For three years Girl Ninja and I worked diligently to build our savings account up to $100,000. If you didn’t know, we picked $100,000 for two reasons. First, it sounded super sexy. Second, it would give us the ability to put 20% down on a home priced up to $400,000 (leaving $10,000 for closing costs/furniture and $10,000 for our emergency fund).
By April 2013 we hit our $100,000 savings goal. Two months later we put in our first, and only, offer which resulted in us buying our current $350,000 house. We locked in at a 4.125% interest rate, have a reasonable PITI payment, and a renter that pays us $400/mo to live in our basement.
Being responsible came with the following benefits:
- We don’t have to pay private mortgage insurance
- It made our offer very competitive since sellers like cash
- We had immediate equity in our house the day we moved in.
That said, I’m not convinced responsibility is necessarily the best choice. What would have happened if we started our house hunt when we would have had less than a 20% down payment?
We could have taken advantage of what pretty much everyone knew were the lowest interest rates we’d ever see. Somewhere around 3.3%. Instead, we locked in at 4.125% which means we pay $120/mo more in interest than some of our friends who bought in 2012.
We could have taken advantage of better inventory. By August 2011, we had $50,000 banked. Had we started looking then we would have had 4 months of inventory to pick from. When we actually started looking in early 2013, there was only 1.5 months of inventory. Meaning we had a SIGNIFICANTLY smaller selection of homes to pick from. Which in turn meant every home that we did look at went for OVER asking and had multiple offers on it (including the home we bought).
We could have taken advantage of lower prices. Between 2011 and 2013 prices jumped 10%+. This means we could have gotten a $350,000 for about $315,000 back in 2011. Normally calling the bottom of a market is pretty sketchy, but just about every one and their mother knew in late 2011 early 2012 we were virtually bottomed out.
So as you can see, being responsible is not always the responsible thing to do. In our case, it’s literally costed us tens of thousands of dollars.
Long story short: Being irresponsible isn’t always a bad thing.