We decided we wanted a fixer upper. Something we could put some sweat equity into. We thought it would be a better investment decision, but I also wanted the opportunity to really make it our home. Plus, I come from a family of fixer-uppers. My brother’s passion is fixing up old Volkswagens, and I tagged along with my dad to his construction jobs when I was small. I know the difference between a Phillips and flat head screwdriver, flat and semi-gloss paint, plus with a plethora of DIY television and YouTube how-tos – how hard could it be? Our goal: buy the worst house in the best neighborhood we can afford.
Purchasing a house isn’t a small thing to jump into. It’s one of the biggest purchases we’ll probably ever make and it will continue to accrue expenses (no landlords to fix anything). We had a number in mind for our savings before we ever started looking. Billy would be in charge of the down payment and I would contribute by purchasing furniture.
We're also big mint.com users. If you haven't heard of it before, it's a really a great tool. Mint shows all your accounts, balances and transactions in one place and categorizes them. You can also set up goals, for example, a goal to buy a house, pay off student loans, travel, etc. Looking at mint you can easily see how much money you spend on food, gas and any other category that month.
I mentioned that we housesat together; this was a good test to see how much we consumed in groceries. Since we lived with our parents for the last year we didn't have an accurate take on what we were spending on food. But in those months we were able to see what we were spending normally, aka we didn’t go out of our way to be cheap. We were surprised that we didn't go out as much because we were able to be content in our own space.
We still wanted to continue with our debt reduction. While we won't be able to be as hard-core about it once the house is bought, we also wanted to be making progress and not just the minimum.
So we knew what number we needed for a down payment and we knew what we could afford. Next was shopping for a mortgage. Billy handled this. I wanted to go with a credit union like BECU but their interest rates for FHA were surprisingly high. Billy ended up going on a site and submitting some of our information for a quote. This was not the best idea. We were getting phone calls for weeks from banks. Not fun. But we did find a bank nearby and our broker was able to give us an unbelievable rate. SCORE.
We ended up pre-qualifying for a mortgage of up to $200,000. Now for the fun part: house shopping.
Other posts - How to Buy a House: Our Story