I’ve thought in the past that getting a mortgage now-a-days would be painstakingly hard. After the 2008 housing crash banks supposedly tightened up their belts and were being super careful in their lending practices.
And then my new husband and I (boy does the feel weird to say) got a once in a lifetime opportunity on a house.
The Original Plan…..
We made plans to save up a very large down payment for a house by the end of 2017. Since our current house is more than half way paid off we’d have around $40,000 from the proceeds of that sale and we also wanted to save at least another $40,000. Our new house budget was going to be in the $150,000 – $200,000 range.
The problem with this plan is that we’d have to find an amazing deal to get the kind of acreage we want for the price. We were willing to be patient and wait it out though.
And Then We Got an Offer
And then, a few weeks ago, my old boss called saying that one of his clients is looking to move to another state and wants to sell all of her possessions quickly. One of those possessions happened to be an absolutely stunning 3,000 sq ft. log cabin on 19 acres of woods.
AKA my dream home.
She wanted to sell to a private individual skipping a realtor altogether and would do that for $165,000. The only comparable house to this one that is currently on the market is priced at $319,000! (However, it could be way over-priced because it’s been on the market for a while.)
We were the first people to get to look at it and I fell in love. (And so did Jamie, my mom, and my kids!)
But Would the Bank Approve Us?
After looking at the house I didn’t get my hopes up. I only have one full year of self-employment income and knew that banks wouldn’t count that when qualifying us for a mortgage. (And I was right. I called two banks and both said they wouldn’t count my income until I had two full years of self-employment taxes.)
I thought the chances of qualifying under Jamie’s income seeing as he still owes $50,000 on his current home were fairly slim. But the bank approved us using just his income with no problem – as long as we put twenty percent down.
How Much Mortgage Debt is Too Much?
So now the problem is if we buy this house we’ll have two mortgages that equal $185,000 after a down payment and until selling our current house. When we sell our current house that will go down to $135,000.
To some people that might not be a lot of money but to me it’s pretty, darn scary. And just to put this in context our combined income at the very low end of the equation is $90,000/year (I’m self-employed and my income while growing still fluctuates a lot.)
So should I take a plunge and get a large mortgage and carry two mortgages for a while or should I put my dream house on hold and keep saving?
I decided to do some digging to see what the experts recommend.
Save 20% of Your Income for One Year Before Buying – We’re currently saving around 47% of our combined (net) income with around 35% of that going toward down payment savings. Since we just got married we haven’t been combing our savings for that long but each of us has saved independently. Plus we already have more than 20% of our one year combined income saved.
Put Down a Lower Down Payment Amount as an Option – Not going to happen for me. I’m not comfortable putting down less than twenty percent for a couple of reason. 1) No way in hell I’m paying PMI and 2) I don’t want to take out any more money than I have to.
Buying a house is such a personal decision. To be honest my back and forth “are we really going to do this?” decision making is stressing me out.
At this point we’re thinking we’ll go ahead and buy as long as this house passes all inspections. (And hopefully the 12+ inches of snow will melt in a couple of weeks and we’ll actually be able to get this done.)
Here’s what I’ve decided – if that house passes inspections we’ll buy it. We’ll put 20 percent down and hope that our current house sells fast. If it doesn’t the bright side is that the payment, including property tax and insurance is only $439 a month.
After we sell the second house we’ll then focus our planned down payment savings to mortgage murder. I think that’s a plan that I can live with.