Weighing homeownership against a fancy car

Prioritizing Home Ownership Goals

Sasha who?

My friend Jay liked to talk about the things he was going to do for Sasha. When he had enough money for “x”, he was going to get Sasha “x”. I should tell you Sasha was his car at the time. He babied her like she was his precious girl. It was funny because I remember our CEO asking in a meeting, “what would you do with an extra $1,000?” Jay replied, “I would get new tires for Sasha”. Our CEO looked at him, her confusion obvious, wondering who is Sasha and why would you spend it on her? In the moment, she didn’t know Sasha was a vehicle either.

Wheels vs Houses

While I don’t want to drive something that will break down, having a new car wasn’t on my list of high priorities because I know cars depreciate, especially new ones. I had always valued home ownership higher than the vehicle I drove. Not that I wanted to push my opinions or values on Jay, but I wanted to share this knowledge with Jay as a friend. He was renting a place to live and I wanted to see him purchase a home and have the pride and joy of home ownership. Jay was paying $600 on a rental. I knew he could pay the same amount of money for a home, especially since we were in the middle of a down market at the time. I knew Weighing homeownership against a fancy carhe would be able to find a beautiful place for him and his children to call home. Home ownership was possible, he just didn’t know it yet.

Jay didn’t have owning a home on his radar. First, he didn’t want to put his extra money away for a home, because he already had his eye on the next car he was going to drive. Second, it was too far out of reach having to find the right house and having the money for down payments and closing costs. Third, he didn’t even know how to determine which house would be right based on the plumbing and heating systems, roof, etc. He didn’t want to purchase a house and have to replace all of these if he missed something important. However, Jay was already dropping $600 monthly in rent and it wasn’t a perfect living situation.

Home Ownership Became More Important Than Sasha!

Friends are willing to say the hard things to friends and help them see things differently. If I didn’t care about him, IJay & Lori's Friendship could have said nothing and watched him continue on his path. I made it my mission at the time to help Jay understand the benefits of home ownership. Once he was convinced though, he sold Sasha and was able to get another reliable car, plus own his own home. He could pay the PITI (payment, interest, taxes and insurance) for about the same amount he was spending in rent. He was able to itemize his taxes and have increased deductions due to interest paid on the home and property taxes on the house. His kids have their own home, they feel pride in knowing it is theirs. If he wanted to make an improvement to where he lived, he was doing it to his own property which would gain equity rather than to do it for someone else’s property.

Jay has since become a lender for ELGA Credit Union and shares vehicle values with our members and how paying top dollar for a car isn’t always the best idea. He can share with our members how looking at a N.A.D.A. (National Automobile Dealers Association) value on a vehicle comes into play to see if the vehicle is worth what the buyer is paying. He has a passion to see members put their money into something they won’t have instant negative equity in.

Benefits of Home Ownership

  1. You are working toward owning an asset!
  2. If you itemize on your federal taxes, you can deduct the interest paid to your financial institution and property taxes you paid. This decreases the amount of money you have to pay in for taxes.
  3. Owning a home gives you a new mix on the trade lines on your credit bureau.
  4. Typically your asset will increase in value, building more equity.
  5. You will have more privacy.

10 Steps to Take for Home Ownership

  1. Begin saving money for your down payment. You should shoot for 20% down to get the best interest rate and no PMI (private mortgage insurance).
  2. Save money toward closing costs. Closing costs usually include appraisal, title insurance, one year home owners policy, escrow funding for future property tax and insurance, origination fee, closing fee, overnight fees and could include other fees.
  3. Know how much you can afford. Play with the mortgage calculator below to see an estimated payment with the amount you want to spend on a house.
  4. Get approved for a mortgage with ELGA Credit Union once you have your down payment and closing costs saved. We would love to see your home ownership dream come true.
  5. Start house shopping. Only look at homes you know you can afford, not the houses above your benchmark. Your loan originator will discuss how much you’re approved for once they look at your income, other debts and affordability combined with the amount you have saved for a home.
  6. Negotiate a purchase agreement for the best price for the home you want. Make sure to include items such as: purchase subject to satisfactory inspection and satisfactory appraisal so you aren’t locked into purchasing a home not worth the value you are paying or with unsatisfactory inspection items.
  7. Have home inspected. During the home inspection, you can hire as many people as you want to come check on things such as the furnace, electric, plumbing, roof, water tests, infestation, radon, etc. These tests are at the buyer’s expense.
  8. Organize a final walk through the property 24 hours prior to closing to be sure the home is as expected. This is a time to make sure previous owners items have been removed from the home and no obvious staining or surprises are in the home where furniture used to sit and there are no missing appliances if any of these were negotiated into your contract.
  9. Attend your Mortgage Closing.
  10. You have mastered home ownership, time to move in!

I challenge you to set financial goals. Knowing home ownership is within reach should encourage you to keep putting money aside to make it happen. After fifteen to thirty years,  owning your home and no longer having to make principal & interest payments will open up your options. You won’t get rent money back after you have paid it in, but you can always sell your home and take the money from it plus the equity to purchase a different home.

Consider joining us for Opening the Door Seminar to learn your options for different types of loans, each offering different down payments.  Click to Schedule your location and time.  

Questions? Comments? Want to share your stories with us? The Click to Comment button is at the bottom of this page. We want to hear from you!

 

 

 

 

 

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