This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Wednesday, June 16, 2010

The Hunt For The Perfect House

Posted By Paul

My wife and I have been in our current house (which was our first house) for about seven years and we recently started talking about moving. Having been in our place for a while we've learned a lot about what we would like in our next house.

So now we were faced with some really tough questions:
-Should we move?
-Can we move?
-What can we afford to move into?

I now appreciate what people mean when they say that buying your first house is the simplest since you don't have to deal with selling your OLD house as well. We decided to take it step-by-step.

We started off by browsing properties on the internet. We wanted to see if properties existed in the area that met our criteria to get an idea of what they cost.

That ended up being pretty easy. We discovered several properties that met the basic criteria of what we wanted. That told us that properties like we hoped for did exist (we wanted a little bit of land) and what they cost.

We then did some research to get an idea of what we could get for our house if we sold it. We tried to factor in a cushion to cover what we would do if there was a long gap between selling our old house and finding a new one.

We quickly end up with a spreadsheet where a lot of the numbers were guesses, but at least they were hopefully guesses grounded in the fact.

Based on a general idea of cost and a guess of what we could get for our current house it was simple math to figure out the mortgage payment we would need to swing in order to make it happen (based on the current mortgage rates).

Unfortunately that is where the process ended. The way the numbers worked out it looked like the mortgage payment for our dream house would be much bigger than we wanted to take on.

So now what? Well we're going to do three things:

1) Keep browsing the web for properties. You never know, maybe some amazing bargain will pop up.

2) Get our current house in shape for selling. This just means that any projects we decide to bite off will be based on the idea that we'll be selling this house in the semi-near future (so projects that help the resale value of the house get priority).

3) Save, save, save! Just because we can't afford our dream house now doesn't mean we can't get there. Towards that end we're focusing on paying down the mortgage (giving us more equity to put towards the next house) as quickly as we can without sacrificing our other "required" savings vehicles (rainy day fund, college fund, retirement, etc.).

It was tough looking at all of these cool properties and trying to figure out a way to get the numbers to work. Phrases like: "Well that mortgage payment wouldn't be TOO bad." keep going through your head. Luckily with a quickly growing toddler in the house it was easy to remember that unexpected expenses come up and that even if we COULD manage a bigger payment every month, it doesn't mean that we SHOULD.

Our hope is that if we stick to our plan that eventually we'll be able to afford our dream house and we won't be stuck in that "house poor" mode where we have a great house but we struggle to make the payment every month.

We'll keep you posted!