Monday, February 9, 2015

Before you buy that house...

Today I went to an EIGHT HOUR (yawn) Homebuyer class. If you are a first time homebuyer you may want to attend the course, especially as a certificate of attendance may make you eligible for certain down payment assistance programs (ask your lender).

I felt like I had a decent (beginner's) understanding of the home buying process but there were a few points I took away that I would like to pass on.

1. A loan officer spoke to the class and suggested looking at your Amortization Schedule, then before you make the first payment take the principal amounts for the next four, add them together, and send that amount in as additional interest, this way you knock out the first five payments for a rather small amount. The next month you have been in the house for two months and are on month SIX of your Amortization Schedule. Then you can continue this each month. We are SO doing this! Right now I at least double our premium but it makes sense when we are again at the start of a mortgage to pay tons to wipe these months away, and I love the mind game of following along with the Amortization Schedule to watch the months fall off (see my financial dork within BEAMING!)

2. When deciding how much my family could afford in mortgage payments I wanted to know what my other expenses would be. I knew that buying a larger home would most likely mean higher utility costs, including energy consumption. I brought up this dilemma to my realtor and she encouraged me to contact Excel Energy. I did but their lips were sealed. Why? Apparently because I live in Minnesota, a state where energy consumption is a big ol' secret. At class they also suggested to figure in energy costs, though they were familiar with this new law and had a way around it. If you find yourself in the same scenario use your realtor to contact the current owner. The current owner can easily request the previous twelve months usage history, regardless of whether they lived in the house that whole time.

3. I hate to even mention this last one as it involves a dirty little word. Upkeep. Yep, that nasty U-word that divides the renters from the owners. You know, the renters, who spend their summer weekends at the beach and their weeknights at the gym, and the owners who spend their summer weekends staining decks and their weeknights fixing toilets. Okay, besides the time and work aspect of it, one of the worst parts of the, cough, upkeep, is the cost! At this class they recommended, when figuring your budget, to allow 1-2% of the cost of the house to be set aside each year for maintenance. For a $200,000 house that means setting aside two to four thousand each year, or budgeting an additional $170-335/month above your mortgage costs. Ugh, once I rinse my mouth of this vomit I will plan to earmark a good $200 each month for this Ugly Unruly Unwanted Uninvited Upsetting thing called Upkeep.

So, how about you? Have any good tips for those on their path to homeownership?


  1. Consider the cost of PMI, if required by your lender, as well as the cost (and recent averages) of property taxes for your neighborhood. Factor in lots of other things - your commute, school district(s) if you have (or want) kids, and even cost of insurance. (Our car insurance was cut by over half moving from our old neighborhood to our new one.)

  2. I would prefer "Money Pit," the Tom Hanks/Shelly Long movie, over Barbie's "Dream House" any day.

  3. What the loan officer said about checking your Amortization Schedule was very clever. A lot of your readers might be able to emulate that too, as they probably should. People should really familiarize themselves with the workings of payment mechanisms, so they don’t end up paying too much for something basic. Having said that, I agree with the gist of your message, which is to plan ahead for everything, even for something as simple as miscellaneous fees. Good day!

    Naomi Cruz @ 4 Pillars