We're building a house. Can't be that hard, right?

We're embarking on a home building expedition, and here's what we have to say about it!

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Friday, May 21, 2010

A Bump in the Road

We have our first bump in the road to new homeownership. It's not on Ridgewood Street, nope. The streets of Ridgewood are perfectly flat, always sunny, lined in gold, and magically light up under your feet like the "Billy Jean" Michael Jackson video.  Seriously! And all the neighbors are nice, there are no crazy dogs running loose and your driveway shovels itself.

Our bump has to do with our very lovely condo. Yes, there is some sarcasm there. Three years ago, the housing market was at its highest. We were just starting to look for a home and knew we needed to either get a new apartment (2 years in Watertown's oldest home was enough), or buy a place.

Conventional wisdom says if you can afford to buy, buy! You are building your credit, equity, a financial foundation, you aren't throwing money away by renting, blah, blah, blah.  Even if you don't get your dream home, you can start modestly, do some updating, stick around for your mortgage balance to go down and then sell for a nice profit and move into your dream home.

Sounds like a plan, right?

Enter 2008/9 and the giant economical crash that pretty much dream crushed its way into the 2010s. Suddenly, home prices are way down, people are defaulting on mortgages, lenders are getting tougher, stocks and 401Ks are falling and those of us lucky enough to keep our jobs, are getting little to no raises for this year, last year, and probably next year.

So why in the world would we be building a house now??

Good question. Half the answer is because home prices are low and we'll get a great house for much less money that what we would have paid 3 years ago. And since we don't plan on moving, ever again, it's a good investment regardless of what the market does over the next 50 years.

The other half is we sort of have to...Kyle is getting bigger and our 4 room condo (5 counting the basement) is getting smaller and smaller. If we ever want baby #2, we need a bigger place. It's time!

We do have a few things on our side. We thought hard about each decision we made in the last 4 years, especially financial decisions (thanks to a banker Dad and a husband who went to a business school, money management was pretty easy for me!) We're in no way rich, but we were smart enough to buy within our means, were comfortable with our 1300 square feet mortgage payment, were able to save a little, took work bonuses (however small) and paid off as much debt as we could and kept our eyes on the housing market, knowing that it would level off at some point.

I am a champion coupon clipper (years of watching Mom!), very rarely pay full price for anything, and signed up for every store rewards program so I'm always getting deals. I also belong to a lot of survey websites that pay you for your opinion. Not a lot, but I made about $200 last year in points and was able to buy John and Kyle some pretty good Christmas extras.  I save an average of about $25 at the grocery store EVERY time I go, that's about $650 a year, and I hardly ever shop for myself anymore.

We also invested into our place by doing things like having our basement finished by a good friend who did an amazing job and helped us out on the price (thanks Billy!). We tiled above the showers in our bathrooms to protect the walls, back splashed the kitchen and added more recessed lighting in the living room. All done by friends, or family recommendations, so we got great prices on everything. Our sole intention was to make this condo so irresistible that it would sell fast and high when the time came.

It sounds like we're in a great place, right?

On the new house side, yes. The bank was extremely impressed with our debt to income ratio and we are approved for the new home at a good interest rate.

However...and here's the bump. Our condo is no where near the value it was when we bought it. Well, the value is high because of all of our extras and new additions, but the price is low thanks to the economic situations we are all living through now.

There's a chance we will lose money on our condo. :( (BIG SAD FACE). Like I said, we were smart and do have some savings, but the more we have to pay to get rid of our stupid condo, the less we have for our down payment, which affects the mortgage.

Our plan (I say plan like WE devised it, but no, it's really what we are being forced to deal with) is now to sell the condo for as much as we can, which will still be about $25K LESS that what we bought it for, and then paying anywhere from $5 to 10K out of pocket for closing costs/fees etc.  Bye-bye money invested in the actual purchase of the condo and in all the home improvements we made. Now, we're going to have to spend the 6 months it takes to build the new house scrimping and saving every single penny to make that money back.

It also changes our temporary housing plans. Since we have to have a sign P&S on the condo before Steve the Builder will start building, there's going to be between 5-8 months where we'll be homeless. We were going to rent a smaller place for way less than our mortgage, save a few hundred a month and use the condo profits for our closing costs etc. Then, the money we saved would be for things like furniture, moving costs, storage, painting, a lawnmower, etc. You know, house stuff.

Now, it's looking like we'll need to save a lot more in the next 6 months. This means, we'll probably be moving in with my parents! Crowded house! My Dad thinks it would be good enough for a reality show. I don't totally disagree... Hey, if it pays the bills, come on in with your cameras! (OK, not really, I would hurl myself off a bridge if I turned out like any of these Heidi Montag, Tila Tequila, Kate Plus 8 reality weirdos).

All complaining aside, we are VERY lucky to have been smart enough to save and invest so this can still happen. If this were last year, or if we had not been careful, this wouldn't be a "this sucks" post, it would be a "this is over" post. Yuck.

We are also extremely lucky that my parents have a house big enough for 5 adults and a baby. And, that they OFFERED to let us stay! They are asking for the insanity that is the Brinegar child. Kyle is cute, but boy, can he mess up a house fast! :)   Captain Chaos is an appropriate nickname in so many ways.

As of now, we are going to list our condo on June 1, and hope for a quick offer that's MORE than what's left on the mortgage. Cross your fingers everyone!

(In the meantime, I'm checking out cool black and white photos of Boston landmarks for the new place! Gotta stay optimistic!)

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