A lot of my readers and friends reached out with more questions from my previous blog of Steps to Buying A Home (https://loveahmongus.com/steps-to-buying-a-home/) so I am writing this to help people prepare financially for their home purchase.
It probably seems like a never ending list of things to check off before you purchase a home but I’m here to help with the financial aspect of it and hope that some of this information will be useful to you.

1. Check Your Finances
Isn’t this the most obvious? Sometimes not. Check your bank account, check your spending, can you afford another payment added onto everything that you already have going on? This is a good time to check your expenses and see if a home purchase is a good time for you. I’ve written a blog with an excel sheet that can help with your spending, for free! (https://loveahmongus.com/what-does-my-expense-sheet-look-like/)

2. How Much Should I Put Down?

My answer will always be 20% or more. Why? Because if you don’t, you’ll be paying $300-$500 more a month in PMI which stands for private mortgage insurance. This does absolutely nothing for you but goes towards insurance to the lender in case you default on your loan. On top of that, you’ll be paying this until you reach the 20%. Did you know that real estate investors always put 20% down on all their investment homes because they don’t like throwing money away so you shouldn’t either because your home is your investment.

3. 30 Year Mortgage Is Okay But 15 Is Better

My husband and I did our mortgage for a 30 year term because we were unsure what would happen in the next 15 years in case we lost our jobs and didn’t want to risk it. A year later, we refinanced for a 15 year term because we don’t know what’s going to happen in the next 15 years either and I actually left my job to become a Stay At Home Mom. Not only did we get a better interest rate but we will be debt free in 15 years instead of 30! Can’t really beat that!

4. Make Sure Everyone Is On The Same Page

This really should be #1 but I feel like when people are looking for a home, most spouses and family are already ready together. This just doesn’t apply financially but also mentally and physically. Make sure the home is a good fit for everyone and get their input when looking at homes together. You want a home for everyone and not just you. Sometimes everyone agrees and sometimes it’s a little more difficult but let everything be done within reason. A green or orange wall can always be painted over or a yellow fireplace can always be painted. The same goes for kitchens, bathrooms, and bedrooms. You also don’t want to overwork yourself or others to death feeling like you are flipping a home. Just some TLC to a home is expected but not flipping a house — unless that’s the purpose of your purchase.

With all that said, don’t let this discourage you from purchasing a home. Only you know when the right time is to purchase a home whether you have 1% or 20% down. These are just steps to encourage you to save money in the long run. I wish the best for you in your home purchase!

Sincerely,

Melissa Lee

I didn’t know that the FIRE movement existed until I started living more frugal and minimally. For those who are new to it, it stands for “Financial Independence, Retire Early”. They have a great purpose going and I hope we are able to jump onboard soon. Right now, my husband and I are focused on the FI part which is “Financial Independence”.

After a year and a half of the “minimally frugal” lifestyle, my husband and I were able to save up 20% of our down payment for our new home. We did this to avoid PMI which is private mortgage insurance. PMI does nothing for you, it only benefits the lender in case you default on your home. I was not okay with paying $300-$500 extra a month for something that was not equity for me. We were also able to do this without risking any of our emergency fund. We actually had an extra $10,000 after closing to spend on new furniture and furnishings for our home. Hard work does pay off!

The other part of the FIRE movement is the Retire Early part in which we are working on. It makes your investments do all the work for you so you can retire early. There’s an equation online with the FIRE movement that you can do to see when you will be eligible for retiring early. What this process consists of is pulling out 3% of your investments each year to live off of so you never have to work a day in your life. People who are part of this movement are retiring as early as 30 years old. What a great encouragement!

Here is the link to the FIRE equation: https://playingwithfire.co/retirementcalculator/

Whether you’re working towards the whole FIRE or just a couple of those letters is still an improvement. I hope financial freedom will give you a more purposeful and meaningful life. We aren’t meant to buy everything on this planet and if we were, we would still be left feeling empty. Read up on my other blog if you are interested in starting the frugal or minimalist lifestyle!

Sincerely,

Melissa Lee