The Plan & What Actually Happened
To give a tiny bit of backstory to this; We’d been living with my husband’s family for almost 5 years and were finally ready to find our own place.
To begin our journey, we laid out a plan. Well actually it was a series of plans:
One thing was clear, we had to pay off the car: $10,000 remaining
First, we upped our monthly payment by an extra hundred ($350 —>$450)
Then we came up with a bunch of scenarios:
$4K from tax return
Result: Paid off in 10 months. Leaving us with 2 months to find a house and buy it!
My Extreme, Don’t Wanna Do it Plan:
$4K from tax return
6K from savings (Bonds)
Result: Pay it off now! This leaves us with no down payment for home though! But we would have ~8 months to save.
The Hopeful, Fingers Crossed, Least Likely to Happen Plan:
$6K from tax return
$4K from savings (Bonds)
Result: Pay it off now! It leaves us with ~$2,000 in savings for the house plus ~8 months to save.
As you can see we had put all our hopes on a large tax return. With some of the tax laws changing, and our income was higher due to my husband’s promotions (2 in a year). We figured we would be put in a higher tax bracket, lessening our return.
Then this happened:
The Actual, Better than Expected, Plan:
$8K from tax return
$1,000 from savings (cash):
~$100 from selling items
~$900 from bank savings
Results: Have it paid off in roughly a month! Leaving us ~7 months to save, find, and buy a house.
Yup. By March we had $10K less of debt. We couldn’t believe it. This in of itself was a major check off my life goal list. Having grown up with broken-down, used cars. Buying an almost new car and pay it off in less than 5 years was such an accomplishment to me.
This eliminated hundreds of dollars a month from our expenses. Plus it lowered our DTI (debt to income ratio) well below the percentages that banks like for home loan applicators. So we checked off two boxes with one action. We were now in the “green” according to the bank.
With the car paid off, we could now focus on saving up for the house.
We then switched it to $400 a week and directed it towards a savings account that would become our down payment.
Our goal was $10,000. We didn’t even want to talk to the bank until we had that much.
I have to let you know that I had $5,000 in savings bonds, so that meant we only had to save up another $5K, which, in turn, sped up our timeline. We were going to use it to pay off the car, but instead thought it was best to use it for the house down payment.
We had two savings account. One for the house and another is our regular savings. We didn’t want to touch the money in our regular savings account since we planned on using it for buying things after we bought the house, but knew we could use that if needed. If we added that, in reality, we had $6K saved but we decided to keep that separate.
We did some quick math: $5K/$400=12.5 weeks. 12.5 weeks/4 weeks = 3.125 months
Then we realized that finding a house would probably take longer than expected, and at the time the market was hot (houses were staying on the market for a max of two weeks). And if our savings plans stayed on track, we would have more than enough to put on a down payment if things took longer than expected. So to avoid missing out, we decided to talk to the bank earlier than we anticipated.
The Whirlwind (AKA Finding a house in less than 2 months!)
The first thing that surprised us; we were told we could easily get a loan for $50K more than we anticipated.
While that made us feel relieved, we let them know that we didn’t feel comfortable with the monthly payment required at that price, and told them we weren’t going over $250K.
Quick Tip: Bring every single piece of paper you think you’ll need to that first meeting (most banks have a list online. If not, email their mortgage team and they will help you.) The more prepared you are; The easier it is to get your application sent off, and hopefully approved!
If your situation is anything like ours, the mortgage officer took our info and started the folder that is sent to the underwriters, right then and there, which sped up the process ten-fold later down the road. (We were pre-approved for a loan in under an hour!)
As we drove away from the bank, we were thrown for another loop. The real estate agent that worked with the bank’s mortgage program called us and wondered if we had any houses we were interested in seeing. We did of course (we love us some research) and one thing led to another and we ended up meeting her that night to look at our very first house!
A quick re-cap:
- Went to the bank just to see what our options were, ended up leaving with a pre-approved loan of $300K, in less than an hour.
- Then 10 minutes after that meeting, we were on our way to our very first house showing!
Although it was a hard pass on that first house we went to, due to our eagerness, it only took two months to find a house.
In the end, we decided on an area that we knew well, a small country community about 20 minutes from the base of Mount Rainier, which is one of our favorite hiking grounds, but it’s still close enough to a larger city that had all the necessities to get by.
While it’s not the log cabin in the woods away from civilization we dreamed about, it’s ours, and it’s a great little starter home for us.
While we said we didn’t want to go over $250K, we did end up going a smidgen over since the seller agreed to pay closing costs. The total of the loan came out to $252,650, which we are okay with.
The End & What comes next:
Now comes the fun part! I say that a bit sarcastically because buying (and owning) a home is expensive and stressful.
Two things we’ve done right away to start on the right foot:
- We’ve upped our monthly payment by $63. (Which equates to one less date night a month to our favorite sushi place.)
This changes our monthly payment of $1,537 to $1,600. This little amount sped up our pay-off date by over two and a half years, and saves us almost $18,000 in interest!
Our next step will be to switch our payments from monthly over to bi-weekly, which will shave off another three and a half years for a total of 6! And that tiny switch will save us over $40K in interest!!!
- We kept our aggressive savings going. Our down payment account has turned into our mortgage account. That $400/week is now going towards our mortgage payment. (Our first payment isn’t due until September, so we are already a month ahead plus a little more.)
This house does need work, mostly in landscaping and outbuildings. We have plans to upgrade a few things that will be sure to up the value of the house substantially if or when we decide to move. Which won’t be at least until the kids are out of high school (13 years minimum).
Besides working on the house, our next major goal is to pay off our other vehicle, a GMC Sierra ($20K remaining).
Related Post: 2019/2020 Goals
Have you ever experienced a big, life-changing goal happening quicker than expected? Let me know in the comments below.