By Eric on June 1, 2011 17

Stupid Tax: Buying a House Before We Were Ready

What’s stupid tax? Check out our first installment of stupid tax that we paid on our honeymoon.

What’s next on the list after you get married? Buy a house, right? That’s one of the biggest questions we were asked once we were married: “Are you looking for a house?”

It seemed like the logical next step. Sure, we had more than $30,000 in student loan debt, but that’s “good debt,” right?

Not exactly. Our student loans were at a pretty good interest rate, but why would we want to owe anyone money? Think of what we could do with an extra $200 in our pockets every month. Instead, we listened to the people that told us we were throwing away our money by renting. Don’t get us wrong, we liked the idea, too–but it felt a little rushed.

So we started looking at houses, and when the bank pre-approved us and told us what we could afford, for some reason we thought we could really afford something a little more expensive than that. So we bought a house out of our price range. Just like they always do on the show “House Hunters.” Every time we watch that show now we scream “Noooooo!” because we have discovered the truth that owning a home is way more expensive than we expected.

This was probably just us not being very mature at the ages of 22 and 23, but did you know that when you buy a house, you need a lawn mower ($200)? And that a brand new house doesn’t come with window coverings ($1,500) or a garage door opener ($500)? These are just a few of the unexpected, never-thought-about things that came up after we bought our house. And since we bought our house, we have not had the money to do some things that we’ve wanted to do (save money, save for retirement, go on a vacation).

We should be spending 25% or less of our income on our home, but we spend closer to 33%. This allows us to get by, but we feel strangled most of the time, and when we were trying to pay off our debt, it forced me to get a second job so we could gain some momentum.

Now that we are debt-free, we are starting to dream about what we want our lives to look like financially. With our current home, we don’t see any of these dreams coming true. So, before we any Kels Jrs. or Ric rugrats running around, we are hoping to sell our house and start over.

Here’s Our Plan

  1. Sell our house
  2. Rent an apartment, townhouse or house that allows us to live on my income
  3. Save Kels’ income and any extra we can for our next house (we hope to save 50% down in one to two years)
  4. Look for a house that we can fix up and add our own flavor to it
  5. Buy a house with a 15-year mortgage that costs less than 25% of one of our incomes

With this scenario, we’ll achieve the dream of financial peace!

We realize this is going to be a very difficult time for us, but we are committed to the dream. The painful lesson we learned from having to pay this stupid tax is that a home is like the church: It’s the people, not the building that make it special. We don’t need a fancy new home to be happy, we simply need each other.

Who thinks we’re crazy?

Update 12/5/12:

Since writing this post, a lot has changed. We had a baby, paid off our second mortgage and decided to stay in our current home for the next few years at least. The principles still apply, we still think we purchased the home way before we were ready but have fought hard to dig ourselves out of the hole we made. We have and updated budget breakdown post that explains our current situation.

Other posts in this series

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Eric

Husband to Kelsey. Father to Rooney. Follower of Jesus. Born and raised in Iowa. I like blogging. Bulleted lists excite me. Thanks for stopping by.

  1. It’s ambitious, but I think you can do it! Especially since you realized early enough that your current house is a little too much to handle.

    We just moved into our first house this weekend and also had to buy a lawn mower, washer, dryer, etc. And then there’s more furniture, but we’ll wait a little while before plunking down more money.

  2. crazy: no.

    awesome: yes.

    : )

  3. Regretful Home Buyer June 1, 2011 at 7:32 pm

    You are so right. I wish I’d discovered Dave Ramsey back in 2009… We just didn’t know any better. Sure, we’re making it work living in the home we bought, but I DREAM of going back to renting & having a little more financial peace in our lives (particularly when we now have a parent who is terminally ill and we have to find a way to pay for flights out to visit).
    The decision you’ve made to sell, get out of debt & save for a better time!!! HUGE WISDOM! YEA!!!!

  4. I found your blog through snappy casual and you are not crazy. I wish someone had told us we were being stupid and not financially ready to buy a house. We aren’t where we should or could be and we’ve thought about selling our house, but at this point we’re doing what we can to pay off debt and refinance to a 15. Anyway, good luck with the house sell.

  5. way to go guys! you’ll come out better than the rest of us for sure! it’s definitely hard to not satisfy the flesh now, but you’ll be so much better for it down the line! i know you can do it!

  6. It’s refreshing to see people realizing they are in over their head and come up with a logical plan to move ahead. Instead of just getting to the next step people say.

    I love your posts, you make me smile lots

    • Thanks for reading Namine! Sometimes it’s hard to be honest and admit we made a mistake, and our hope is that others might learn from it.

  7. We are paying the stupid tax now on our house but in a different way. Our mortgage including taxes, insurance, and HOA is 18% of our net income, which is awesome. We bought our townhome a few months before we got married in 2008. The housing market where we live has suffered with the rest of the country, and our home is worth about $17,000 LESS than we OWE currently! I makes me want to cry. The plan was to live here for two years, and we have been here a little over three. We wish that we had rented, but we were 25 and 28 when we got married and we had each been renting for years. We were ready to own. Foster parenting has been on our hearts, and we would love to start pursuing it. However our tiny little two bedroom townhome is just really too small to start any kind of family. The upside is if it’s meant to be, we trust that God will make a way whether it’s renting out our home for a while or by miracle selling it for not so much of a loss. Good luck with selling your home! I hope you are able to do so quickly!

    • Bummer! We got our updated appraisal in the mail the other day, and we were totally bummed because our house is appraised at $13,000 less than we were hoping to sell for. It hurts, but people keeping telling us we’re still young and there is lots of time to make it back.

      As for foster parenting, that is amazing. I pray that it all works out in His timing and that you will change lives!

  8. I pray that it all works out according to your dreams. You know what a planner I am, and sometimes I think God laughs at me when I think that things will go according to my plan….we know it’s all up to His mighty plan. Love you two!

  9. I guess we were “lucky” that we live in a housing market that was totally unaffordable for us before the crash(like totally dodgy fixers for $500K. WTH?), so we were forced to wait to buy until we both housing prices went down and we had an increased income. So we stayed in a rental for much longer than we really wanted to since it was just so affordable.

    Then when we finally got around to buying our house (back in 2008) it was a good value and not a huge percentage of our income. But you’re definitely not the only ones to get in over your head! Our next door neighbors are renting because they had to short-sell their previous house because they just couldn’t afford the adjustable rate mortgage anymore.

    Good for you guys for taking steps to get out now!

  10. I’m almost 27 now, and am still renting! I’ve always been moving around way too much to ever even consider the idea of owning a home. It has always been one of those “I can’t wait to one day be in the place in my life where I can finally buy a home and STAY a while.” I’m starting to get impatient, but I also am very cautious with my “steps” in my life and think on things long before acting. Which means, since I’ve been house dreaming a lot lately, we’ll probably buy one in 2-3 years. LOL. Ugh I’ll be so friggin old by then. ;)

  11. It’s so ironic that I stumbled upon this site at 2am in the morning as I’ve been pre-approved for a loan recently and have been looking for a house. In two days I have to resign my lease or be out by mid September and I’ve been stuck with the dilemma of wondering will I really find a house and close that fast or should I give myself another year. I’m 28, single and very flexible with the housing area I choose however I’ve applied to a new job a couple months ago which may put me about 45min-50min away from my current area. After reading what Eric wrote along with everyone’s comments I think I will wait the extra year and definitely put myself in a better position by ensuring I am aware of all home ownership cost. If I bought now I would be putting just about everything I have into acquiring the house and as I’ve been crunching the numbers I would definitely be putting myself in a tight squeeze financially not leaving room for any what if’s. Like Meagan V I’ve been house dreaming and the HGTV network doesn’t help :) but another year will pass in no time. Thanks for the words of Wisdom.

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