Ok, so we were supposed to be moving home (out of state). Only, the job that we were only weeks away from moving out of state for basically fell apart. They started pulling a bunch of shady stuff on him last minute when the person who hired him abruptly quit to take a really nice gig at another firm. Basically, I think they didn't want my husband anymore since they'd lost all the business the guy who left was bringing in and they decided to sink the deal. Anyways, my husband told them to forget it. So, we're staying put.
We'd sold our home, though, in anticipation of moving. And we needed to find something ASAP. After looking for about a week...even in the span of a week housing prices were going up and we were getting outbid on homes even before we'd made an offer.
OK, so fast forward just a week. We found a house we love. It's new construction and we signed a purchase agreement and we put down our earnest money 15,000. We took another 15,000 and paid off debt. We are living in temp housing until the house is finished in November. We will have about 10,000 saved over the next few months which will be the rest of the money we will need to put the downpayment on the house and close. Then, we will have ZERO savings for 1 month and he will get a bonus (december) which, after taxes is about 5000 and our tax refund will be about 5000 (february). So, we will have 10,000 back in savings but we won't be able to contribute to that savings account again for another year at which point the scenario should be similar and we'd add around another 10,000.
Here's the problem. We can't really afford this house. I mean, we can make the payments and pay our bills but we are going to be BROKE. Like not even funny gas rationing type broke. We will have 250/week or 1000/mo for gas groceries and other stuff. Our reasoning when we made this offer on the house was as follows:
In two years my husband WILL be making at least 25% more than he makes now. This is a house in a neighborhood that we want our kids to grow up in. Top rated schools, incredible community. Our dream home (even though we can't afford all of the dream finishes--we will later). Since we've signed the purchase agreement the cost to build this house has gone up over 20K. Meaning that as we stand we have at least 20K in equity.
Where we live, rents are high. Homes are old, and because of the economy many haven't been kept up well. When we moved here we had a house that had mold issues and let me tell you...I thought I was going to die. We are renting a small apartment which is OK for the short term and although it's safe there's an influence here that I don't feel is healthy for my 4 year old--the neighbors in the building are single mothers who drink a lot and their children are often not appropriately supervised or cared for very well. Before I came here, I looked at 15 other place (yes, fifteen with two small children in tow in the span of a week), each one seemed to be competing for some worst of the worst apartment award.
So, basically. We are looking at this as short term pain for long term gain but I'm scared. Scared to be that close to the wire every month, scared that we aren't doing the right thing, that we are being irresponsible...but not really seeing many other viable options between high rent and rising housing prices. I can't keep moving around. I'm incredibly stressed I need to put down roots and so do our children. They desperately need some roots because we feel like we don't have any ourselves it's hard to give that to our children.
I do know that if things get totally dire:
--I can watch children, I have in the past and I am qualified and happy to do so.
--I can take classes to defer some of my student loans that have subsidized interest.
But this is VERY scary. Just want some supportive thoughts.
(This is factoring in all insurance and taxes, etc)
My best advice. Was in a similar situation. Bought more than we could afford, the airline industry tanked from 911 (who would have EVER anticipated that?) as a result we've STRUGGLED to keep up. Buy less than you need, you never know what's around the corner. I wish you the best.
Change is scary no matter what. It's the unknown what if's that make everyone question everything all the time. Go for it! Babysitting is a great way to bring in money. I use to do it and cover groceries every week. Do you have a craft? I knit and use to do 1 craft show a year that covered all my holiday gift giving expenses.
You can do this!
I am being supportive in telling you this. DO NOT buy a house you can't afford. I mean it from the bottom of my heart. You must must not do this. The mortgage is not the expensive part of the owning a house. All the upkeep is. The taxes. The insurance. The higher utilities you are paying. When you go to sell it, you have to pay the realtor's fee.
Don't use the wish of wanting roots to make you buy a house you cannot afford. If you think the stress in you is bad now, you just wait until you can't pay your bills in the house that is perfect, but costs too much money.
You are taking a few things for granted. One, how do you know your husband will make 25% more in two years?
I would give up the tax refund and redo his withholding taxes. Better to get the money each month than to give the government a loan interest free loan.
We have been house poor before. It totally sucks! You worry about everything and life is hard enough as it is. Personally, I will never do that again.
Good luck.
Okay, so you are going to be house poor but there are a lot of positives to this house/ neighborhood. Here are some additional thoughts in case you needed more :)
- First and foremost, you need to ask yourself how willing you are to scrimp? Coupons? Reducing your cable TV? Foregoing vacations and trips to the amusement park? Canceling gym memberships? Not having a land-line phone? What about the holidays? Can you tell your relatives you want to draw names instead of exchanging gifts with everyone? Really think hard about where you stand with things.
- What about changing your husband's tax withholdings? Getting a 5k tax refund each year is great but so is getting a $1400 one and having an extra $300/ mo to live off of.
- New homes need stuff that adds up quickly. Window coverings, landscaping, etc. When you factor $40 for a bag of grass seed from your $250/ week budget...
- You need to put together a plan to bring in some income asap. Do you have skills or a talent you could use to freelance? Because it's a new neighborhood, what about watching kids after school? Or working part time in retail where you could work the 6-10 pm shift and hubby can watch the kids?
- Your cars. How old are they and in what condition? Are you close to paying off a loan? Can you remove collision coverage or raise deductibles? Get them as mechanically sound as you possibly can so that expense won't pop up.
You need to look at every single expense you have and see if there is a way to reduce it. You also need to look at every possible expense that may pop up and have a plan. You have the advantage of time right now and you sound like a planner. I believe you can do it if you really want to but you need to decide what you are willing to sacrifice.
I would not do it. We all want our dream home. If you cannot comfortably afford it, do not do it. Today's economy is on such shaky ground. What if your husband loses his job? What if a car Ned's work, we just got hit with a 2500 bill for our car. What if someone gets sick. Way too risky if you ask me. Utility bills are going to be much higher too. Buy something smaller.
Don't wait until things get dire. Make a plan now to bring in some more income so that you don't hit bottom. Making a plan will help you face things in a more positive manner without the fear. There will always be some unexpected expenses of moving. Can you take on a part time job now- perhaps when your husband is home to earn extra money? How about getting a job in a day care center that lets you bring your children? This could provide extra income and give your kids a chance to play while you are living in the apartment. Could your husband pick up a part time job a few nights a week. If you listen to Dave Ramsey on the radio for financial matters, he always suggests delivering pizzas to raise extra money. If you take classes to defer your student loans, you will incur tuition costs and child care expenses (unless you take on line). Good luck. This is doable, but planning will make things go easier on you and your family.
Wow, had much stress in your life lately? :)
I agree with Doris Day .. and like her, I mean this will all support and kindness. It's not worth it. What if your car breaks down? What if, what if, what if...
Keep looking. You can find the roots you want for your family in a smaller home because cutting it this close every month is not a happy way to live. I'm sorry that your husband's job fell through and that you are in this position. I hope things work out for you! Good luck!
What if the economy tanks again and your jobs are affected? One must never count on possible future earnings. My husband and I learned a big lesson from 2008-2011. You are feeling the way you do because you know you are not comfortable with this decision, and rightly so. Being house poor is NOT fun and not advisable. Good luck in your decision.
How do you know for sure your husband will be making 25% more in 2 years? And why a $5k tax refund every year? Why not adjust your witholding a little? I'd also get some part time work now. You should have more cushion than what you're describing. I'm hyper conservative financially so would say don't do it except it is a sellers' market now so I agree you likely already have some equity and this risk may be worth it. Housing probably isn't going to go down in the near future. But what interest rate are you using on your mortgage? Rates are going up so if you're not going to close on a mortgage until November, it's very possible rates will have moved and make the monthly payment impossible. If you want this house and aren't working, get some work. Lots of mothers work. I'm not in our dream house but still work...
Regardless of what you do, I would fix your tax witholding so that you're not lending $5K to the government interest free for a year. Wouldn't it be better to have that income in your own bank account every month?
I know this feeling. It's not great to live your life sailing so close to the wind. Money stress can lead to many other problems, including depression, marriage breakdowns etc. it can be very difficult. I would, and have, revised my housing expectations. Change the way your dream home looks in your mind. Find a smaller, cheaper place to make beautiful. Smaller homes means less expense all around for purchase, heating, cooling, electricity, furnishing etc. look on the Internet for beautiful small spaces.
Also, if you feel that there are 'unsavoury' influences in your area, then you and your husband can make extra effort with your children at home. Be great role models, and teach them how to behave. A private education at a good school can be equalled with a public education, and a good home influence.
Good luck.
"cold feet" -- Listen to your intuition. Don't put yourself into a situation in unexpected mishap could have you paying medical deductible on credit cards or needing a new car because a tree fell on the old one. Live on less than what you make *now*, not based on potential future income.
Cold feet or no cold feet, 15,000 is a lot of earnest money. Is that figure correct? The housing market where I live sucks. I would not be wanting to compete right now with whats happening in the housing market. However, 15,000 is a lot to walk away from. I say never bank on what should happen in 2 years with your husband's income. Live in your means now and upgrade latter if your financial situation improves.
Since you are between a rock and a hard place, you could bank on this housing rise lasting another few months and flip the house instead of walking away from 15 big ones. I don't think its wise to be so cash poor as you are making yourself.
You are buying a new house so thats good. I can tell you that as soon as we closed on our older house we were needing to spend thousands on maintenance and repairs. You are really betting that things go smoothly for a while, no car issues, etc. Do you have family that can help in a jam? if not, I'd probably bail. Suck it up to renting for a year, and hope this house craze simmers down in a bit. Could just be another mini bubble.
You can do this. Make a plan to earn extra income now before things get desperate. Even just $100-200 a week from babysitting will make you feel more at ease. Or take a part-time job a couple nights a week when your husband can be home with the kids. If you are not working outside the home now, that may be the simplest solution. There are a lot of ways to cut spending -- can you downsize cars? cut down your cable/internet/cell phone bill? plan meals around supermarket sales/coupons?
The most important thing is to have a plan in case your finances get unreasonably tight. Get out ahead of budget issues so you can enjoy your new home.
I'm kind of in a similar situation, though currently we save about 20% of our income so we can tap into that....
I think being aggressive with your money is essential to wealth building. With the increased wealth, there are risks: you could lose everything.
If you think you can do it, and are willing to radically reduce your lifestyle, go for it.
I think we are going to go for it, and I think it's important to grow into a mortgage payment, I.e. be house poor for a few years, with the plan of staying put for an extended period of time. Financially, this will build more wealth in the long run. And money is super cheap right now!
Is your mortgage, including taxes and insurance, close to what the rents are in that area? In that case, it really makes sense.
Since you have already put money down on the house, I don't think it's useful to say anything negative. The only time I think it's certainly irresponsible to buy a house and put yourself financially on the edge is if you are buying it under the assumption that its worth is certain to increase. Nothing is certain, especially in the housing market.
I don't personally think this recent uptick is going to last, since most people's income is not high enough to sustain it.
But if you are buying this house in order to live there for a long time, and your mortgage is close to what rent would be, and you know you will be able to afford it in a couple of years, then yes, it's a good move.
