It’s nice to know someone else is in a similar situation. 😉 We originally planned to upgrade our lives, get the two-bedroom, etc. (Obviously, by upgrade I meant upgrade to 880 square feet! Ha!) But after a month or so at looking at properties, we realized that we might not be able to sublet our co-op as a rental and if we paid more every month (not a lot more—I was looking at $200-$300 more every month which is still not a lot considering where I live) we still weren’t getting that dream house. So why bother?

      I think if we knew 100% that we were going to stay where we are forever, we would have went with a two-bedroom. But after realizing that we may not, why not buy a place, pay a mortgage and maintenance fee that is cheaper than our rent and end up getting tax deductions for over $2,000 every year? That started to make sense to us. We’ll just keep saving for that dream house that way…

      Good luck. And don’t let the naysayers get in your way. Everyone, except my mom, says, “Buy a house.” “Don’t buy a co-op.” “Why aren’t you getting something bigger?” But when they are the ones paying my bills, they can worry about it.

  2. Maria August 2, 2012 at 2:54 pm #

    I’m sorry that this whole experience is getting frustrating for you… I actually feel guilty, because I find it exciting to be reading about all of this experience. I love how your reasoning works, and, hey, you said it yourself: no matter what, – you’ll still win!

    • the thrifty spendthrift August 3, 2012 at 10:59 am #

      Thanks. I think in the long run we’ll think that way. I think part of the frustration was good because it really got us to re-prioritize what we should be looking for in a home.

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