We’re Buying Our First Home and It’s Scary!

Good news, everyone! We’re buying our first home.

It’s been a long time coming. We first started looking for our first home about two years ago. It was right after we got engaged but before we got married. In that time, we saw a ton of homes.

Most were crappy. Many were expensive and crappy; a real killer combination. Some that were OK were just too expensive for us. The few that we liked sold very quickly before we could even make an offer. We did make two offers during those two years and both went to other buyers who were more eager to pay above what we were. The issue with buying a home in a hot market is that evaluating value is hard given what other buyers are willing to do.

We’re in a pretty hot northeast market and a good home is hard to find. The price range we are looking in($300-$400k) is filled with many dumps that need a lot of work.

Quickly, we realized, that if we wanted a home in the neighborhoods we liked, we’d probably have to bump up our price range just a tad.

We were ready to buy something but weren’t finding anything we liked.

As far as what we wanted. Well, it was something in the 1500-1750 sq ft range.

After all, a smaller home is cheaper to maintain and what do we need all that size for? It’s only the two of us with no plans to expand that. We wanted more space than our current apartment didn’t want to over do it. . The modern home with it’s tiny yard and massive square footage wasn’t for us. We wanted something smaller with a little bit of yard for our dog to run around in. There had to be central air and natural gas was preferred. On top of that, public sewer and water was a must too. Who wants to deal with a leach field!

Well, a couple of weeks ago we found it! It was a cute little home in a neighborhood we loved and it ticked all the boxes and while the price was a bit high, we were prepared to move on it.

We actually made an offer on place in that same neighborhood last year but there were better offers than ours. It seems like this neighborhood draws in buyers like crazy as the offers were quite a bit above market price on that home. This one a bit more expensive and was at the top of our price range but it had exactly what we wanted.

This house wasn’t even listed. The seller reached out to our realtor after our realtor sent some letters to the neighborhood looking to see if anyone was selling. We saw the house, liked it and made an offer.

After all, apartment life is nice, but we’re at a point in our life where we want a lifestyle change. We want a yard for our dog, we want to have backyard BBQs and most of all we want more space for our hobbies.

Right now, I have an office where I can write and stream but it’s cramped. On top of that, my wife has no space for any of her hobbies which is unfair to her. She likes to sew and paint but it’s hard to do that in a small one bedroom apartment. It’d also be nice to have some of our workout equipment set up in a way where we wouldn’t have to put it together each time we want to use it!

We were excited and ready to get moving on the home.

However, someone else was already in there with a higher offer. That buyer needed some time to finalize everything so it wasn’t a sure thing. The seller had a timeline to sell but agreed to wait 2-3 weeks to see if that offer would firm up. We assumed it would and moved on!

Fortunately for us, the other buyer asked for an extension. The seller came back to us to see if we wanted to counter and we did! We met in the middle and they accepted!

Yay! We’re going to be first time home owners!

I’m both excited and nervous about what that means. The problem with being a first time buyer of a home is that we really have no idea what that means yet. We’re getting more clarity soon but right now, I’m in a limbo of expected costs and expensive things. It’s scary!

I know a few things for sure. For one, we’re going to be very cash poor soon! I used to have no house and 1 moneys, now I’ll have 1 house and no moneys.

Fortunately, we have a good cash cushion but the down payment alone will wipe most of that out. I do have some extra cash in my investing accounts right now but hope not to have to dip into that.

There’s other costs involved too like lawyer fees and inspections, stuff I’ll have to get a handle on as the process progresses. I’m sure I could do some research but what do I look like, a guy who’s not lazy?

I actually mentioned the potential of a home purchase in my latest expense review and what it might mean for my savings rate going forward. I didn’t expect it to come so fast but I’m glad I was saving a lot to start the year. That’s because my savings rate is likely to plummet soon with all the associated costs. It was good to get a head start on saving if I want to meet my financial goals.

Last year, we had my wedding and honeymoon as expenses that dragged down my savings rate for the year. Now, it’ll be the down payment and associate home expenses!

The down payment won’t affect my savings rate since we have cash saved for that specifically but all the fees and stuff likely will. That means my next few months may be ones were I try to strap down and cut other spending to replenish my cash fund/save for upcoming expenses. For example, we likely want to replace the carpet on the 2nd floor of the house with some sort of hardwood or laminate flooring and that won’t be cheap.

In addition, our lease doesn’t expire until September and our close will be in July.

It’s quite possible that there might be a month or two of overlap where I actually have to make a mortgage payment and a rent payment! That’ll suck! We might actually want to do that for one month if we’re making a lot of changes to the house. Replacing flooring will be a lot easier if we’re not already moved in. We’ll likely want to hire out movers too because we’re not lugging all that stuff around! On top of that, who the hell knows what other expenses will come up!

It’s a whirlwind of expenses that I don’t fully have a grasp on just yet. In addition, we’re back in debt with a payment that’s going to be higher than our current rent. If you account for the equity part of that, the actual interest + taxes payment is lower but it’s still a higher overall payment which is what matters on paper.

The good thing is that the payment will be static(aside from rising taxes). We’re also buying at a time where interest rates are low now which is nice. On the end side, our rent has been creeping up every year and in a few years would likely eclipse the payment we’ll be making for our home.

At the end of the day, we have to pay for lodging somehow. We’re paying a bit more now but we’re getting a lot more too and it’s a price we can better control.

I’m not one of those people that think a house is a great investment. I think it’s a good way to better control costs especially if I can pay off my mortgage early. Rent in this area has been going up quite a bit and locking in home costs is probably a better idea than being at the mercy of the market in the next decade.

However, in the end, this is mainly a lifestyle decision for us. We’ll pay a bit more in the short term for more space, a yard and a better neighborhood. That’s why we’re buying our first home. The equity we’ll start building is nice too. The home MAY be a better investment in the long term but it may not. It all depends on so many factors we can’t control.

We’ll be losing our big cash cushion but in reality that’s just a movement of net worth in the balance sheet. However, while it shouldn’t, the loss of cash bother me on an internal level. That’s why the plan is to cut back in the next few months and make sure we start building that back up. I’m the type of guy who likes having a bigger safety net that needed.

We still have an emergency fund but it’ll likely be smaller than I’m comfortable with after our bevy of expected expenses.

I’ve been pumping all my extra money in stocks recently. Now, that may change for a bit as I pump money into cash and equity for the next few years. Naturally I’ll still be maxing out my 401k, HSA and Roth IRA but maybe I’ll send some extra money towards the house instead of buying stocks right now.

With this house, we also get a 30 year mortgage. I’d be 65 by the time that’s paid off! I’m not sure I’m cool with that.

As a first time home buyer, I’m excited about the house and the process. However, I’m still scared of all the things I don’t know! It’s insane how little you know when you go into this process.

As a person who likes finances, I’m eager to get the debt off my plate too. I’m already thinking of ways I can add more money to the principal and pay this thing off faster. My mortgage will be in the low 4% range which isn’t bad but paying that off early is a guaranteed return. It’s like a reverse bond right now. It’d be cool to pay it off faster than in 30 years.

At the end of the day, we’re at the very start of the process. Closing on the house is the focus right now as is getting moved in and set up. It’s an exciting time and a big change in my adult life.

After that’s done, I’ll be just as eager to get started on getting my cash fund established again and paying down that mortgage ASAP.

Still right now, I’m excited to see what the future brings. Buying a first home seems like a step forward into a new part of life with my wife and that’s pretty cool.