Valdosta Daily Times

Business

June 23, 2013

Dear house in Wizard of Oz, please land on me. . . I need somewhere to live

SAVANNAH — It’s been a rough week budgeteers. As you know, me and the hubs are in the process of buying our first home and unfortunately, it’s looking like it just might not work out.

While now is a great time to buy, we are learning that it might not be a great time for those on a tight budget. The interest rates on loans are so unstable and volatile to the point where they are changing sometimes multiple times in one day. For example, when we were looking at homes, the interest rate was 3.5 percent; when we went under contract it jumped to 3.8 percent;  Monday it was 4.12 percent and Thursday it went down to 3.5 percent.

Sure, this doesn’t sound like a huge difference and many of you who bought at the height of the market would kill for these rates, but for people like me and my husband who have a strict monthly budget, the lack of stability in rates means we’re not quite sure if we can get the monthly mortgage payment where we need it to when it comes down to locking in a rate before closing.

Our home was already at the top of our budget and that means the higher that interest rates climbs, the smaller our “cushion” becomes. What is a cushion? Well, it’s something that everyone should keep in mind when buying a home. I know I’ve written about things you should do before you buy a home, but here are some things I have learned in the process that have contributed to us possibly renting for another year or two.

• Figure out your expendable income, and then watch how fast it disappears.

Figuring out your expendable income is easy. All you do is take your income and then subtract all your bills and your regular expenditures such as gas and groceries. After getting my new job, I did this and was pleasantly surprised because for the first time that number was not approaching the negatives. However, when I started the process for buying a home, all these other little things starting taking bits out of my budget and boy did they add up!

Our prospective neighborhood has a Home Owner’s Association, we need to purchase home insurance and possibly flood insurance, and then put blinds up (which cost a ton), put light bulbs in the over-abundance of light sockets and so much more. These things sound trivial, but all these “little” expenses keep coming, and coming, and coming and before you know it, you no longer have “expendable” income for things you like to do such as going to a movie or eating out every now and then.

• Nothing is ever certain.

While the interest rates are unstable now, the good thing is that once you lock your rate in, it’s your rate and can’t go up (unless you’re not on fixed interest . . . but that’s a lecture for another time). However, there are things that can change. If your neighborhood has an HOA, the fee can go up; also, a big dinger is home insurance. Did you know your rate could go up every time you renew your premium? Well, I didn’t and it was an unsettling reality for me, especially when I saw some of the unpreventable factors that could cause it to go up.

If your home is an area with increasing crime, your home insurance will increase. Similarly, if the geographic area where you live has been struck repeatedly by natural disasters (such as floods . . . sound familiar?) your home insurance premiums will rise, as the insurer will determine that you are now in an area that is more likely to suffer a peril requiring a home insurance claim. It’s a lot like if you get in a lot of car accidents, your car insurance will go up.

• Don’t get emotionally attached.

The biggest thing I learned on my house hunt is not to fall in love. Things happen, and while I was extremely excited about our brand new home, getting attached emotionally could have made us make a really poor financial decision. Because I based all my decisions on facts, number and logic, and not on “OMG I want this house,” I am able to make consistently smart decisions.

There is still hope for me and the hubs though. We explained our situation to our broker and Realtor and they are trying to find a solution to salvage the deal. While the house working out is doubtful at this point, we are actually really okay with it because we know that we are making really sound, financial decisions.

This process has taken so much out of us mentally and emotionally, but we have learned a lot. Even though it may turn out to not be the right time to buy, we have learned a lot that will help us the next go around and hopefully, my trials and tribulations have helped you as well.

Make sure to keep tabs on my life by following me on Twitter @BudgetBrittany and liking me on Facebook at www.facebook.com/BrittanyDenneyMcClure. I’ll be moving into a new place eventually and you will kick yourself if you miss out on all my cheap decorating tips that I only share with my most social budgeteers.

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