WE ARE BUILDING OUR DREAM HOME PART 1!
Before I get started, I want to first say how grateful Brendon and I both are that we are in the position to build a home at such a young age. Everyone goes through life at a different pace, so where you are is exactly where you are supposed to be. You should never feel down on yourself if you are not in the same place as someone you see on social media. God has you exactly where He wants you, and you should take pride in that. Be grateful for what YOU have and who YOU are, and live your life at the speed in which YOU feel is best for you.
... and with all of that being said, we are so grateful that this is where we are, and I am so excited to share this process with y'all! In this post, I am going to go through all of the FINANCIAL steps that it took us to get where we are currently in the process. As we progress, I will make new blog posts that will follow this one - kind've like a little series! So consider this the pilot... buckle up, 'cause it's a long one - let's go!
RENTING VERSUS BUYING
Obviously the first step in deciding to own your home would be to weigh the pros and cons of renting versus buying to determine which is the best option for you. When we moved to Texas, we opted to rent our apartment for a couple of reasons.
Reason 1: It helped us to determine what areas of Texas we loved. While living here, we have explored different towns, cities, and neighborhoods. Visiting an area for a day on a trip is a lot different than taking your time to really get to know an area. We are actually moving 45 minutes away from where we are living now, and would have never thought to purchase a home there before living here. Real estate is an extreme commitment, so you want to be sure you're in an area you love.
Reason 2: It helped us to realize what we needed and didn't need in a future home. For example, we don't have a coat closet in our apartment. When we first moved here, it didn't seem like an issue. But now living without one, we see how much we need one, and wouldn't want to buy a home that didn't have one / didn't have a place to add one. Our apartment also has a laundry room that is more like a laundry closet. The size hasn't bothered me at all living here, so we weren't determined to get a "nice" laundry room in our future home. These are small things, but again, real estate is a commitment, so it is great to know what you love and what you don't before purchasing.
It's important to consider the maintenance, upkeep, and "extra costs" that come along with a home that you wouldn't have if you were renting. For example, if your pipe bursts while renting, you call your landlord or leasing office and they'll pay to fix it for you. If you own your home, this an expense that will typically have to come out of your pocket. And obviously smaller things like mowing the lawn, cleaning the gutters, pulling weeds... these are all "extra" things that just come with owning a home.
The biggest question of whether you should rent or buy is typically the financial side of things. People tend to say you're "throwing money away renting"... and while that's "true" in a sense, you're also throwing money away when you own your home. Your mortgage is made up of more than just paying back what you owe. You have to factor in taxes (and in Texas.. taxes are extremely high), home insurance, HOA fees if applicable, PMI if applicable, interest, and the principal. The principal is the only thing that is technically going back to you, as that is paying back what you borrowed to buy the home. The other stuff that makes up a mortgage isn't "investing back to you" so it is essentially money being "thrown away". Both renting and home buying have pros and cons, you just need to do your research and find which is the best fit for you!
HOW WE BUDGETED TO BUY A HOUSE
When I asked on Instagram to ask questions about the home buying process, how we budgeted/how we could afford it was the most common asked question. I would like to preface this by stating that Brendon and I are purchasing this home entirely on our own with no help from family/friends. Everything we have has been earned by us through extremely hard work and saving/investing our money. A little back story - Brendon graduated college in Spring 2020. Prior to graduation, he interned for a company and they ended up hiring him as a full time employee as soon as he graduated. For myself, I stopped college in 2017 and began modeling full time. We are both in our careers, thus how we are making income.
I cannot stress enough how important saving is. For a while, Brendon and I lived with my parents (which I am extremely grateful for) before we moved out on our own. Those years were where we truly built our savings accounts. Any money I made modeling, I put it into my savings account. Obviously I went shopping, bought groceries, paid car insurance... but the majority of it, I saved. (We also did move to Miami and NYC, and we paid for that as well. Just stressing to save whatever is not necessity). I read something the other day that said spending $27.40 a day on pointless things equates to $10,000 a year. $10,000 is just about 3.5% down on a $286,000 home.. which for an FHA loan is all you have to put down. Just think... if you decided to make your coffee at home daily, and saved $5 a day from not going to Starbucks, and put the $5 into a savings account every day, you would have over $1,800 saved in just one year. You can still treat yourself and do things to make yourself happy, but cutting out a few small things every day that you don't need and putting that into savings is a great way to save to buy your home. I always say this: if I can't buy it with the money in my checking account at least 3 times, I don't need to buy it. (Not talking about necessities like groceries or gas etc.). For example, if I just received a check for $2,000, and the new Gucci bag I want is also $2,000, it doesn't mean I need to go buy the bag. Just because you can, doesn't mean you should. Just something to think about.
Credit cards can be deadly, y'all, lol. It's super important to have credit cards and use them monthly to build your credit. Your credit score is how your lender will determine if you are eligible for a loan/what kind, and what your interest rate will be on your loan. The better your credit score is, the lower your interest rate will be, meaning the overall price of your home and your monthly mortgage will be lower. But like I said, credit cards can be deadly in the home buying process. Your lender will look at your debt to income ratio. This means, if you have a ton of credit card debt (also factors in car payments, student loans, afterpay... literally any kind of debt you may have) and aren't making about 36% of it in monthly income, you may not be eligible for a loan. Brendon and I are extremely careful with our credit cards. We use them to help improve our credit, but we pay them off in their entirety every single month. Credit cards can be dangerous because you can buy things without having the money to do so. Be smart in using your credit cards.
So, to sum up what I said above, Brendon and I budget for our house by saving money where we could, and not letting ourselves get into any outstanding debts. If we had extra money, we would set it aside for our house and not touch it. It's important to evaluate your own specific financial situation and figure out what would be best for you and your life style.
UHH.. HOW CAN YOU AFFORD TO BUILD A HOME?
For a while, I thought you had to be RICH to build a house. I never thought it would be a tangible goal for us, so we kind've just ruled out the idea entirely. At first, Brendon and I were looking to buy a pre-existing home and either A) buy something way under budget and fix it up on our own or B) buy something at the top of our budget that was move in ready. We searched for quite a while, and even put an offer on a few homes but turned up unsuccessful. The market right now is insane, so homes are selling for $20,000+ over the listing prices. This turns out to be an issue because the bank is going to loan you what the house is worth. So if you put an offer in at $200,000, but the house is only worth $150,000, you will only get a loan for $150,000. Wondering about the other $50,000? With the market the way it is right now, people are coming up with the additional $50,000 out of pocket. For us? Yeah, not happening. We felt discouraged, frustrated, and ultimately felt like we would have to rent for another year. One day we were just driving and ended up at a model home. We went inside to just "look" and immediately fell in love. We realized that we could build our dream home (let me emphasize this is NOT a custom build) for LESS than what it would have cost us to purchase a pre existing home. No, you don't have to have any additional money to put down. No, you don't have to pay everything up front. We are using the same loan type, putting the same amount down, and we stayed under budget! Building, for us, was a win-win!
WHAT IS A PRODUCTION BUILDER?
For this home, we have decided to build with a production builder. After choosing the company you want to build with, they will give you an outline of the different homes and floor plans that they build. With this, you have to stick to their floor plans and design style. Typically, you don't add extra rooms or funky designs like you would with a full custom build. With that said, we are using KHOVNANIAN , and they have been amazing! With them, you get to choose everything you want design wise. We chose all the finishes, flooring, exterior color and style, fixtures... pretty much everything inside the house. This allowed us to get exactly what we wanted without having to do a full custom build. This article explains the difference between custom homes and production homes extremely well.. click here!
FAQ'S FROM INSTAGRAM
Like I said earlier, I posted on Instagram asking if anyone had any questions about this process. I'm going to answer some of those here!
Do you need a realtor to build a house? We started this process thinking we were going to buy a pre existing home, so we already had a realtor, so for us, yes. He has come to contract signings, given suggestions of things to add to the home for resale value, and helped us with any questions we didn't know ourselves. I would recommend having a realtor even if you're building, but it isn't necessarily required.
How much do you have to have saved to build a house? This question is different for everyone depending on the prices of the homes you're looking at. I would suggest reaching out to a lender and getting pre-approved before you start looking. Your lender will look at your income, savings, credit, etc to determine what you can afford.
How did you budget for the house? Like I said before, saving is key... just know what is a necessity for you! This will look different for everyone, but cut out what you can and save that money. If you decide to cut out eating out, don't use the money you didn't spend on a new pair of shoes. Keep that money in savings or invest it so you can continue to build off of it.
Can you show the designs you chose? Absolutely! I plan on sharing the process as it goes for sure! Since we haven't broken ground yet, I don't have much to share just yet. But we did pick everything out! Our house will have light wood floors, a white kitchen, and a super open concept. Definitely stay tuned and I will share!
How much was your house? While I'm not going to share the pricing, I will say that it was under our budget and we are getting everything we want!
Like I said, we are in the early stages, so I am excited to share as we go! If you have any other questions, feel free to shoot me a message. Be sure to subscribe to my blog to be emailed when I upload the next post in this series! Talk soon, babe! xo