My Housing Experience: Lessons Learned

pond
This is my backyard!!

Congratulations you are a grown up!!  You got a job, you got your life together, and now you are thinking of making the largest purchase/ investment of you life.  You want to buy a house!!

So what they don’t tell you, is that when you buy a house with your 30 year mortgage, that you will trade 30 years of work, and sacrifice lots of fun stuff, or investment monies, in order to live the American dream of home ownership.  So, lets talk about a few tips about home ownership, if you are trying to get out of the rising rent game.  I will teach you through my experiences in home buying.  Here is the story….

I have bought two houses, and lived in six apartments over my adult life.  I am currently in my home I hope to die in one day; that I custom built.  My father has been custom building homes since 1977, and I grew up knowing the ups and downs of real estate in the 1980’s and 90’s.  I always knew I would live in my own custom home one day, but I guess I expected to live in a few more homes before I settled down.

1st home
1st Home

I decided to move into home ownership at the ripe old age of 24 when my rent went from $600 to $750 in my apartment.  I realized that in the neighborhoods around the corner I could get a nice 1,700 sq. ft. home for $180,000 in the Dallas area.  I realized that, that home with a mortgage would be about $900-$1,000 a month.  I was making about $4,000 a month, so it was only 25% of my take home pay.  That is a fair ratio for housing, so I began to house hunt.  I decided I wanted something new because in Texas at the time that was cheaper then older homes, due to cheap prices on materials.  I also, noticed that if you go north of Dallas you pay more for the same home.  So, I looked east of Dallas and found the same floor plan of the $180,000 home for $129,900, and it was less built up in the area, so it had a nice country feel, 25 miles from downtown Dallas.  My payment on the 30 year mortgage was $720 a month after 10% down and insurance was added in too.  I got this in 2006 and it finished being built in January of 2007 with a move in early February 2007.

Then the 2008 mortgage crisis hit, and I got in my home so cheap it never dropped in value!!  It was estimated online at $127,000, when the economy was at its worst.  We paid $900 a month for the five years we lived there, creating some equity, and we sold it for $138,000, We made some money and it was during one of the worst home disasters in American history.  Dallas wasn’t hit as hard as some places, and that helped a lot.  I learned that if I paid more each month, then the bank made less money off me.  I hated the idea of getting robbed and paying $300,000 for my $129,900 house over the life of the 30 year mortgage.  So, I devised a plan for the next house to pay the bank even less then before.

We decided to get land, and build our own house the second time around.  We stayed

yard
This was a stagnate pond, now it’s my side yard.

east of Dallas moving about 35 miles from downtown, and we looked for a good deal.  We got our own plan together, picked our site, and set up a plan to pay this next house off in full in 5-7 years, using a 30 year mortgage.  The next house came in at around $185,000 and was 600 sq. ft. larger and on gifted acreage.  I wanted to go with a tiny house, or container house, or a barn house, or a metal building house, but my wife wouldn’t go for a cheap living experience.  It could have been as low at $80,000 for a great home.  So, I joke I went over budget, even though you couldn’t build our house again for that low of a price.  Sometimes, you have to compromise, and she wins.  I’m happy with the location and she loves the house.  It’s a win for both of us.

The plan that we put in place was pretty easy.  We had been a family of five living on my one teacher salary for ten years.  The kids where all school age now, so my wife would find a job teaching at the kid’s elementary school (Power of 2 Salaries!!).  Then, I would pay the mortgage, and all the bills just like we have always done, and use 75% of her paycheck to pay the mortgage down.  If we stick to the plan, the house would be paid off in 3 1/2 years, and we’d be debt and mortgage free in our 30’s.  However, I also know we love to travel, and do fun stuff with our kids, so we knew that a few of those paychecks of her’s would pay for other life changing experiences (Hello, travel).  So, we say the house will be paid off in five years, and the worst case scenario is seven, that is if one of us gets fired or something; we have a whole other plan that can take shape if jobs are lost (not discussing it today, no time for that).

I hope, since the oldest is 12, that we can have it done by the time she is 16, so I can use my mortgage payment to pay for those extra teen expenses (yeah!, car insurance increase).  Also, my wife can have the choice at that point to quit or keep working.  If she keeps working then I hope to start purchasing some rental properties, and maybe do this all over again as a side rental business (We’ll see in a few years if we want to do this).

So, some pointers for home ownership:

  1. Buy in an area that is affordable to you and your budget.  Not all areas are equal.  I saved a fortune moving east instead of north in the Dallas area.  Now east is growing and is becoming a city.  This makes demand in our area go up and our country home goes up in value.  We also are getting a minor league baseball stadium and lots of commercial growth, so everything is so close now if we need it.
  2. Don’t become house poor.  I try to stay in the 25% of my take home for rent or a mortgage payment.  Some people suggest 35% or less, but 10% extra of my take home is huge, and I’d rather spend it on experiences for the family to help create memories.  Look at your numbers, and only buy what you can afford, so you can still have a life. Being house poor sucks the life out of you!
  3. I’m spoiled being a son of a home builder, and with all the changes in price of materials and energy star everything in houses today, I would only buy new.  Most don’t follow this, because you want to be in a certain neighborhood, or a certain school district, but if it is available, I would highly suggest newer is better.  I have hurricane straps on my house, in case of tornado’s, and it’s foam insulated for energy saving.  I’m also 6’10” and my custom 8 foot doorways, 10 ft. ceiling, and shower heads 8 foot up, make my life easier.  I’m spoiled…and my bills are way lower because new houses are better designed for energy efficiency.
  4. Never pay full price for any home, or anything ever.  Haggle everything and be
    floor
    Stained Concrete

    creative in your vision.  I saved a ton staining my concrete slab like a Chipotle restaurant, and not putting in flooring that my kids would destroy.  It looks great too!!  My land was a nasty dump site for construction and brush removal companies.  But with vision, it was cleaned up and we got a huge discount on the land.  It was on the market for 16 months, and no one had the vision to just clean it up and ask for a huge discount.  Haggle and learn to love it.  Our house and land have almost double in value over the last three years.

  5. Never pay off your 30 year mortgage in 30 years.  If you like being robbed, then take 30 years, but before you buy, crunch some numbers, and find out how much you can save by paying it off early.  10 years, 5 years, 25 years early saves you a fortune.  Have a plan ready to pay off early in place on your move in date.  Don’t get robbed out of your future retirement money.  If you can’t afford to pay more on your mortgage, then you are not ready to buy a home yet.  You can also get a 15 year mortgage but pay it off early too.  Never pay the full term!
  6. If rent is $2,000 and the cheapest mortgage in your area is $3,000 (California?), then consider moving to a better area if you “must” buy a house.  Texas is great for cheap prices, and we have people from all over America moving here.  It has driven some markets up such as Austin, and north Dallas, but there are lots of bargains around if you look hard enough and research.  In some areas it’s just better to rent forever, so if you must buy, then you might have to relocate.  Austin is better to rent in a lot of areas than to buy.  Look around your city at the different areas at rent and mortgage prices.  Area matters in your decision to buy.

That’s it, if you have any home buying tips or experiences in other markets besides Dallas, use the comments below and share with everyone.  Help one another, and lets save our hard earned dollars by making smart home buying choices.  Buying a home shouldn’t be a curse if you plan it right.

Snow
Side yard in winter (Snow Day!!)
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