Banking

The best home-buying advice I ever got helped me build my business, grow my family, and stay out of debt

  • At 26, a mentor warned me to buy less house than I could technically afford.
  • I followed that advice and my family was able to live comfortably on one income when I had a baby.
  • That advice also helped me build my business from scratch after having twins.
  • Read more stories on Personal Finance Insider.

At 26, I shared my plans to buy a house with one of my mentors. She suggested that I look at properties half as expensive as I could afford. A year later, I felt ready to become a homeowner. I had been saving and researching the market for two years and was prepared to implement the advice I had received: Buy less house than you can afford. 

After months of research, my soon-to-be husband and I identified the area where we wanted to purchase our first home. It was a sought-after neighborhood because of the school district. However, inventory was low, so it was a challenge to find a property within our budget. Our agent and lender encouraged us to buy a more expensive home because we had been pre-approved for double the amount we were willing to pay.

It was tempting, but we liked the idea of being able to afford the mortgage on one salary and stuck with our initial plan. Then, with patience, we found a house that met our needs and purchased it. We lived in the house for close to two years before having our first child.

4 years into our homeownership journey, we found out we were having twins

Four years after purchasing our first home, we had twins. We had planned for a second child and were blessed with a third. Though our income increased, our expenses also unexpectedly increased during that time. 

Our kids were born prematurely and spent two months in the neonatal intensive care unit (NICU) before coming home, which came at a cost. 

Then, overnight, our childcare bill tripled. For the next three years, we spent about $40,000 a year on childcare alone. But because we purchased less house than we could afford, we faced our new expenses without going into debt.

It was time to move to a bigger house

When our twins were a year old, we felt that we needed more space and were ready for a bigger house. We were determined to apply the same rule with our second purchase because it worked out for us the first time. Inventory was low, and home prices had increased significantly in the past few years, so. any house within our budget had multiple offers within days.

After looking for a year, we finally found our next home. With 2-year-old twins,  a 4-year-old, and busy work schedules, we decided to purchase our new house and list our old place after moving out. In our neighborhood at the time, homes would rarely stay on the market for more than a couple of weeks. We received an offer at our asking price and were ready to sell.

Then the worst happened

It was a holiday weekend; my husband and I decided to get away. We returned to find two levels of water damage at the house that expected to close the following month. We had to replace the floors, as well as renovate most of the basement.

The buyers backed out and it took close to two months to fix the house and put it back on the market. We accepted another offer on the house and everything was back on track.

Unfortunately, a few days before closing, we had some bad news regarding structural damage in the house and the new buyers withdrew their offer. After assessing the damage, we ended up selling the house for $100,000 less than expected. Our net worth decreased by $100,000 overnight. We had spent the past couple of months paying two mortgages and walked away with much less than anticipated.

Our more affordable home helped us stay above water

The following year, we cut down our expenses. We had less money to furnish the new home, less discretionary income, and went on fewer trips. But we increased our savings and investing to make up for some of the loss. 

Buying a less expensive house than we could afford gave us more flexibility to make adjustments in our budget. A few years later, I quit my job to start my business. Having a house we could afford on one income made a tough decision a little bit easier for our family.

It is normal to want to own a nice home. Ideally, you can find a house that fits what you are looking for without having to stretch yourself too thin financially. In our situation, buying less house than we could afford has kept us away from debt during challenging financial times.

Most Related Links :
Business News Governmental News Finance News

Source link

Back to top button