The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

February 20, 2010

“My Experience in . . .” Series Part II Purchasing a Home

Part I-Paying for College

Welcome to Part II in The Balanced Spreadsheet’s “My Experience in” series.  This series is designed to discuss big financial events that occur to most people while at the same time sharing my experiences with them and hopefully letting you learn from my mistakes. 🙂  After covering my experience in paying for college in Part I, I am switching gears and going into my experience in purchasing a home.  This is an important topic I believe because purchasing a house is probably the most expensive purchase you will ever make in your lifetime and there are ways to make home ownership a blessing and ways to also make it a nightmare. 

So far I only have experience with purchasing one house and that was in August of 2006 when I bought my current residence.  A lot of mistakes were made on my part the least of which is that I had the great foresight to buy at the peak of the real estate bubble.  🙂  In addition I did not do a lot of research that I should have done and rushed through the process.  That probably led me to overpaying for the condominium, but with that being said I have since learned from my mistakes and will be a better buyer the next time I am in the market.

The main thing I learned was that you need to do your research ahead of time before you even talk to a realtor.  What you want to research include issues such as the market tendencies where you are looking to purchase, the current interest rate market, and most importantly knowing how much you can afford.  There is a lot more that goes into the price of a house then just plugging the purchase price into a mortgage calculator as there are other factors to consider like home owner’s insurance, taxes, and in my case monthly condominium dues.  By doing this research there will be less surprises on your end and when it comes to negotiating the purchase price, those with the most knowledge usually win.

Another thing I learned was that it is important to take your time and be patient and not rush things.  The moment you get “house fever” is the moment when you make a bad mistake that costs you money.  Taking your time gives you more bargaining power which allows you to get a better deal.  By being patient you will also have time to build up a bigger down payment which will help you avoid carrying Private Mortgage Insurance (PMI).  It will also lower your monthly payment and decrease the chance that your house value will drop below your mortgage balance, which is commonly referred to as an underwater mortgage.

Finally as mentioned above it is important to not fall in love with the first house you visit and like.  You always need to be able to walk away from a deal if necessary and being attached to a certain house will usually cost you more money at closing.  By going for the first nice house you find you could be turning your back on other houses with better deals. 

With all this being said I will definitely be more prepared next time when my family decides to purchase another home.  I will have more knowledge of the market that I am looking at including the area’s property taxes and price trends.  When I bought the condo I did not do this and wound up buying into an area with larger property taxes then the surrounding area.  Also I will visit more homes for comparison.  The condo I bought was only the second of three that I looked at.  Finally I will have more money to put down on the condo.  No money was put down on the condo I have now even though I did have $15,000 that could have been put down.  This means I am still paying $58.00 a month in PMI and as mentioned before the condo has dropped about 16% in value since 2006.  Thankfully I am in aggressive pay down mode so the condo is not currently underwater, but if I had just made the monthly minimum payments only I would be currently $18,000 underwater!

Writing this post made me cringe when adding up all the mistakes I made, but it definitely was a learning experience.  Hopefully if you are in the market for a new home you picked up a thing or two and will not repeat what I have done.  Next week we will discuss My Experience in paying for a wedding!

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2 Comments »

  1. Great info. As a realtor, I’d say you covered most of it! Well done. Best of luck on your next purchase.

    Comment by donjacks — February 20, 2010 @ 10:01 am

    • Thanks Don, I am glad I got the realtor seal of approval. 🙂

      Comment by thebalancedspreadsheet — February 20, 2010 @ 10:09 am


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