Goodbye FIRE, I'm headed to the poorhouse

[saluki9]

file this under "be careful what you wish for"

I've been complaining here for 6 months that I was trying to sell my condo and buy a house. Well, last week my dream came true and my condo sold. What is ever weirder is that the buyer of my condo is the seller of the house we bought. He was so desperate to sell his house that he bought my place just to get rid of his.

Now its starting to sink in just how expensive a proposition this is going to be. I've never owned a single family home. Everything in my condo was covered by my association fee so I've never had to shovel snow, cut grass, fix things etc. Thankfully my wife and I know this is a house we can stay in forever. It's got four bedrooms, 2.5 bath and is about 2700sq ft.

It's also sinking in that my monthly mortgage payment will be more than my monthly take home pay just a few years ago. I'm old fashioned and went for a 30year fixed at 5.875. That was an emotional decision and not a purely financial. All my friends made fun of me for not doing the 10 year I/O.

Advice from any longtime home owners?

 

[Rich_by_the_Bay]

...Advice from any longtime home owners?

Well, not much to add on the mortgage -- it is what it is, though you may be happy with the interest deduction. And a decent fixed rate, to boot.

Re: the house, we have always enjoyed maintaining and improving our house on our own terms, rather than some condo association's schedule. It works both in terms of preventive maintenance and also deferring things to a certain point for various reasons (e.g. hold off on a needed roof until after some other project was done). Sometimes it's hard to decide what to farm out to others v. doing yourself but ultimately you have control over that (lawn, snow, windows, gutters).

I bet if you budget your home maintenance costs like you did for condo fees, you won't find it's that much more, barring catastrophes for a few years.

Give it time. The payments will become routine, you will enjoy the property, and have the security of knowing you are someplace you can stay as long as you want. And no HOA to cause problems down the road.

Congratulations on your new home.

 

[Hamlet]

I've owned my home for a little less than two years. I think you are smarter than you seem to think-- I think you will look brilliant with a 30-year fixed at that rate in 5-10 years. I have the same morgage at a little lower rate, and I'm pretty sure it will be the decision I am happiest with when it comes to my house.

Are your payments making you stretch financially? Home ownership can be uncomfortable if you buy all the house they will let you, rather than the amount you can truly afford.

It definately seems like home ownership will delay retirement here at the beginning. However, I'm hoping that as inflation makes our house payment shrink (30-year fixed rocks :>), it will improve my opinion of home ownership

Enjoy your new home.

 

[OkieTexan]

I have owned this house for 24 years. During that time I have learned to do carpentry, plumbing, landscaping, painting, fence construction, and brick masonry. All those skills are marketable if I need a few extra bucks!

I outsource the big stuff.......roofing and concrete work. I have hired someone to trim the trees a few times. But mostly I like the DIY approach.

You were wise not to get an ARM. A bunch of mortgages are going to get more expensive in 2007. Yours won't be one of them!

 

[brewer12345]

I wouldn't sweat the maintenance. DW and I went from a condo to a 50 YO house 4 years ago. The house was in decent shape when we bought it, but hardly "like new." I figure we spent about $10k within the first year doing stuff that we wanted or it needed. After that, I don't think we have spent more than $3k a year (and often less) doing maintenance (and we are not handy). We'll be spending some coin on a kitchen renno this year, but likely no more than $10k and it is because we have the money to do it, not that we absolutely must.

Soon you might be a SITCOM: Single Income, Two Children, Oppressive Mortgage

I think the 30 year fixed was not a bad way to go. I like a 15 fixed better, but having a smaller monthly nut is worth something.

 

[Nords]

Advice from any longtime home owners?

Congrats, Saluki. What a coincidence, that pretty well describes our house. The good news is that you're probably going to be saving quite a bit on condo association fees.

After 19 household moves, spouse and I have a few opinions on the subject.

- Gosh, the new homeowner knows where you live. Change your locks and your garage door remote-control codes!

- If you only do one other thing on this list then take out a $20/year subscription to Family Handyman. Their archives are a godsend of "how to" for newbie homeowners. The library is a great source of in-depth info on topics like plumbing, electric troubleshooting, or drywall repair. We've also learned a lot about common problems or tasks by sitting in the outdoor furniture sections of Lowes & Home Depot and browsing their "How To" books for 30-60 minutes. If you want to walk through a task then take one of their free classes/seminars.

The rest of this list is made up of things we've wished that we did sooner or better:
- Point out to the title company that your home swap is saving them a lot of paperwork and suggest that they drop their fee (or at least the commission on their title insurance).
- If you're not already an expert then read up on comprehensive vs "named perils" homeowner's insurance and consider a high deductible-- like $2500-$5000-- and invest the premium difference. Most homeowners insurance claims are subject to review at policy renewal time, and many homeowners live in fear that their policies will be cancelled or premiums boosted for submitting "too many" claims. A high deductible can avoid this issue.
- You probably already do this, but keep tracking those home improvement expenses for your cost basis. If you stay in the new place for a couple decades of inflation then a $500K cap-gains exemption won't be much help.
- Take a look at your liability insurance. I think liability litigation considers gross worth, not net worth, and your gross worth might be getting a big boost.
- Your vehicle insurance rates might change due to owning a single-family home instead of a condo.
- If home prices continue to decline in your new neighborhood then consider challenging your property assessment (to get it lowered). Assessments usually lag home-sale prices by a year or more on the way down, and the taxing authority has no motivation to catch up.
- You probably already know about getting rid of the insurance/property tax escrow account as soon as you can get out from under it.
- Make sure your property taxes reflect any homeowner's deductions. Some states have filing deadlines that close as little as 30 days after purchase.
- It might be convenient to use the closing documents to also obtain a no-fee HELOC. You may never need it but it's a great source of emergency cash.
- Research/consider this question now so that you can respond quickly later: How much will fixed interest rates need to drop for you to be interested in refinancing the mortgage?
- If you guys watch TV then start taping HGTV shows and PBS' "This Old House". It'll help you resist the urge to spend $50K remodeling a two-year-old "out of style" kitchen. It'll also keep you abreast of the latest tools & home-improvement technology.
- If you haven't already, talk to your electric & water companies about home energy/water audits. They may do most of this from a website questionnaire, but a home visit could include a bag of freebies and turn up several good ideas.
- If you haven't already had a profesional do a three-hour home inspection then consider getting one. It's well worth the $400-$500 to find the surprises.
- Energy Star appliances will pay for themselves within eight years. The fridge & A/C are pretty well-known candidates but you could also consider dryers (or clotheslines), dishwashers, and front-loading washing machines. This would also be a great time to invest in compact fluorescents.
- If the water heater is over 10 years old then not only replace it with a high-efficiency unit before you move in, but consider installing a water conditioner. It greatly reduces the toilet/shower/kitchen sink cleaning. You might even want to forsake the water heater for local water-heating units in the kitchen/bathrooms.
- If I was buying new appliances then I'd make sure to include a convection/microwave oven with shelving for two levels. If you're a cooker then you might also want a serious range exhaust hood and a gas cooktop.
- If your home is in a neighborhood of similar models then it's worth visiting the open houses of homes for sale. You'll learn a lot from the realtors about neighborhood issues or home problems and you'll see what home-improvement projects are worth tackling.
- Your condo association had to maintain the reserve funds for painting & new roofs. Now it's your problem.
- Solar yard lights are more expensive than wired yard lights but they save a lot of hassle in layout & maintenance... especially if you'll be digging in your yard later on.
- Do you have to change your phone number when you move?
- Now you have to start all over again with the "Do not call/Do not mail" lists...

We watched one couple buy their home and then immediately send in the landscaper, the painters, and the closet-organizer people. On moving day they were well ahead of the game.

In every major home-improvement project that we've tackled, I've later wished that I bought or rented the right power tools up front instead of trying to save money by going cheap or manual. (Even if you only use them a couple times you can recover a lot of your purchase price by reselling on Craigslist.) For example, after several upgrade purchases we've ended up with a 25cc two-stroke weedwhacker and a monster pole-mounted hedge trimmer. The smaller/lighter tools just didn't cut it.

BTW my spouse greatly prefers an electric lawn mower for our tiny slow-growing grass plot. They're lighter and they don't require any starter's muscle. Your spouse will appreciate your concern for her lawn-mowing welfare & comfort...

 

[saluki9]

Gosh, the new homeowner knows where you live. Change your locks and your garage door remote-control codes!

Yeah, that's first on my list

- Point out to the title company that your home swap is saving them a lot of paperwork and suggest that they drop their fee (or at least the commission on their title insurance).

They did, everybody involved was shocked

- If you're not already an expert then read up on comprehensive vs "named perils" homeowner's insurance and consider a high deductible-- like $2500-$5000-- and invest the premium difference. Most homeowners insurance claims are subject to review at policy renewal time, and many homeowners live in fear that their policies will be cancelled or premiums boosted for submitting "too many" claims. A high deductible can avoid this issue.

we went with $5K and the rate from State Farm is very reasonable

- You probably already do this, but keep tracking those home improvement expenses for your cost basis. If you stay in the new place for a couple decades of inflation then a $500K cap-gains exemption won't be much help.

Yeah I already do that. My Quicken file is now larger that all of the computerized storage that existed on the earth in 1990 (I'm pretty sure)

- Take a look at your liability insurance. I think liability litigation considers gross worth, not net worth, and your gross worth might be getting a big boost.

Good idea, time to call State Farm again

You probably already know about getting rid of the insurance/property tax escrow account as soon as you can get out from under it.

I'm putting 20% down so Im starting without one

- Make sure your property taxes reflect any homeowner's deductions. Some states have filing deadlines that close as little as 30 days after purchase.

Yeah, I have to check. For some reason the previous owner lost the homeowners excemption so that taxes jumped almost $2k from when we first started looking at the house.

- It might be convenient to use the closing documents to also obtain a no-fee HELOC. You may never need it but it's a great source of emergency cash.

I had my mortgage broker do that already

- Research/consider this question now so that you can respond quickly later: How much will fixed interest rates need to drop for you to be interested in refinancing the mortgage?

Well, my broker pays all of the closing costs so it isn't going to be much.

- If you haven't already had a profesional do a three-hour home inspection then consider getting one. It's well worth the $400-$500 to find the surprises.

Done. It was very enlightening. I learned a lot about houses. The $400 seemed very well spent.

Your condo association had to maintain the reserve funds for painting & new roofs. Now it's your problem.

Yeah, tell me about it! The inspector said I have 7-9 years left on the current roof. The house is brick and vinyl siding so at least the only painting will be trim.

Do you have to change your phone number when you move?

Yeah

We watched one couple buy their home and then immediately send in the landscaper, the painters, and the closet-organizer people. On moving day they were well ahead of the game.

We are doing the same thing. I've hired a professional cleaning crew to scrub the vents, walls, floors, and steam clean the carpets for $500. Then we're having the painters come in which is another $2k On the bright side having a professional carpenter as a life long best friend is going to REALLY pay off now!

What is shocking me is how expensive REAL furniture is. To date most of our stuff is Target, hand me downs, etc. It's just amazing to me that a dresser is $1500 (cheap end!) and a dining room table and chairs is like $3k.

As for the lawn work. This is an area where people don't do their own lawns. My sister laughed when I said I was going to do it. I have fond memories of lawn mowing as a kid so I'm doing it myself. I guess as a "white collar" worker physical labor has novelty to me.

 

[Nords]

Excellent, you're all over it. If you're cleaning carpets then I'm preaching to the choir.

What is shocking me is how expensive REAL furniture is. To date most of our stuff is Target, hand me downs, etc. It's just amazing to me that a dresser is $1500 (cheap end!) and a dining room table and chairs is like $3k.

Yes, but only if you buy it from the store. I know I'm beginning to sound like a broken record but if you buy it from the first owners it's at least half off. I can't believe how much stuff is sold when it's only a year or two old.

Our kid's going to furnish her first apartment entirely from Craigslist...

 

[jazz4cash]

"What is shocking me is how expensive REAL furniture is. To date most of our stuff is Target, hand me downs, etc. It's just amazing to me that a dresser is $1500 (cheap end!) and a dining room table and chairs is like $3k."



Try Pier 1....DW forced me to go thru there before xmas. I have always liked thier stuff, but its been awhile since I actually compared them to the budget places. She was shocked when I readily agreed to make a discretionary purchase ( I shoulda played harder to get), and we were both shocked when the sales clerk eagerly agreed to know extra 10% off the discounted price of 30% for an item that had to be ordered.

Another option discussed here that I like is 2nd hand if you can get higher quality at a lower price. Around here (East Coast), everything used thats not junk is priced as "antique", but in the Midwest we had several stores that featured high end stuff from estate sales, etc.

 

[wabmester]

Wow, I'm surprised this wasn't on Nords' list:

When you move, places like Lowes and Home Depot want to know. They'll offer you coupons (usually 10% off). We *always* find a use for them.

https://www.homedepotmoving.com/sign_up.do?action=SignUp

http://www.lowesmoving.com/

 

[magellan_nh]

Do you need to change your phone number?
Yeah

Have you considered an Internet phone such as Vonage? For around $17 per month you get 500 mins of free long distance and you can keep your old phone number when you move. The service does require a high speed Internet connection.

I've used Vonage as my only phone service for around 3 years now and I'm very happy with it. I went from paying $75-80 per month down to $17.

One caveat is that out of 6 people I've recommended it to, 2 have cancelled the service and said it was lousy. Four think it's the greatest thing in the world. Not sure what the drivers are, but people's experiences vary widely. Also, I think there's a general consensus that the customer service isn't very good (in 3 years I've never had to use it personally).

One feature with Vonage that's really cool is that they provide voicemail for free and it can automatically send an email with the voice messages as an attachment.

For safety consider a regular line for emergencies, or buy a battery backup unit for your cable modem and phone adapter (~$50). We had a direct hit lightning strike that killed the power and started a small fire, yet my wife was still able to make the 911 call using vonage on our battery backed up system. Fire dept. arrived in 5 minutes and put out the fire with minimal damage.

Jim

 

[Sandy]

As you try to decorate, furnish, landscape, paint and do any other changes to make it yours, remember to pace yourself. the house will be yours for a long time and it is ok to leave a room empty or used for storage while you work on other main areas.

Finish one room at a time - that way you feel like you've accomplished something and can see the results of your efforts.

Get to know your neighbors. Not everyone needs to own every tool, especially occasional use tools. They are expensive and hard to store. If you get along well, everyone buys things to fill in and then you borrow each others.

Sandy

 

[Sheryl]

I think it was a smart move Saluki. Especially the 30-yr. fixed. That is what I did when I bought my home in 1989. It kept the payments very low. Then in 2000 when rates went way down, I re-fi'ed for a 15 yr. and barely changed the payment at all. Plus 11 years later, my income and inflation made the payment seem like nothing. (Well, $428 for a mortgage IS almost nothing).

See who gets the last laugh when your friends with the ARMs start getting the annual adjustments.

As to repairs and upgrades, as others said - don't go crazy right away. Live there a few months, then see how important you really think all those improvements are.

Most of all ENJOY!

 

[wabmester]

Not everyone needs to own every tool, especially occasional use tools.

Buying tools is part of the *fun* of home ownership. Not only are the tools themselves cool, but you can almost always rationalize a purchase decision by the money you'll save vs paying some contractor to do the work.

How many condo dwellers have a laser-guided miter saw with Titanium Carbide blades? Everybody should own one!

 

[saluki9]

Thanks for the encouragement.

Concerning the fixed mortgage: The vast majority of my friends work in finance, investment banking, portfolio management etc. They make most of their money in the form of bonuses and they tend to be very analytical. Therefor they also choose the shorter term ARMs to manage cash flow and invest the difference in assets with a higher expected return. My dream is to have a paid off house even if my portfolio is smaller than theirs. To me its an emotional thing.

As for fixing things up, I'm all for living there a couple months and seeing what is very important. My wife on the other hand loves how after 5 years our condo is just how she likes it. So, she wants everything fixed up by move in day (Which isn't gonna happen woman!)

Sandy, I really like the idea of doing one room at a time. It does make the task seem much more doable as opposed to doing it all at once.

 

[Goonie]

What is shocking me is how expensive REAL furniture is. To date most of our stuff is Target, hand me downs, etc. It's just amazing to me that a dresser is $1500 (cheap end!) and a dining room table and chairs is like $3k.

Another good place to find good furniture on the cheap is at estate autions. I used to work part time for an auctioneer, and saw some REALLY nice furniture go for way less than $100. Antiques included!

Saw one where a 1-2 year old, complete bedroom set went for about $300!!!

 

[magellan_nh]

Buying tools is part of the *fun* of home ownership. Not only are the tools themselves cool, but you can almost always rationalize a purchase decision by the money you'll save vs paying some contractor to do the work.

Buying a cool new tool can often be the fun part of an otherwise tough d-i-y project.

A guy I used to work with has a saying that "friends don't let friends borrow tools".

Jim

 

[Jay_Gatsby]

Another good place to find good furniture on the cheap is at estate autions. I used to work part time for an auctioneer, and saw some REALLY nice furniture go for way less than $100. Antiques included!

Saw one where a 1-2 year old, complete bedroom set went for about $300!!!

The problem is finding a way to get it home. You either need to own a truck or have a friend who owns a truck and is willing to let you borrow it.

 

[Rich_by_the_Bay]

The problem is finding a way to get it home. You either need to own a truck or have a friend who owns a truck and is willing to let you borrow it.

Hernia Movers - "the Potentate of Movin' Freight"

(actual company up in Wisconsin - kind of a "2 men and a truck" type deal)

 

[Sheryl]

Sandy, I really like the idea of doing one room at a time. It does make the task seem much more doable as opposed to doing it all at once.

When I bought my house, I enjoyed the fact that each room was "evolving." But I'm one that will wait years to find just the right dining table. It took me about 10 years of estate sales, yard sales, junk stores, and trips to IKEA to get everything just the way I wanted it. And by then things were ready to be replaced (like the chair the dog took over). I see remodeling and fixing up as an ongoing process, not something to be done and checked off.

 

[Martha]

When I bought my house, I enjoyed the fact that each room was "evolving." But I'm one that will wait years to find just the right dining table. It took me about 10 years of estate sales, yard sales, junk stores, and trips to IKEA to get everything just the way I wanted it. And by then things were ready to be replaced (like the chair the dog took over).

I am still waiting for the "just right" dining table.

I see remodeling and fixing up as an ongoing process, not something to be done and checked off.

The parents of a friend of mine had their dream home built in about 1965. They also bought all new furniture at the same time. They still have all the same furniture, though one of their kids persuaded them to get new mattresses a few years ago. We joke about their wildly flowered couch. Damn thing won't wear out.

Saluki, congratulations on the house. I like the idea of doing a room at a time too.

 

[maddythebeagle]

I havent had as much luck at the auctions (overpriced) than just at garage sales....picked up a huge solid maple dresser this summer and refinished it....not hard to find stuff under 100 bucks if you are willing to put a little work into it ...I think the most we paid for anything was 100 bucks for a solid cherry dresser that didnt need much work...

 

[Sheryl]

They also bought all new furniture at the same time. They still have all the same furniture, though one of their kids persuaded them to get new mattresses a few years ago. We joke about their wildly flowered couch. Damn thing won't wear out.

They just need a spoiled dog or two. I've had two couches worn out by the dogs over the course of 20 years. Now for diplomatic reasons we will be moving SO's big old 2-recliner couch into my tiny living room. It is one of those early-90's neutral rose/tan/gray/blue tweedy things. Really works well with my pink and purple oriental rug.

 

[HFWR]

Buying tools is part of the *fun* of home ownership. Not only are the tools themselves cool, but you can almost always rationalize a purchase decision by the money you'll save vs paying some contractor to do the work.

How many condo dwellers have a laser-guided miter saw with Titanium Carbide blades? Everybody should own one!

[Insert]Tim the Toolman grunt[/insert]

I own a table saw, two routers and their assorted bits and jigs, a circular saw, a sabre saw, a palm sander, one corded and one uncorded drill, a rotary tool, a miter saw, a biscuit cutter, a powered hand planer, and a compressor with finish nailer...

 

[audreyh1]

We sold our furniture (pretty dirt cheap) to a furniture consignment store. They had a lot of decent looking sets in there.

Audrey