One major lesson I learned is that just because you are pre-approved for something, doesn't necessarily mean that you can afford it. When you are approved for a loan, although they do take into consideration your income and debt, there are many things that they don't factor into the equation. Like tithing. Like food, gas, insurance, utilities, etc. While those aren't set "bills", a good chunk of our money goes into each of those categories each month. And if we were to try to buy a house for the highest amount we qualified for, we would've found ourselves lacking money for some of those other bills. Even though we had found a house $30-40k below what we qualified for, it still seemed like something we couldn't afford. And it didn't make sense.
When we first got pre-approved for our loan, we didn't even have two pay stubs yet. Our loan was based on Lance's job offer salary. When we got our first few pay stubs, things were looking pretty good. But then we adjusted our taxes and enrolled for insurance. And boy were we off when we tried to estimate how much they would withhold from each paycheck.
We had already made our decision to purchase the home in Syracuse when we got our first "real" paycheck. The check that we could expect every other week for the next year or so. And it made me extremely nervous. We quickly made a spreadsheet of all of our bills that we had, trying to determine how much we really could afford for a house payment. (Something we probably should have done before even looking.)
We estimated things like gas, utilities, and food to the best of our ability. Once we had put in what our house payment would be, plus our monthly bills that wouldn't change, we had $2 left over. Two dollars for emergencies, entertainment, fun, extras like toilet paper, shampoo, etc. Two dollars! And when you look at past bank account activity and see that you average several hundred dollars a month in random/useless purchases, you begin to realize that there is absolutely no way that you could live with only $2 extra a month.
When we discovered this, we were pretty heartbroken. We had already invested so much time looking for a home and we were really excited about the one we found in Syracuse. We were mere weeks from our closing date and owning our very own home, then suddenly realizing that it would likely be many more years before that ever actually happened.
Yet even with those impossible numbers, I continued to debate. And I was extremely confused. Initially, I would get queasy and a bad feeling when I thought about buying a house. But then every time I went to call my Realtor and tell him we were no longer buying, I couldn't do it. Every day, Lance would come home and ask if I had canceled yet, and I couldn't tell him yes. It was an emotional roller coaster for both of us. One moment it seemed we were buying a house, then the next we weren't. It was extremely stressful and difficult.
I eventually decided to go and do something that I should have done initially. I decided to shop around a little bit and make sure I was getting the best interest rate and see if there was any way we could get a lower payment for that house. I met with a different lender and he was able to make a pretty big difference. Although the house payment stayed about the same, he was able to reduce the amount of money we would need for our down payment. Our original lender had originally told me that she would match anything I found, so I showed her what he had done. It turned into a little battle, each lender dropping fees and trying to outdo the other. In the end, we were able to get our lender to drop about $2,000 off of the amount that we would need up front, enabling us to keep some money in savings. That's a lot of money to save just for shopping around.
Even with the $2000 in savings, it still didn't help the fact that we would barely make enough money to cover our bills and would be left with nothing leftover. While that is a good chunk of change, I knew that it would disappear quickly if we had to use dip into it each month.
Though we were sure we were going to back out (even though it would mean that we would lose our $500 deposit), I still found myself unable to officially back out of the house. I had a hard time distinguishing whether I was having a hard time canceling just because I wanted it so bad, or if I simply knew that we weren't supposed to back out.
I knew it was a decision that we couldn't make on our own, so I found a babysitter for the next day and Lance and I went to the temple. We decided that it we felt good about the house then we would go for it and have faith that somehow things would just work out. But if either one of us had any doubts or any bad feelings at all, then we would call our realtor immediately and cancel.
The temple was amazing...as usual. For the first time in weeks, I was able to de-stress and think clearly. And I found that the only thing I could think about was our house in Syracuse. I thought about all the things that I would eventually want to do to the house. I thought about Will and Blake growing up there and running around those streets. I could picture our lives there, and it felt really good. Lance and I both left the temple feeling like we were supposed to buy the house. It was extremely scary, but it was much less scary to push forward when we had confirmation that we were doing the right thing.
I had told my realtor the week previous that there was a really good chance that we were going to have to back out of the house and not buy it. I told him we would let him know once we knew for sure. I hadn't heard from him in over a week, which was really unusual. But about 5 minutes after we got out of the temple, he called me and asked if everything was alright and if we were good to continue forward. What great timing and such a feeling of relief to be able to give him an answer.
When we moved to our apartment in Kaysville, we didn't think that we would be trying to buy a home so quickly, so we signed a year lease instead of doing month-to-month. And our landlord was an absolute stickler about things. I was terrified to ask her if she would let us out of our lease. Then I found something in our lease agreement that said, "Tenants who move out prior to the end of their year lease agreement agree to pay $50 per month that they would have paid as month-to-month tenants, as well as forfeit the nonrefundable portion of their security deposit." I took that as meaning that if we paid $50 for every month we had lived there (which was only 3) then we would be free of our lease. I read and re-read that part of the contract several times to make sure I understood correctly and I was so sure that I didn't bother asking our landlord about it. I also waited so long to mention it to my landlord because I didn't want to tell her we needed out of our lease until I was sure.
By the time we had gone to the temple and got our confirmation, we were about 2-3 weeks from closing. I knew I needed to contact my landlord and tell her that we would be moving out within the next month. When I talked to her, she informed me that while we could get out of our lease by paying the extra $50 per month, we were required to pay rent until the unit was rented out to someone else. So if it took her 5 months to find someone to rent it, then we would be paying rent until that time.
My initial reaction was panic. With our finances already pretty strained, there was NO WAY that we could afford to pay double rent for one month, let alone the possibility of several. But then I remembered the feelings I had at the temple and knew that we were making the right choice and that things would work out. And they did. Within a week and a half of informing my landlord that we were moving, she had found someone who wanted the apartment.
We have been so blessed throughout this whole process. While there have been many stumbling blocks, for the most part things have just fallen into place. Slowly but surely, piece by piece, things just seemed to be going in our favor. I think that was part of why I was having such a hard time initially backing out of the house. There were too many strange coincidences and things pushing us forward.
Lance and I both have a hard time making decisions, especially life changing decisions. It's scary when it's a choice that will affect every aspect of your life. Would we be happy in the new area? Would we have friends? Would our kids grow up happy? Would the payment be too much and cause us to lose our home eventually? Would the house start falling apart and require all of our money to fix it? Was Lance even going to like his new job enough to stay there long term? What about Grad school? Were we jumping into it too quickly? Was there a better house if we waiting a little longer?
So many questions. So many what ifs. But there is no way to answer those questions. I don't know what the future holds, but I know that God is with me. That doesn't mean that things will be perfect. That doesn't mean that things wont break, or that we'll suddenly have all this money to buy what we want. But God will be there to help us find a way through it.
Even with so many doubts and so many unanswered questions, we moved forward. We closed on our house on August 14, 2013 and moved in the following day. We have really enjoyed our first month as home owners and I definitely think that we made the right decision.
I am still processing the fact that we are home owners.
*In case you missed any other posts in this series*
Part 1: Rent Vs. Buy