Paying for a new home
Ten years ago, when we purchased our current home, we had this long term plan of purchasing another home in 2016.
We missed that deadline by about a year (thanks to market changes and economy mostly), but we will be settling on our newly built home in less than a month now!
But, it’s not like we just woke up one day and decided that we could afford to build a house.
We’re not independently wealthy (or wealthy at all!). We are working people with debt and commitments and less savings than we would like.
But, we were still able to afford to build a house and make this dream come true.
So many people think they can’t afford to build a house or to even be homeowners at all. In fact, even we didn’t think we’d ever be able to afford to build a house either.
But, with some time, research, and knowledge about the process, you too may be able to make this dream come true!
Can You Afford to Build a House? 10 Things to Know About the Money
We didn’t decide this overnight. As I mentioned before, we planned to buy a home at this point in our lives over ten years ago! While most people won’t need a ten year lead time, you will want to begin planning for the purchase of your home at least 12 months in advance, sometimes more.
Get your credit in the clear.
DudeDad has awesome credit. It’s why I married him, of course.
And do something about your debt too.
The less you have, the better your debt to income ratio is going to look to lenders which means the more likely you will be to get approved for the loan you want. That doesn’t mean you have to be debt free (although that would be awesome), it just means that if you have debt, you’re going to need income to offset it.
Understand the building process.
Admittedly, we didn’t do a great job with this. When we began our house hunting process, we were actually looking for a pre-built home –not a new build. We stumbled into the building opportunity after not being able to find a home we wanted within our children’s school district. Because we didn’t plan to build, we didn’t prepare ourselves fully with all of the info we should have before we began sitting down with builders. We learned quickly, of course, but it is smarter to know what kind of money you will need to bring to the table and other things that make the process financially different from the standard home buying process. For example, you will likely need a significant investment up front to begin the build process. Most builders aren’t going to just build a house for you, to your specifications, without taking some money from you up front.
Think about your necessities.
And be prepared to give up some niceties. We wanted hardwood floors on the entire first floor of our home because of the dog. We had to give up on the fireplace to make space in our budget for them. There were things that were important to us when we started looking for our new home (hardwood floors on the first floor, four bedrooms, two car garage, location) and we agreed to stick to those.
But weigh your quality of life.
Technically, the way our debt to income ratio is set up, we could afford a higher house payment, but the way our lives our set up, we didn’t want to. We also like having well running cars, and seriously cute shoes (okay, the shoe thing is just me). We like to eat out and go on vacation. Our kids are involved in a ton of sports and activities, and the fees and equipment needs for those are real. And, while we know that one day, they are gonna appreciate all of the awesome we lavished on them when they were young, we don’t want them to have to wipe our butts for us when we’re too old to do it for ourselves. With all of this in mind, we sat down and decided what was important to us and what wasn’t so much and went with that.
Shop around for your loan.
Every lender isn’t going to give you the same rates or charge the same fees. Often, new builders will offer you upgrades or closing help if you decide to use their lender. This may or may not be the best deal for you and your situation. Don’t discount other lenders just because your builder flashes some cash in front of you. Shop around a bit to see what they can offer you before you commit.
Don’t be afraid to negotiate.
Just because the price on the tag is one thing doesn’t mean it isn’t open for discussion and negotiation. Your builder will not be offended if you ask them to work with you on the price in one way or another. Remember, they want to sell the property as much (or more!) as you want to buy it!
Think about extra expenses.
Like HOA fees, insurance costs, and taxes. These will come with any home you buy, but they are really going to change your bottom line and you need to be aware of what they are.
And expect the unexpected.
You’re going to be asked for more money for something. Your house may not be delivered when you expected and you may have to make alternative living arrangements. Or, you may decide that you actually do want those recessed lights you actually weren’t planning on getting. Or, maybe you decide to buy down your interest rate. Or, um, something. There is a darn good chance that there will be a thing or two you will have to shell out some bucks for at the last minute. So, be ready for it.
Planning to build? Check out this post: 12 Things You Need to Know About Building a Home