How to Buy the Right House for You

In order to produce the podcast and keep content up free for you, I work with partners so this post may contain affiliate links. Please read my full disclosure for more info.

Are you house hunting or about to start? Learn how you can buy the right house for you and your budget. 

Mistakes Home Buyers Make

Buying a house is usually one of the biggest purchases you can make and the financial paperwork of getting a mortgage gets complicated quickly. 

Besides having a down payment ready, you have other costs like 

• Home inspection
• Lender fees
• Appraisal
• Title search and insurance fees
• And so forth

If you’re buying a $300,000 home, you’re looking at paying anywhere from $6,000 to $15,000 in closing costs. If you’re living in an HCOL area, those numbers leap up. 

It's really important to make sure you're ready for this leap before you signed the papers.

You rush into it and you’re stuck with a mortgage you can’t comfortably afford, making your home a burden, not a blessing. 

If you live in a hot real estate market it’s even more of a challenge. You’re dealing with multiple bids, some of them being much higher than the listing price. Here in Raleigh, it’s not uncommon to be competing with all-cash offers. 

In the middle of 2020, my mom moved to be closer to us in Raleigh and we helped her with the home buying process. It was stressful because there were so many more buyers than houses. It took some patience, reflecting on what features she needed and truly wanted, and honing in on the budget, but thankfully she bought a great place for herself.  

Whether you’re a first-time buyer or not, my advice is to detach yourself emotionally from the process. That’s easier said than done. 

That’s why I want to share from the archives an interview I did with Jonathan White. He’s the author of A Tale of Two Houses: Our journey of buying a home the right way after buying one the wrong way. 

As you can guess from the title, Jonathan understands some of those house-buying traps many of us fall into. He made

In this episode we get into:

• Some of those home-buying myths that can get you into trouble
• Unexpected expenses that come up as a homeowner
• Why you need to run your own numbers

Are you ready? Let’s get started! 

Resources on Getting a Great Deal on Your Mortgage

If you’re looking to buy, here are some resources to help you find a great deal with your mortgage

• Best Budget and Money Apps: Personal Capital, Tiller, Mint
• Grow Your Stash Faster: High Yield Savings with CiT Bank
• Jumpstart Your Marriage and Your Money
• What You Need to Know About Mortgages
• Understand Mortgage Loan Options
• Free 5 Days to $5K Course
• 9 Questions to Ask Before Buying a House
• Is It Better to Rent or Own a Home?
• How to Snag a Great Deal When Buying a House
• Buying a Home: From Contemplation to Closing

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

See how Coastal can help you with your mortgage needs!

Rollover Your 401(k) Easily with Capitalize

We’re grateful for wonderful partners like Capitalize. Not only do they support the podcast, but they help make managing your money so much easier. 

Did you know that it’s estimated that there are currently over 24 million “forgotten” 401(k) accounts? In fact, the average American changes jobs every 4 years. 

And because of the Great Resignation, you or someone you know might be changing jobs even more 

It’s an extreme case of out of sight and out of mind. Is your old 401(k) in there somewhere, left behind at a job you're no longer with?

One huge benefit with an IRA is you get to choose how your money is invested, not your old employer. 

If you want to consolidate your old 401(k) and have more options with how you invest, it may be time to roll them over into an IRA.  

With Capitalize, they handle the process from start-to-finish – for FREE. They handle the process from start-to-finish, and yes that includes calling the 401(k) provider on your behalf. 

Find out how and get started today!

Getting Caught Up in House Fever

Elle Martinez: Before he became a financial coach Jon White was in many ways like his clients. He was enjoying life. Finances were all right as he wasn't spending extravagantly.

As the years past some of his friends decided to move forward on their American dream and that included buying a home. Even though he had a background in accounting, John wasn't immune to house fever.

Jon White: Well, two things. I had one buddy who had bought a condo to one of my college friends and they said, oh, it's a great deal and good for him. I think I'd actually visited them and was like, oh wow, this is pretty cool. I could have my own place. So it's that kind of get the ball started. The other was when I was renting, I had a roommate and he had gotten married or it was in the process of getting married.

I bought the condo, not because I was in a good financial position to do so. I didn't buy the condo because I knew what I was doing necessarily. I did it because people told me renting, was throwing my money away and that. The way to build equity as the buy house, as soon as possible, real estate is always a good investment.

And so I just listened to what other people were saying and that time period, 2006, the real estate market was hot. I just got housing fever.

Home Buying Myths and Half-Truths

Elle Martinez: We heard some of the same things when we were house hunting, especially that rent is throwing money away, buying a house isn't bad, but you really have to look at the cost.

Besides the obvious, there are expenses that homeowners may have to deal with that renters don't. Your own maintenance for one thing, but depending on where you live, you may also find yourself buying property. That is a part of a home association, which is something John had to deal with

Jon White: firsthand. When I bought the condo and was looking at over it, they mentioned that the condo association association was suing.

The original builder. Those are the condos for some leaky fault, excuse me, some faulty Russ. And so there was an extra home owners, association dues associated with that. And I asked around and they said, oh, well, the ruling is going to be coming soon. So I was like, okay, that makes sense.

Well, then here's what happens about a year into the condo we settle with the builder. However, the settlement did not cover all the repairs to the chimneys that for some of the condoms that were faulty. So the homeowners association association asks us for $5,500 over the course of two years. So that was a real eyeopening thing to me is like, okay, wow. Yeah. When things break, I'm responsible for it.

Elle Martinez: So before you buy a place, that's a part of a home association, know the bylaws check with the residents. See if they're happy and ask about the fees over the last few years. Have they been increasing? Why? See what the home associations responsibilities are in, which would be yours.

Biggest Home Buying Mistake

Elle Martinez: As financially painful as that bill was John doesn't consider it his biggest mistake.

Jon White: The biggest mistake I made, and this is going to be a broad statement was that I just rushed the process. I got house fever. And when you get house fever, you just go with it. And I said, I didn't put anything down in the house.

The real estate agent I went with was the first person who contacted me back and asked them if they had experience selling condo or buying condos in this price range or what they knew about the area didn't know what my mortgage payment would be. Oh, how much I could afford it; believe it or not. I just told the banker, okay, this is my income and they told me, okay, you can probably afford a house in this range. I went with it and so I basically rushed the process.

Elle Martinez: To make matters. Worse was timing. John bought his condo in 2006 before the real estate bubble burst. When it did, he found himself about $20,000 underwater on his home while he did thankfully have some savings, his financial situation still weighed on him.

The Real Deal with Building Equity

Jon White: The good news is when I did make this purchase. I remember I got my first statement in the mail and I started to look for my packet that I got into closing and I looked at my 30 year amortization schedule and I had never looked at that thing before.

I saw how much of my payment was going to interest compared to principal. And the very few what was going to the principal. I was like, wow, this is insane. Why didn't I consider any of these costs? I bought in 2006 and 2007, 2008. That's when the housing market, the bubble burst, so to speak. And I was thousands upon thousands of dollars under water. Just looking at that amortization schedule and seeing, okay, it's going to take me like six or seven years if I just make the minimum payments that I'm supposed to to get right side up and having no idea what would happen if I had to move, if I lost my job, if I wanted to move, if I want to do something different, I was kind of stuck with this, this, this really financial burden.

That was just a wake up call for me to get with it. So yeah, there was a lot of financial stress. I know a lot of people during that time had to lose her house, got foreclosed on miss payments, lost jobs. I didn't have any of that, but the risk was still there and it was hanging over me. For a few years there, it was not, not fun to look at that deficit each and every month.

And a lot of times it was growing and no matter what I was doing.

Lessons Learned with Buying a House

Elle Martinez: Fast forward a few years, John got married. He and his wife used a principles and baby steps of Dave Ramsey to build their finances together. Eventually they became parents and that's when they began to consider selling the condo and getting another house.

Jon White: A couple years later we had our first son and then that a couple of years later, that winter, we found out we were pregnant with our second child at that time, the 900 foot, two bedroom square foot condo, just to not fit our family's needs. And we had put ourselves thankfully into a financial position to do so.

So we talked about it. We prayed about it. We live in the central highway area in Columbus, Ohio. We wanted to move closer to family. Basically we wanted to move on the other side of the town of town. And so we talked about, okay, here's our situation. Here's how much we owe in our mortgage currently.

Here's how much approximately we could sell our condo for here's how much we would net approximately also because we didn't know exactly how much we would sell our condo for. Thankfully we did have some equity because we had been really serious about paying it down.

If we get done the normal thing and pay the 30 year mortgage off like a 30 year mortgage, we would not have been in that position. It took us a lot of time and effort or money to get to the point where we did have some positive equity. Just having that scar from that first experience, I was really scarred. So I wanted to be really conservative and take control of the process instead of be reactive to the process.

Why It's Key to Run the Numbers Yourself

Elle Martinez: Seeing where things went wrong the first time John was determined not to let the same thing happen with their next house. He and his wife started with running the numbers themselves so they can understand and be confident with what they could afford.

Jon White: We determined, okay if we net this much from the sell of our condo and we put it all towards her down. Here's what current interest rates were. We also were determined to get a 15 or 20 year mortgage because we wanted to get our house paid off, looking into the future. We took that information. Okay. Here's what our payment could be. That could fit in our budget. Here's our down payment.

This is what we can

Elle Martinez: afford. Knowing their numbers proved to be beneficial as they were tempted with one house during their search,

Jon White: big test was for us, was. Our condo had sold or was in contract and we hadn't found a house yet. So we were looking at like a month of basically being homeless, not really being homeless, but we'd have to live there.

In-laws but. We're looking at, we don't have a house, so we're scrambling. And we found a house that was right on the edge of our budget. Of course, right? We looked at it and we really liked the house. The thing it was, it was a foreclosed house and it was a blind auction and so you put in the bid, you don't know who's bidding against you, what they're bidding against.

And that was a real test. We're like, okay. We said, this is how much we can afford. This is right. Are we going to stick to our budget? Are we going to try to break our budget or go a little over our budget and hope it works out? And, and I'm proud to say we stayed in our budget. We did the maximum that we could within our budget.

Fortunately though we got outbid. Someone had a, quite a few thousand dollars more than us and so we lost.

Finding a Great and Affordable Home for Your Family

Elle Martinez: They're self-controlled paid off when they found a house that suited their family and was within their budget so that they can enjoy it together instead of stressing

Jon White: out. But looking back on it, I'm still proud of us that we went through that and we didn't waiver on our budget.

We ended up with the, how the house that we have now. It's been been a financial blessing and we're still here and we're not living in a house that we hate. We have a nice house that that's our needs. It was fun and exciting and scary all at the same time but I'll tell you it was worth it at the end.

It's not a perfect house, but it's a house that's our budget and we're able to do the other things that we went to with money, such as give, invest, save, and pay cash for things.

It's in a really good thing for our marriage to not have that financial stress that a house can bring.

Support the Podcast!

Thank you so much for listening to the podcast!

• Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share.
• Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your review on Apple or Stitcher or Audible. 
• Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together!
• Become a Patron. 

Music and Photo Credits

Like the music in this episode? Come check out artists over at Audiio!

Photo by Belle Co

This episode was originally released in April 2016. Shownotes have been updated April 2022.