It’s been overcast every time we’ve gone to see the house – so I’ll get a better pic at some point…hopefully!!!
Well, after multiple false starts and hopes dashed, we’ve finally found a house!!! As I talked about in my last update, we decided to increase our budget and search area to see if that would help us find something we would be happy with. Well, big surprise (sarcasm), we found the perfect house for us almost immediately. It is pretty far out of our original search grid and budget, but this is what it has going for it:
- Schools – Our original search was in a “hit and miss” school district, where some of the schools were excellent, but others were pretty crappy. This house is part of a nationally acclaimed school district that helps keep values up and will bring buyers whenever we go to sell it in the future.
- Location – While it will be a further drive from the lake and Mrs AB’s school, it is in a beautiful neighborhood of newer homes with great curb appeal. The peaceful setting should help keep us relaxed during stressful times.
- The House – The house is amazing, the floor plan is a large one story with a massive kitchen and large covered patio. Even better, it backs up to the edge of a large parcel of undeveloped farmland, so it’s very private. There is a ton of room in the house for me to have my office, my wife to have a place to work, a reading area, a “media room”, etc. On top of all that, it will require almost no work before we move in. There are a couple of rooms we are going to paint, but that’s about it. No major remodeling, no walls being removed, etc. Just paint and move our stuff – that’s it!
Of course I mentioned the good things first, but it does have some drawbacks.
- Price – The house was listed for over twice our original $125k budget!!!! We went back and forth, but settled on a selling price of $245k, which is still pretty significant. When you factor in taxes and insurance, it will cost a pretty penny to live in this house, but I know it will be worth it!
- Location – I think it’s a great location, but it is a little off the beaten path. The only way to get something this new (built 2007) for this price was to go in this direction. I’m happy with the decision, but I just want to point it out here!
- That’s it – we had an inspection and there were only minor issues, but other than that – we love the house and can’t wait to move in!
So, I’m sure you’re all wondering – how are we going to pay for this house? And that’s a very good question. Over the last few weeks I’ve definitely been reminded of the complete ineptitude of mortgage brokers. Here’s what Mrs AB and I have settled on, although it’s not final yet so the numbers may change before closing.
- Purchase Price – $245,000
- Down Payment – $97,000 (40%) – to keep our payment down, we have decided to put a large chunk of our cash cushion into the house, as I discussed in my 2013 goals post. We could definitely put down less, but our goal is to pay off the house quickly, so we’ll be using it for the mortgage sooner or later, so it makes sense to just put it towards the house now.
- Loan Amount – $147,000 – this is just the purchase price minus the down payment.
- 7/1 ARM at 3% – We looked at a lot of options (30 year fixed, 15 year fixed, other adjustable rate mortgages, etc) and settled on a 7 year adjustable rate mortgage (ARM). Our plan calls for us to aggressively pay off the mortgage within the next 3-5 years, so having a fixed interest rate for next 7 years seems like more than enough time. I am well aware of the risks involved in having an adjustable rate mortgage, and if we don’t pay it off we will be at the mercy of the market if we have to refinance it, but I don’t see that happening. If we end up staying in the house for longer than the 3-5 year period we’re currently expecting, then I see very few scenarios that would leave us with a mortgage after 7 years. We looked at a 30 year, but the rate on that would be almost 1% higher, and we just don’t see the value in having the rate fixed for 23 more years if we’re not going to keep the mortgage around that long!
With the numbers above, here’s what our payment will look like
Our Monthly Payment
- Principal and Interest – $620 ($147k for 30 years at 3%)
- Taxes – $518 – This is based on the 2013 appraised value. We will be paying our taxes once a year, but we’ll be saving for it every month.
- Homeowners Insurance – $100 – This is just an estimate at this point. I have a couple of quotes, but the one I think I’ll go with (through Liberty Mutual if anyone has any thoughts???) is around $1200/year.
- Homeowners Association – $33 – We have a community pond…and that’s about it, but we still have to pay $33/month for this privilege I don’t mind though, as HOAs typically help keep the neighborhood looking good and property values up.
- Total – $1271 – It’s still an estimate at this point, but it should be close to the real number. It’s pretty surprising that this number is lower than our current rent!!!! But of course, if something goes wrong – we’re responsible for paying for it – and we do have almost $100k invested! We will be paying more than this each month to get this paid off quickly, but this is the minimum that we’ll have to spend to live in our beautiful new home – not a bad deal if you ask me!
I know I haven’t covered closing costs, but we are increasing the mortgage rate to cover most of them so I have excluded them above. We’ll also have some expenses from a new washer/dryer/refrigerator right upfront, and then from new furniture and technology over the first few months we’re in the house (some of those will be FUN!!!!). Our closing date is set for May 31 and then we’ll move our things in over the next couple of weeks. We’re really excited, so hopefully things go well between now and then! I’ll keep you updated on the process and I’ll give you an update on the final cost once we get settled in!
Have you bought a house? What did your costs look like? Do you think we’re crazy????? Let me know in the comments!