Thursday, March 25, 2010

How We Chose to Buy Our Home

After coming across yet another blog about renting versus buying, I decided to explain how we chose to buy our home.

First of all, I was extremely frustrated that our rent was increased by 5-10% at the end of every lease. We were clean, quiet, and paid early every month. I was always able to cut down on the increase, but I could never stop it completely.

Secondly, having to ask permission to change absolutely everything meant we never changed anything at all. Our apartments didn’t feel like homes…they felt like temporary bases. We did everything that we do now in a house, but now I’m surrounded by the colors we picked out and art that we finally allowed ourselves to buy since we felt stable.

Thirdly, the financial numbers worked in our favor in our area. No, it isn’t wise to buy a house that you cannot easily afford. That means that we would probably never allow ourselves to buy a home if we lived in the high cost areas along the coasts. Luckily, Houston has inexpensive homes in good locations. After looking around for a couple of months, we found our house – the perfect starter home for us. This is how the numbers looked:

Rent was costing us $8760 a year and was increasing 5-10% a year.

Our home was going to cost us $24,000 up front (20% down and closing costs) and cost an additional $15,000 a year including taxes, insurance, and maintenance for 11 years. After the end of 2017, we’d only need about $4500 a year for taxes, insurance, and maintenance, and we were budgeting for that to increase 3% each year (our taxes have actually decreased since 2007, but these are the numbers we used).

That meant that with a 5% increase every year on rent and a 3% increase every year on property taxes, we would be breaking even with home ownership in less than 20 years plus we would own a home outright in about 11 years. In less than 20 years of renting, we would have paid just as much and have no physical thing to show for it. That alone would have convinced me to buy in our area.

Lastly, by putting 20% down on a foreclosure that was already heavily discounted since it was on the market for more than a year, we had instant equity. This didn’t effect our decision much, but it was nice to know that we could have taken out a home equity loan if necessary. I like having lots of options when it comes to finances.

Over the past 3 years, our taxes have decreased but our equity has increased. We are still on track to pay off the mortgage by the end of 2017…maybe earlier if I get my way. We’ve spent less than $300 a year on home maintenance since it was built very well and barely lived in at all before we snatched it up. To be honest, we have spent almost $3000 on new floors downstairs and paint, but that was a choice and makes us very happy.

No, home ownership is not for everybody. It’s not even a good financial choice in many areas. I also know that I don’t enjoy having to fix my own problems. Yet, I wouldn’t change a thing.

How about you?  Is your market nice to homeowners?  Do you enjoy renting?


  1. I'm currently in a condo, which is nice because I don't have to maintain the outside of the house. I live on the East coast, so the market isn't necessarily nice to homeowners. My wife wanted a place of her own and I had grown tired of renting. I'll admit I didn't do a cost-benefit analysis, but did calculate how much we could afford. I've already worked on some numbers for a potential new house next year. We would like a larger place. I certainly enjoy being an owner and I think I'll enjoy it even more in a single-family home (currently in a townhouse). My goal for the new place is to have it paid in about 15 years.

  2. We have a single family home on the East coast. Our market is not that nice to homeowners, but the rentals available in this area leave a lot to be desired. Coupled with my husband's love of not having an adjoining wall with our neighbors and being picky... well.. we bought a home.

    We've been homeowners since 2004, bought the house we live in right now in 2008, and are on track to pay this house off by 2020 with the extra principal payments I've been making.

    We spent 10K before move-in on replacing every scrap of carpet on the 2nd floor and stairs with hardwood. We've also spent a pretty penny to get the whole house (and ceilings and trim) professionally painted as we have a little one and would never be able to get time to do it ourselves.

    Do we spend more than if we rented a place? Probably. But we also get to do what we want within our house and my husband is happy.

    We have close to 3000 sq. ft not counting the finished walk out basement, but it sure feels cramped when my husband's 16 (and counting) family members stay over for holiday events that we host. Also, my mom is temporarily living with us, and the space makes it not too bad. We also get the perks of my mom cooking for us every night and babysitting on weekends.

    Our mortgage is pretty large even with putting over 20% down. I don't see us able to pay it off that much earlier than 2020, which is kind of depressing.

  3. MikeS, yep, my husband wants to move into something larger too. I've convinced him to wait until we pay off this place plus a couple of years (2019-2020). Maybe I'll come up with other ways to convince him we're fine when he gets antsy...I hate moving...

  4. Julie, don't be depressed! Your house sounds awesome, you'll have it paid off in 16 years total, and you will probably not need to move again. Sounds great to me!