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Archive for the ‘Economy’ Category

Some call it The American Dream. But how can something that is supposed to be a dream, and by definition difficult to achieve, be so easily attained by (seemingly) anyone with a heartbeat and a credit score?

Perhaps it should be reclassified as The American Entitlement. Everyone thinks they DESERVE to own a home, regardless of their financial ability. Much like everyone thinks a car is a necessity, but we’ll talk about that some other time.

I bought my first home at age 23, less than a month after graduating college. It was technically under contract before I graduated. Which means the bank approved me for a loan while I was still a student. Sure, I had a job lined up, but I look back at that moment and it is no surprise to me that the real estate market crashed the past few years.

We had no down payment – but no problem – most banks were more than happy to lend 100% of the home value (sometimes even over 100%) in return for paying private mortgage insurance (PMI). So in addition to being in debt to the bank, we had to pay an insurance company to protect their asset (the mortgage). Nice work if you can get it.

We also had no savings to speak of. Hell, I was fresh out of college, finally on my own and earning a decent living. I wanted to buy “stuff”. I didn’t worry about things like insurance deductibles, roof replacement, or even general home maintenance. I realize now one major expense could have bankrupt me, or at best sent me to seek more credit. Not to mention what could have happened had either of us lost our job.

I look back and realize how stupid I was. But I got caught up in it because it was what everyone was doing. That’s not an excuse. I just want to point out that just because everyone is doing it doesn’t make it right. Heck, I’d venture to say going against what most people are doing is the wiser bet.

To add to the stupidity, after a few years, we decided to sell our “starter home” and move up to a bigger home, even though we had plenty of room in the first home. After all, we were working – we DESERVED a nicer home.

Hogwash. All that home did was stress me out beyond words. We were truly living paycheck to paycheck. Sometimes I would have to send in bills late because we didn’t have enough income on the current paycheck cycle to cover it. It was one of the worst, most depressing times of my life. So much for living a Dream.

I even suggested to my wife at the time (now my ex-) that we sell the house, pay off our debts and rent a cheap apartment for awhile to get a safety net built up. She had none of it. I think she was more worried about what it would look like to our friends and family. Not surprisingly, for this and other reasons, we divorced soon after.

That’s when I pledged never to get into such a financial mess again. If I was going to buy a home it was going to be comfortable. I was either going to have a 20% down payment (and a nice cash cushion to pay for unexpected repairs) or find a place that was cheaper than renting and would allow me to use my DIY skills to fix up and potentially sell for a profit.

After that, I rented for a few years and got serious about living frugally. I realized I didn’t have to own a home and fill it with a bunch of stuff to be happy.

Only when I met my current wife did I even think about buying another home. We would sit in our apartment and talk about finding a nice little unloved house that we could renovate and make our home. We window shopped for a long time. Realtor.com was at the top of our “favorites”. We looked long and hard and came up with a list of must-haves or to-dos for our future home.

In September 2005 we found a hideously ugly 2 bedroom house in a cool downtown neighborhood that we enjoyed. S didn’t even want to go in at first. I saw a blank slate, not to large to overwhelm our budget, assuming it was mechanically sound. We didn’t have quite enough for 20% down, but the since mortgage payment wasn’t going to be much more than our rent we decided to make an offer. Soon after, we got the keys and started working, putting those plans in action.

I’ll never forget that house. We transformed it from an eyesore to one of the nicest looking homes on the street. It wasn’t fancy, but was simple and we did a good job. Several neighbors were amazed and what we achieved with a little money and a lot of sweat.

It was a good feeling. And we were comfortable. We didn’t stretch ourselves to buy the biggest house we could – thereby selling the next 30 years of our lives working to pay off the debt.

We brought our first child home to that house. Our dream came true, but it was a lot of hard work. I think that is why we appreciated it so much.

We sold that house in July 2009, wanting to find a larger home with room to expand our family. Tears were shed. But we carried forward the lessons, memories and photos from that house.

Our current home was done “right”. We put down 20%, have a savings account that has already allowed us to replace a malfunctioning HVAC system and have the knowledge and skills to tackle nearly any home improvement project. We hope to pay off our mortgage early so we’re not living to work.

My new dream is to use the skills I’ve learned rebuilding our homes to help others make their home a dream. Or perhaps buy another ugly little house, fix it up and rent it to the next couple that is doing it the right way, not quite ready to buy.

 

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