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total money makeover

Money, The Home Buying Process

House Hunting: Dave Ramsey Style: Part 2 – Find Your House

May 23, 2014

This is Part 2 of a 3-part series. Be sure to read Part 1 – Prepare.

Welcome back!

Jonathan and I are documenting our home-buying journey here on the blog for all the Dave Ramsey followers out there wanting to see someone follow his guidelines. Yes, it can be done! 🙂  In case you didn’t read part one of this series, you can catch up here.

Last time we discussed all our preparatory steps as we geared up to purchase a home. In this post, we will explore the actual house hunt, which in some ways can be the most exciting part! This is how many people look when they get to start actually looking at houses.

excited

 

But it can quickly turn to this.

displeased

Our realtor told us that we shouldn’t go looking for any home until we have our pre-qualification done and ready to go. Who knows when you will find “the” house, right? She wanted us ready to offer if we loved it, especially since we were looking in the foothills – an area where properties are gone within hours.

You read about the snafu of getting Jonathan’s credit cleaned up in post one. Once that was done, we wanted two quotes on mortgage interest rates. We first asked a local broker recommended by our realtor. We were blown away by her customer service, dedication, swiftness, and that heart of a teacher quality that is so rare. She wanted to help us meet our goals by getting a 15-year fixed rate mortgage with as much down as we could save up.

The second quote was from our credit union.  First they told us that we could “afford” a house $200K over what we were considering. Then he said, “Since you have no debt, most of your income is available for a mortgage payment.” To which I replied, “Yea, if we wanna be house poor, never adopt, send our kids to college, or retire!”

no way

Sigh. Yes, we are weird. No we are not putting 40% take home pay towards a house payment. Geesh!

He couldn’t understand my concerns and thought we were rather odd for wanting a 15-year fixed rate loan and for the payment to be less than 25% of our take home pay, as this puts conservative limits on our “buying power”. Now I understand WHY the housing market crash of 2008 happened! People (and banks) were taking way too much risk and way too high of mortgage payments compared to their income. I would MUCH rather live in a modest home well below our means than live in a house that sucked my income dry every single month.

Not. Gonna. Do. It.

We dropped the bank lender like a bad habit and decided to move forward with the local mortgage broker recommended by our realtor. Between those two, we are in as good of hands as we can get.

Last Friday was our first time looking at homes. We hopped in our agent’s car and she had waters and treats waiting for us – so sweet and thoughtful! Another way I could tell she goes above and beyond in her work. That afternoon we looked at seven houses and in each one, our agent was continuing to provide an education:

“Look, this is how water damage can occur.”

“Ranches will be the most expensive homes we see because they take up more land.”

“I can feel this house is slightly tilting because of the bentonite in the soil…common near the mountains.”

I loved how she wasn’t going to hold her opinion back. She wanted us in the right house and that’s all there was too it. Anything that needed to be said, she said. She truly is a “real-estate mom!”

That day we learned a few things. First – photos always look better online. Second – you can’t smell the house in photos! Smoke, cats, mildew. Gross. Third – location, location, location. I saw a “deal” online only to pull up in front of the house to find it across the street from a ginormous construction thing/highway. Four – if the price is too good to be true (in this market at least) it’s too good to be true.

smelly

We didn’t find anything we loved that day and quickly found ourselves going from excited and pumped up down to discouraged and exhausted. Does “our” home even exist?!?!

On Sunday afternoon we got picked up again…this time with Starbucks and she even went way above and beyond by getting delicious gluten-free chocolate dipped almond horns at a specialty bakery in town. YUMMY!!! We saw a couple different properties on Sunday and fell in love with BOTH! The first property was a town house that was beautifully remodeled inside and the second was a mostly updated brick ranch with an immaculate yard and cozy sunroom.

Now we were just confused.

confused

You couldn’t have found more opposite properties for us to fall in love with. Sure both were beautiful and had charm. The town house would be a 3-5-year strategy since it’s 3 bed/2 bath, 1,300 square feet, and no garage. The ranch would be where we’d raise a family at 5 bed/2bath with a 2 car garage and nearly 2,700 square feet.

We could see ourselves in both homes…BUT we had to sit down and look at the facts…and filter them through the Dave Ramsey lens.

The town house was a no brainer. We can afford it (since it’s basically the same cost as we pay in rent monthly…so no budget impact) and keep saving for things like adoption, retirement, and future home purchases. We could do a 15-year fixed rate mortgage with more than 10% down and the payments would not be greater than 25% takehome pay. Easy-peasy-lemon-squeezy.

The house (with it’s plantation shutters…sigh) was actually out of our price range on a 15-year fixed rate mortgage. Ruh Roh!

scared

I wanted to see…JUST ONE potential dream home. Even upon pulling up, our realtor looked at me and said, “Are you sure you want to go in there?” She knew it was a temptation in the making even by seeing the exterior alone. I allowed my heart to be tempted though…bigtime. The dream house would require us to do a 30-year mortgage and even at that, the payments would be 35% of our takehome pay.

Jonathan and I got dropped off and needed to talk strategy. Were we going to follow Dave’s advice and take off a modest bite as we incrementally work towards the dream home someday? Or would we jump into the dream home and sacrifice other lifestyle/savings in order to have that now…while violating Dave’s principles and knowing it.

UGH!!!!!!!!!

The decision about our strategy wasn’t actually that hard. In five minutes I realized that talking about the town house, we were just excited and happy. A team. In talking about the dream house, we fought. Argued. Lost our peace. I turned to Jonathan and said, “If this is what life looks like in the dream home, I don’t want it!” I refuse to have money fights. We don’t have money fights ever and I don’t want to start. The entire Dave Ramsey program is designed for FINANCIAL PEACE. I will not trade that in for anything.

Drum roll please……

We chose the town home!

thumbs up

This past Sunday afternoon we began the buying process by putting in an offer…knowing there were at least seven others on the table. We will get into all of that in part three.

Stay tuned.

For those wanting some nice bullet points to wrap this post up:

  1. Compare mortgage interest rates with at least two lenders 
  2. Do your homework on how quickly each lender could close (Our bank would take 30 days where the local broker could pull it off in 7 days.)
  3. Don’t look at homes outside your price range. (Of course the more expensive one will be better, that is why it’s more expensive!)
  4. Stay objective while touring a property.
  5. Don’t overlook things like deep smells, location, sunlight, or any other quality that you can’t really change. It’s not all about the resale value but keep it in mind.
  6. Have an open mind and be willing to look past changeable qualities that aren’t to your taste – you can change them!

 

Money

Saving for a Down Payment

April 26, 2014

Jonathan and I sat down in August to have a conversation about where we were going financially. In the process, we reviewed the Total Money Makeover and we were technically in Baby Step 3B – time to save for a down payment. I was feeling like I needed more encouragement, as the Denver housing market is pretty intense.

So I called Dave Ramsey himself. In his own words:

“The Denver market is white-hot and you should scrape together a down payment as soon as possible.”

He also said that he could tell we were focused and intentional about our finances – how did he know?!?! 🙂 I guess he has a sense about these things. It was the highest compliment we could get from Dave himself.

Into Baby Step 3B went we!

It’s not technically one of the “7 Baby Steps” but it’s between Baby Step 3 and 4. For those wanting a refresher on Dave’s Baby Steps:

dave-ramsey-baby-steps

We didn’t quite go back to beans-and-rice-gazelle-like intensity but we’ve been close. We have definitely lived like no one else so later we can live like no one else. As you can guess, we won’t be doing this home buying process like the average American.

Check out Dave’s home-buying standards:

  • Be completely debt-free and have a Fully Funded Emergency Fund of 3-6 months of expenses (otherwise Dave says Murphy will move into your spare bedroom and bring his cousins Broke, Desperate, and Stupid)
  • 100% down is preferred (OK being realistic, we are NOT doing this)
  • 10-20% down payment minimum (20% preferred to avoid PMI aka wasted mula)
  • Total payment <25% of your take home pay (most Americans qualify for a MUCH higher monthly payment…making them susceptible to being house poor)
  • 15-year fixed rate mortgage (Dave has studied how the 30-year mortgage hurts people long term. He also says if you think you will pay a 30-year mortgage like a 15-year mortgage, you are kidding yourself)

Pretty different approach to the typical American home-buying behaviors. Sure, Dave’s advice is fairly conservative but I know this – it will never lead to our harm. Will we follow ALL Dave’s recommendations? I really hope so but sometimes I get impatient and want to compromise…as there is so much to factor in. For now, things feel a little touch and go. Currently the Denver real-estate market is the 7th most overpriced in the nation. Ouch. There is talk of a “bubble” happening again. Maybe. Maybe not.

What do we do? Get in quick or wait? Buy a house (the most overpriced type of real-estate) or a town home (priced more appropriately)? Do we buy something we will have to move out of in 4-6 years as our family (PLEASE GOD) grows? Or do we buy the bigger house we could stay in for 10+ years that would require us to take a 30-year mortgage (at this point in time)? Or do we go for the cheaper fixer upper on a 15-year fixed mortgage but have to put $30K in updates/repairs during it’s first couple years? Or do we wait one more year, hope interest rates don’t climb and the market doesn’t keep inflating? What are the longterm affects of delaying retirement savings another entire year? So very many options. Enough to make ones head spin.

We will be using this mortgage vs buy calculator for many varying scenarios to calculate the smartest move possible. But there will always be risk we just can’t get rid of. Dave’s standards help minimize that risk, thankfully.

We are currently going through the “pre-qualification” process and from there, we will either begin looking at homes in there area or decide to wait and save longer. We are committed to that 10% down minimum but are going to shoot for as close to 20% as we’re able. Join us as we continue this home-buying journey! I will keep yall updated as we make various decisions.

Anyone out there have any advice? Regrets? Encouragement? I look forward to hearing from yall!

Money

Why we Drive a 2000 Dodge Stratus with 190K Miles

October 11, 2013

Many of you know about it Debt Free Journey. Sometimes we get asked, “So now that you have no debt, why don’t you get a nicer car?” We drive a 2000 Dodge Stratus with 190K miles on it.

OLYMPUS DIGITAL CAMERA

There are many many days that I want an upgrade. And in reality we have enough cash to go out and buy a nicer vehicle now if we wanted to. But then I remember why we choose to keep this car. The video below gives the explanation of what we are doing.

http://www.youtube.com/watch?v=BKyV8CTHeJ0

You won’t see the Teixeiras with a car payment because we can do math. When it is time to upgrade someday, we will pay cash from our Drive Free Cars for Life Fund we are saving for in the bank and the car will be at least a few years old, since we will let someone else pay the steep depreciation costs instead of us. We could upgrade now but we want to get as much life from this car as possible because the longer it lasts the more it allows us to save for other things on our priority list as well.

We are tortoises, what can we say? Everyone knows that the tortoise beats the hare, it just won’t be for a while! If you are reading this and have a car payment or a leasing a vehicle (most expensive way to have a car btw) please know we aren’t judging you or hating on you. We want you to win with the money God has entrusted you to steward.

Check out Financial Peace University  or Total Money Makeover and discover how to  begin making your money work for you and not a bank! We will be your cheerleaders along the way!

Money

Our Total Money Makeover

April 30, 2012

Jonathan and I got married this past October. By November we read Dave Ramsey’s Total Money Makeover and got pumped up about our finances! We even started listening to his podcasts every single morning while we get ready for the day. We were sick and tired of seeing so much of our paychecks go to student loans! Since we fundraise our entire income, working for FOCUS – Fellowship of Catholic University Students, we take every paycheck seriously. The money we live off of is the hard earned tithe to God from so many generous family and friends we’ve made through working in campus ministry. We owe financial responsibility not only to God and ourselves, but to these people who are donating to us, who desire Jesus Christ to be known in our world. It was time that our money started working for us and not some bank! I can think of a LOT of great ways to give & spend that money I see whisked off to Sallie Mae every month…now it’s time to kick the old woman out of our house!

After going through all the necessary changes from getting hitched – name, driver’s license, SSN, address, etc., we were ready to start our new financial  journey in January. We had around $21,000 in student loans at that point and have been working the baby steps. We got our $1,000 in an emergency fund set aside and then began with gazelle-like-intensity to pay down our debt as soon as possible!!!! We have lived on next to nothing, literally. We chopped up the credit cards and started paying cash for our purchases. Every date night is spent playing board games at home and eating home cooked food. We took a “stay-cation” over Spring Break under our own roof instead of traveling to see family or go on a mission trip. We haven’t bought any clothes or anything non-essential. We’ve eaten beans and rice…a lot.  I’ve been selling things so fast, I wonder if we will have anything left by June! We splurged once, to see The Hunger Games with friends, but it was in the budget 😉

Despite it seeming like we haven’t had much of a  life in some people’s eyes, we are so HAPPY! Living frugally has forced us to come up with new ways to have fun, create a budget and stick to it every single month, to communicate about what we buy and why we value certain things, to dream about all the ways we desire to give and spend our money once we become debt-free, and to have a less distracted life by the fact that we don’t have “stuff” to distract us as often. Thankfully we have amazing and supportive friends who like to do free things together and working for FOCUS provides us with so many exciting adventures with college students built right into our daily lives. So we don’t feel like we miss out on too much since we are surrounded by a great community of joyful people.

So, we’ve got four months under our belts of our gazelle-like intensity and we have seen results!!! As I said earlier, we started out with close to $21,000 in debt. I am excited to say that today, we only have $10,461.09 left on those student loans. Our income fluctuates, but we’ve been paying 50-65% of our income towards debt each month. I don’t share those numbers to toot our own horns and to show how great Jonathan and I are…but to INSPIRE anyone reading this who wants to dump their debt too! If we can do this, anyone can!!! We are set to be debt-free sometime between August and September 2012. We originally thought we would need 12 months to pay it all off but once the ball got rolling, we got more and more excited to see our loans GONE, it truly became a snowball effect.

We aren’t at our final goal yet, but it’s close on the horizon and we are already talking about how to celebrate being debt-free.  We aren’t sure about what we’ll do but we’re certain we’ll be paying cash 🙂 You can bet we’ll be calling Dave to do our “debt-free scream!” Thanks be to God for the ministry of Dave Ramsey and his team of workers. Their hard work is truly paying off in the lives of so many people and we are just one of many. YOU CAN BE NEXT!!!! www.daveramsey.com