With mortgage rates rising along with homes prices, a lot of our younger relatives have asked me whether they can afford to buy a home. They feel like they can't afford to wait with the current market situation. Looking back, I realize my husband and I bent all the rules for buying a house 7 years ago. Some people would say we were reckless to make the leap to homeownership without being financially prepared. However, I don't regret buying my condo on my own or my single-family home with my husband.
Having an emergency fund
Most experts say it's important to have a 6 to 9-month emergency fund before buying a home. It's true that there are many hidden expenses that come with homeownership such as home owner association fees, lawn maintenance costs, appliance repairs and replacements as well as taxes and insurance. I found my utility bills were a lot higher. However, we bought our home with less than $500 in savings. After we moved in, I remember relatives pressuring us to buy new furniture and decorate. But I wasn't willing to even purchase a hand towel until we built up our emergency fund. We bent the rule by being extremely frugal after we purchased the home so that we could build up our savings.
Saving up a down payment
I purchased my condo before I met my husband with just a 3 percent down payment. I had heard many experts say a person isn't ready to buy a home unless he or she has 20 percent to put down. I don't regret my decision to buy a condo. Even though my monthly payment was high, I considered it an investment in my future. Besides my mortgage payment was equal to the rent I had been paying. I ended up living in my condo for 24 months and walking away with a profit of more than $25,000 after decorating expenses. If I had waited to save up for a down payment, I would have missed out on a profit of more than $1,000 a month.
Having job security
After the Great Recession, I'll never have a feeling of security with any "job." However, when I purchased my condo I did think that I had job security. Having a job helped me qualify for a loan on a home. However, I actually feel more secure about my finances when I'm making money as an independent contractor. I didn't have job security when my husband and I bought our new-construction home because many of my colleagues had been laid off. I bent the rule by creating my own sense of financial security with different freelance gigs.
Keeping the house for 5 years
Another common rule that homebuyers are supposed to follow is the "5-year rule" for buying a home. The idea is that a person shouldn't buy real estate unless they plan to keep a home for at least five years. Otherwise, they lose money due to closing and moving costs. I only kept my condo for two years. The home builder paid my closing costs when I bought the home. When I sold, the buyer covered all the closing costs. Even though my husband and I have lived in our home for 7 years, our home peaked in value about two to three years after we purchased it.
I think most people who make money on their real estate purchases just get lucky. They have good timing or the good fortune to pick a home in an undervalued real estate market that later becomes a boomtown. In my experience, it's just as much of a financial risk to be a renter as it is to be a homebuyer. I've never had my deposit returned after renting an apartment. Financial experts like to have rules about the best way to approach a major purchase, but I am not afraid to do it my own way.
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