Personal Finance
So, We Bought a House: What Changed My Mind About Owning
As Ferris Bueller once declared, “Life moves pretty fast.” A mere three weeks ago, I wrote about how my wife and I had resumed our home search after several years and were taking baby steps toward buying. Well, damn — that baby learned how to run.
Recently, my wife and I ended up putting in an offer on a home, which was then accepted. As things stand now, we’re scheduled to close on the deal early next month. And while I’m putting off the official start of a series I’ll be writing about the homebuying process until we actually own, I figured I could at least share some thoughts about what led me to this point.
So how did I go from being a lifelong renter and wondering whether I waited too long to buy to suddenly being on the brink of homeowner? Here are a few things that changed my mind.
4 Things That Changed My Mind About Homeownership
A gift offer
First and foremost, in the interest of full transparency, we would almost certainly not be buying a home right now if we didn’t have funds for a down payment gifted to us by my wife’s mother. Funny enough, the amount we discussed will nearly perfectly cover our 20% down plus closing costs. Without these funds, our budget for a home would have been significantly lower — especially given the current mortgage rates (more on that later). So, needless to say, the offer of this gift was a gamechanger.
Better-than-expected home inventory in our area
A couple of months ago, I did a search in our area for homes in our budget that met our very basic requirements (at least 2 bedrooms and 1.5 baths). The results? I found a dozen houses — that was it.
Apparently things have changed since then because, when we decided to start looking a few weeks ago, we came across many more options. Of course, as you’d expect, each of these had their pros and cons. Still, we did see at least a couple of other houses we’d have considered living in.
As for the house we did end up putting an offer in for, it had actually been on the market since my initial search. However, at that time, it was out of our price range. Luckily for us, following a few price cuts, it fell into our budget. What’s more, unlike many other homes we looked at, this one is closer to the area we most wanted to live in, which was a nice surprise for us. Those factors all made it easier to say “yes” to the idea of buying a home after all.
The threat of rising rent
When we moved into our current apartment, we asked the apartment management assistant about the rent rate history. This question came up as we were living in an apartment that had only increased its rent $15 in six years — but we also had the experience in Los Angeles where our monthly rent might go up $25 to $100 each year. In this case, the management assistant told us that he’d only seen rent go up by about $50 or so in his several years at the property. Unfortunately, that trend would apparently end soon after.
At the end of our first lease, our rent increased by $50 on paper — but was actually higher since a discount we’d initially received was discontinued (meaning we’d pay closer to an extra $100 a month). Then, our most recent rental re-upping saw prices go up again, even as our included amenities went down. And while our current lease isn’t up for a few more months, I can already bet that we’d be seeing yet another increase.
That’s why I suddenly started to think about homeownership a bit differently. Although our monthly mortgage payments will initially be higher than we’re currently paying in rent, these will remain largely the same for the foreseeable future, whereas there’s no saying where our rent will go (or what other negative changes management will make along the way). Sure, home insurance prices and property taxes could rise, but these are likely to be less impactful than rent hikes. Once I put our payment in that perspective, it was definitely an easier pill to swallow.
The option to refinance
Finally, regarding those payments, the main reason why they’re so high is because of where mortgage rates are. After years of historically low rates, interest rates have soared in recent months. So, instead of getting a mortgage at, say 3% like we may have been able to in 2021, ours will be just shy of 8%. With that in mind, before we’d even received pre-approval for this mortgage, I’d already inquired about the refinancing process.
From what I learned, refinancing does cost some upfront money — but it’s not as much as I thought. According to our mortgage broker, the closing costs on the transactions are between one-quarter and one-half of those associated with an actual home purchase. In other words, while you may need to pay a couple of thousand dollars upfront, you could save a few hundred per month.
What I also found interesting is that you have options for how long to make your refinanced mortgage. So, for example, if rates go down in five years and we wanted to refinance, we could get a 25 year mortgage so that our 30-year payoff timeline is unaffected. Or, if rates really tank, we may wish to move into a 15-year mortgage and potentially pay off our home sooner while making similar (if not lower) monthly payments.
While I’m sure the actual refinancing process will be a bit more of a pain than our mortgage broker made it sound, it does seem as though it could be a good option for us in the future. Of course, lacking a crystal ball, I can’t say for sure if/when we might be able to secure a lower rate. That’s why we made sure to stick to a budget now — but I’m definitely excited about the prospect of potentially lowering our payments in the future.
Thanks to the above factors, I now feel like I’m ready to own a home (which is good since I’m two weeks away from closing on one). At the same time, I will admit that I still have some fears about the whole thing. For one, seeing as I’m not at all handy, the maintenance that owning a home may require does intimidate me. Also, now that we’ll be responsible for paying the entire utility bill, I’m already brainstorming ways to warm the house as efficiently as possible this winter.
Setting those and other fears aside, I’m really looking forward to being a homeowner and, honestly, having a real space of our own for the first time ever. As for what’s next, you’ll need to stay tuned as I share much much more about what I learned during the house buying process in the weeks and months ahead.
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