Our House Buying Adventure

I’ve always enjoyed looking at houses and floorplans and going to open houses. I get this from my parents who, despite not moving in over two decades now, used to take us to look at random houses that we never moved to (which really confused us as small children and teenagers). So it’s no surprise that I would get automated emails about similar properties to our current apartment on a regular basis, to stay on top of the market. Nor is it a surprise that I have regularly dragged my husband to open houses in the past. If you’re at all considering moving, it’s really helpful to have an approximation of what you think you could get for your current place, which helps to anchor you with prices for other types of places in your area.

Recap of my decision to buy our current condo

I didn’t grow up in a big city and for some reason, I associated owning with owning a house, perhaps because I had always lived in houses that my parents owned and I didn’t know any other ownership model. I thought that all apartments and townhouses were rented. So when in my early twenties, I started to find myself with extra money, I first didn’t even think of buying a house, but I saved money anyways. I really loved living in an apartment, but I also loved the idea of having my own garage directly attached to my place where you could leave your groceries for a few minutes while you ran in to use the bathroom.

My first realization that you could buy not houses was a townhouse, so that’s where I concentrated my search in late 2011. My picture of a townhouse though, wasn’t one in the city – it was one in a more suburban area. The ones I pictured didn’t have direct entrances on a street, street noise, or garages that were at weird angles to get into because they were, you know, larger communities on more land. As a single woman, I didn’t want to live in a city in a place with a direct entrance on a street, plus there were several annoying floorplan decisions that weren’t changeable made in many of the townhouses I was looking at at the time that I now realize was common of that particular era of building. From those big items, I ruled out living in a townhouse and thus buying a townhouse back then.

Next, I realized that you could buy an apartment, which was the most mindblowing amazing idea ever. I loved living in my apartment! I could see myself living in an apartment like mine through the rest of my twenties! So why not buy one? I wanted a full second bedroom so that my office had a window versus the den in my then-apartment, but otherwise, my apartment was great. I looked at many apartments, including one that fell through, and eventually found this one that just felt like home when I walked in. I loved that it had rooms and doors and some separation between rooms. For a single person, it felt like a mansion. (And it still does when only one of us is home!)

How did I decide on budget? I had enough saved to put 20% down and wanted to find a place where the monthly payments (mortgage, condo fees, taxes, and insurance) were similar to what I was paying to rent. I originally started looking at places that were about 70% of the purchase price of the place I eventually picked. They felt more affordable, but I realized eventually that I didn’t want to live in those areas as much. That resulted in me buying an apartment that was about 4x my then-salary income. It wasn’t a big stretch in hindsight since it was very comparable to what I was paying for rent, plus my income did go up and I also had a decent amount of non-salary income eventually, but the mortgage felt so huge compared to my income at the time. I’m really glad now that I stretched to buy this place though it was a bit stressful at first.

How we feel about the condo now

We love: there is space for a king-sized bed in the master bedroom (though we don’t have one yet!), the master ensuite (including the separated toilet), great closet space, and space to barbecue outside. We love the area, especially its walkability. We love how much light there is in the living room. We love all of the little changes that we’ve made, with thermostats, overhead lighting, painting, light switches, replacing a pedestal bathroom sink with a vanity, and putting in quite close toilet seats everywhere. We love the cost, how small this mortgage is and how close we are to FI if we stay in this place. We love all the kitchen storage space. I love that it’s a place I bought on my own and substantially paid off by myself too.

We dislike: the kitchen, other than the storage space. It is beautiful for someone, but not for us. We cook far more than I did when I bought this place and there simply isn’t enough counter space to do the amount of cooking we do. Our kitchen has great square footage, but very little counter space. We have bought a couple of tables/carts to makeshift give us more counter space for appliances that we use regularly enough that they shouldn’t get put away in a cupboard. We don’t have quite enough personal space in our current floorplan – what was a mansion for one isn’t a mansion for two. The condo association won’t replace windows with energy efficient versions (and we can’t either without their authorization, which they won’t give), which is really frustrating when all of the light in our living room is discoloring furniture. The association has also been really poor at both following the rules and maintaining the building.

We’ve put a lot of work into reforming the space to improve its use for both of us, which has helped, but not quite enough. If we weren’t frustrated with the board, would we move over the kitchen and personal space restrictions or would we work with it to avoid moving and save the money? I don’t think we can properly answer that question.

What we looked for this time

Our basic ideal place items are the items we like about our current place, plus a total of three bedrooms (to aid in the more personal space desire), about 50% more finished square footage, an amazing, large house-sized kitchen and dedicated garage space. We’ve looked off and on starting about two years ago, during which time prices have gone up. Location again really impacts price and to be price conscious, we were trying to limit ourselves to at most 1.4x what our current condo is worth, which was requiring us to change neighborhoods. After finding enough places we liked the inside of, but not the neighborhood enough to buy it, we realized we needed to adjust our budget or find a way to become happier with our current place. We also realized that we are really particular about our color preferences (but generally aligned!) in that neither of us are a fan of super dark kitchens, for example. We generally prefer contemporary, modern minimalist decor.

We looked at a lot of different types of places this run. We looked at the occasional three bedroom apartment. We looked at single family houses built last century, townhouses built this century (and ones this decade), and single family houses built this century.

We ruled out three bedroom apartments because they’re hard to sell, difficult to even find, are generally only in smaller condo associations (which is one of our lessons from this place), and their floorplans aren’t often conducive to the additional personal space we were desiring since the secondary bedrooms are so small. They’re typically only about 10-15% larger than our current place and our goal was closer to 50%.

We were really attracted to single family houses because I ideally wanted a single level. (part of why I’ve loved apartments for so long!) The catch with the single level houses was that they weren’t always in walkable areas (or if they were, they were substantially less central) since that requires more land and more central places tend to be more dense. We also realized that we didn’t want the maintenance of a yard and there were some other cons to a yard as well. Newer construction single family houses tended to be about 2500-3500 square feet while the older, remodeled ones were more in the square footage range we were looking (1500-2000 sqft), but they often had weird layouts or parts with ceilings too short for my tall husband or no garage, which was really important to us for the secure bicycle storage. (To get a newer build in our desired size range, you need to

Townhouses (or attached houses, depending on your region) vary a lot in their features. Some have an HOA, some don’t. Some have shared garages, some have their own. Some don’t have garages. Some are really narrow, which I didn’t like! Some have shared maintenance agreements, but no HOA. With townhouses, we automatically ruled out any units that were a middle unit (we love our windows!), attached to too many units, shared a garage with any other unit, or had any shared maintenance agreements without an HOA. We looked at a new construction townhouse a couple years ago that was near us (so we liked the area), but the units were too small and narrow at three levels with only about 15% more square footage than we have now, which really just covers the stairways, meaning the rooms all felt tiny and we hated the colors they had picked. We have friends who own townhouses without HOAs or shared maintenance agreements but functionally share items such as utilities or garage space, which is its own frustration.

What we picked (!) this time

Their marketing worked because I saw a sign showing new construction townhouses near the grocery store one day. The first time I saw it, I thought we don’t want to move, we like our apartment. The second time, I looked it up and thought they were too expensive. The third time, I looked again and really, really liked one of the floorplans and that lower priced one wasn’t so bad of a price. (Which of course, that was not the unit we picked.) I forget at what point exactly I suggested my husband look at it too, but he also thought it was interesting. We actually had a hard time picking which floorplan we liked best because they had quite a few we liked! We drove by the area to see how far along they were and figure out where it was. It turned out to be in quite a good spot! And they were pretty far along with some units, which was helpful because we could walk through a unit with an outside and fully framed to get a feel for the space.

A few days later, we walked into one of the units that was fully framed and immediately felt like this could be home and could work! Both of us!

We picked an end unit! It has a garage, lots of windows, three bedrooms, an amazing, spacious kitchen that we are really jazzing up, a walk-in closet in the master bedroom and a separated toilet with a double sink in the ensuite. The garage has tons of space for working on bicycles and storing them, plus our car. The main entry is on the kitchen level, but the kitchen isn’t right at the entrance. There is a powder room on the kitchen level. (We saw so many places with no bathroom on the main level with the kitchen! That would drive me crazy.) The laundry is on the main bedroom level, which is great. (So many places put it on the garage level and I’m not interested in carrying laundry up two flights of stairs on a regular basis.) We also get to pick quite a few parts of the place: flooring, the neutral interior wall paint color, all of the appliances, countertops, cabinet colors, toilets, sinks, showerheads, faucets, speakers, light switches, networking equipment, etc. It’s been a bit exhausting and overwhelming, but we’re both really excited to pick things out together and to build a house we will love!

The price is the only catch here, which terrifies us a bit. This condo was a really great financial decision and I really hope this new townhouse doesn’t turn out to be a terrible one. I’m really glad that I bought our current condo when I did because that’s a big help in us being able to afford the new place comfortably versus our friends who are just buying places now and are picking different neighborhoods entirely.

We really struggled with how to figure out how much house we could afford. My previous formula of around 20% down and monthly cost should be comparable to renting didn’t seem like the right answer with how much further along we are in our financial lives. We, as usual, were far more conservative in how much house we could afford than any mortgage lender: we tried to keep our maximum house price at most definitely no more than our combined net worth and preferably below our current condo equity plus our cash and taxable account balances. The house definitely costs less than our current combined net worth and it costs about 10% more than the estimated second figure as of our estimated closing date in the future. We don’t want to empty our taxable accounts and want to continue to balance them with paying off the new mortgage by the time we are 40.

Those numbers all feel comfortable with our current household income and we ran the budget with about 60% of my husband’s current income, though the numbers are also definitely larger than what we had been paying. We definitely had to wait to buy a house until we were comfortable using all of our incomes as household to cover life going forward – houses are too expensive otherwise – and we really had to be solid on the no kids plan because otherwise we likely would have picked a very different place. At first we debated if we should lower our travel, giving, or personal budgets because of this. We immediately said no, we shouldn’t lower the giving budget because this townhouse is a discretionary expense, and we’ll keep it as is. We likely won’t contribute to our Donor Advised Fund at all in 2019 though and will push that out to 2020 so that we get the tax benefits of itemizing. The travel and personal budgets will continue to be under discussion since they’re more discretionary than giving.

Our new place costs about 2x what our current condo is currently worth, which feels like a very steep increase. We asked ourselves a lot of questions in deciding that was okay, primarily: how much does it push out our FI date and are we okay with that? Our FI date was near enough in the future that it really does feel like it’s getting pushed out, but buying the new townhouse should still keep our FI date in our 30s, which was a key for us. It feels so weird that we can afford this large number that I keep re-running the numbers just to verify that it’s okay.

Our new place won’t be ready for somewhere around a year or a bit more, which creates some interesting financial planning situations that I’ll talk through over the next year: When should we sell our current place? Should we sell it sooner and rent for a while? How much of our taxable accounts should we cash in versus save up more down payment in cash in the next while? How much should we put down on the new place before we sell the current place? How much should we re-invest versus apply to the new mortgage recast after we sell our current place? How does this affect our overall financial plan? How much cash should we keep on hand?

This feels like a really expensive and delightful planned for splurge and we are both super excited! It’s super fun to watch it be built and to go check it out since we aren’t really moving neighborhoods!

Readers, how did you decide how much house you bought or will buy? How does our formula this time feel to you?

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10 thoughts on “Our House Buying Adventure

  1. I’d be interested to hear more about your mortgage this time around! And how much money you have to put down etc. before the house is actually built. How does the financing actually work for these situations?

    • I’ll try to talk about that some more. The mortgage is SO weird and confusing, so I don’t want to write a post about it yet. There’s basically no “normal” contingencies in our contract? (No inspection or appraisal contingency and once we get approved from their lender, we won’t have a financing contingency.) So far, we’ve put down 5% of the base price as an earnest money deposit and we have to put down 20% of any upgrades we do, which we have to decide on this month. We told them we were putting down $X and so now we can’t take out a loan for more than the purchase price less $X, even if we do upgrades. We have to get fully approved with their lender soon, but we can actually close with any lender we want. We got pre-approved with another lender to feel more calm about it. Who we close with will depend on rates closer to closing and at that point, the mortgage application becomes more normal, except that closing is dependent on getting an occupancy certificate. They say we should have a month estimate for closing by the end of this year?

    • Yes, you did which was super helpful! Thank you. The new construction process is sure full of different ups and downs than buying an already built place.

  2. Congratulations! I never looked at new build homes when we bought so I find this very fascinating. Would love to hear more about how you are picking the customizations / what sort of aesthetics you’re going for in the new place. Best of luck!

    • Thank you! We looked at recent build homes and we were really intrigued by them. They didn’t always have garages though and often had small issues we could have fixed in pre-sale, so that’s why we ended up finding a place in pre-sale.

  3. Congrats on the new purchase, and I wish you all the best as you complete the process and move into your new home! It was interesting to read through your experience in buying your current place, and how that influenced the new place.

    When we bought our home, we took a similar approach to you in that we were approved for far more than we spent but set our target at a level that was comparable to our rent at that time. And we actually came pretty darn close, with the P&I actually being less than our rent but the taxes and insurance kicked us over (and that has grown since we bought due to taxes going up, but our income has grown considerably as well).

    • Thank you! That’s awesome that your P&I was really close to your prior rent. Taxes and condo fees have definitely gone up a lot since I bought our current place!

      • The states we are looking at generally have fairly low property taxes, almost to the point where we would pay annually what we pay in 2-3 months now. And as we would look to either buy something we can pay for outright or eliminate that mortgage quickly, the property tax reduction would reduce our expenses in retirement considerably.

        And I forgot to mention that I had to laugh at your comment about liking to look at houses, as I am addicted to Zillow and have a ton of saved searches set up in our preferred destinations. Unfortunately being out of state means we don’t visit in person, but I love looking!

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