Sense to Save

We went to an open house and a private showing over the weekend. The open house was out of our reach, but we wanted to see what $110k could buy in that neighborhood. It was a nice, well-kept three-story house with a basement. It had four bedrooms but only one bathroom. The kitchen was smallish. The top story was a ‘bonus room’ type of thing and that was neat. It only had a parking pad out front, but it was better than having to park on the street, which is typical in some areas here. To enter the house, you’d have to go up at least a flight’s worth of steps outside. The fenced-in, mostly level backyard was a plus.

We liked the photos of it and seeing it in person helped us to figure out how those photos matched up with reality. Also, I didn’t like how close it was to the neighbors. 

The next house we saw was a privately scheduled showing. Johnny fell asleep and from the outside the house didn’t look worth seeing, so I stayed in the car while Shane had a quick tour. The place was awful, apparently. The porch looked like it had cracked and was sinking into the ground. You have to be careful with mine subsidence around here. I don’t know if that’s what caused it, but it didn’t look promising.

The photos of that house made it look fairly decent. When we got to it, though, it looked awful. Extremely overpriced for the area and for what it was, too.

In the future, we won’t schedule a private showing for a house that we haven’t driven past first. That will save us a bit of time.

The search continues. Seeing more houses in person will help us figure out what we want and don’t want in a house.

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And now, some links I’ve been meaning to share:

I was featured in the Carnival of Personal Finance last week, hosted by Mighty Bargain Hunter .

Also, I enjoyed this series by M is for Money about first-time homebuyers .

With those expenses we live comfortably with room to meet our savings goals. We don’t feel deprived. If we want something, we budget for it and buy it. 

I do think we can increase how much we pay for our overall housing costs. You see, right now, we’re in “save for down payment” mode. 

Once we actually get a house, we won’t need to save for a down payment, since that payment would have already happened, ya know?

I think we can have our overall housing costs at as much as $1,300 per month and still be reasonably comfortable. Here’s what I’m including in those housing costs:

• Mortgage (principal and interest) $525 
• PMI $60*
• Property taxes about $250 per month depending on municipality and assessed value. Insanity, I tell you.
• Homeowners insurance $50/month? Help me out, what number should I include in my preliminary estimate?
• Gas & electric $250/month with a “budget bill” plan. This will vary by house. I will request to view utility bills for summer and winter for houses listed for sale. Pittsburghers, am I on target? I do know that winters can produce $300-$400/month gas bills in an older house around here.
• Water & sewer $50 
• Trash $15
• Maintenance $100 [Is this reasonable? We'd set aside money each month to put toward maintenance, so it wouldn't necessarily be spent each month. Some months would be more, and of course we have an emergency fund to cover crazy things like an exploding water tank or something]
• What else?

* When I spoke with a loan officer yesterday, I was told that we qualify for an FHA or a conventional mortgage. With the FHA, we could expect to pay around $40 per month in PMI and around $60 per month with a conventional, based on her calculations. 

If we can get a mortgage at 5 percent interest, we can afford a house around $100k to $105k, assuming my assumptions are correct. This will vary, depending on the specific property taxes of the municipality and the utility costs.

I told the loan officers that I thought $105k was our upper limit, and they approved us for the amount. They told me that we could probably qualify for a lot more, but I wasn’t interested to find out how much. No need to be tempted, since I know what we can comfortably afford — not them. And, I wouldn’t want our real estate agent to know we qualify for more either. Don’t show me what I can’t afford, lady!

So ah…to all the people who say when you rent, you’re throwing away money, I say look at how much money you’re throwing away when you buy. Mortgage interest, PMI, property taxes, more expensive homeowners insurance, closing costs, maintenance and all the extra utilities you’re on the hook for … goodness. Seems like you’re “throwing away” just as much if not more with a mortgage in the early years. The benefit is that equity that someday you might be able to see again, if things go right.