Project: Home Ownership Explained

“Unfair Mom”, my super-hero alter-ego has always been an independent, successful woman, living in a 3 bedroom house with a nice yard.

Real-life “Michelle” has been raising her daughter in an apartment for almost 9 years now. What was supposed to be a short-term housing solution has lasted far too long.

Apartment Living

Don’t get me wrong. There are some nice things about living in an apartment. It is affordable. Our landlords take good care of the property. Add some good neighbors and it can be downright amazing.

Then there are times when you have .. not so good neighbors. The ones who hang pictures or play loud music at 2AM. The ones who leave the parking lot so fast you are almost afraid to let your kids set foot outside the door without holding your hand. The ones who block the parking lot by leaving their vehicle in the “no parking” zone. The ones who smoke so much that it seeps into your home or they cook such a smelly dinner that it makes you gag. And then there are the neighbors who are down-right creepy. Add some rules against washing machines and pets, and apartment living can be pretty inconvenient at times.

Things are actually going pretty good at my apartment right now. But it is time to move on.

Step 1: Research … January 2015

My first big step toward home ownership is to research funding options that are relevant to my situation, living in a small town with a part-time job.

• USDA Direct Home Loans are for individuals with a low or very low income. There is no down payment and the interest rate can be subsidized down to 1%. This subsidy does eventually have to be repaid.
• USDA Guaranteed Home Loans are for individuals with a low or moderate income. There is no down payment. The USDA guarantees a certain percentage of the loan, allowing banks to give you a decent interest rate with minimal risk on their part.
• FHA loans require a smaller down payment than traditional loans.

You can read more about these options on my post: Mortgage Options – How do I get a home loan with no downpayment?

Step 2: Game Plan … Mid-February 2015

Once I know which funding options are the closest fit for me, I can adjust my spending to put myself in the best position to ask for a loan. Specifically, how much money should I put toward paying off debts, which debts should I pay off first, and how much needs to be saved for up-front home ownership costs?

Normally I just apply my income tax return and any other extra money toward my highest interest debt. But when we are talking home ownership, debt-to-income ratios and how much money you have in savings matter.

Step 3: Pre-Approval … Late February 2015

I filled out a pre-approval worksheet for a USDA Direct loan in late February, to get a more accurate idea of where I stand and what changes need to be made to my financial situation.

Step 4: Back to the game plan

Now that I have a more realistic idea of what I do qualify for and a more realistic idea of what I can qualify for if I am patient, it is time to focus on paying off the debts that are holding me back.

Step 5: Looking for that dream home … April 2015

Before you can find your dream home, you need to know what that dream home will consist of. For me, some of the important factors were:

• 650-1200 sq ft with 2-4 bedrooms. If the house is on the smaller side of that range, it will need to be designed in a way that I can add rooms if my family grows.
• Kid and pet friendly, meaning it needs to have a “decent” size fenced in yard and not be on a major street.
• Energy efficient, preferably with central heat/air and ceiling fans.
• Doors and windows need to be easy to use because of my arthritis.
• Walking distance to work.
• “Nice” neighborhood. (quiet, low crime, non-creepy neighbors)
• Bonus points if neighborhood is easily accessible from places that teens may gather. I don’t want my daughter and her friends crossing major streets or questionable neighborhoods after church or a football game.
• Bonus points for covered parking! My current car has severe sun damage. I hope to take better care of my next car.
• And of course it will need to be in a price range that I can afford 🙂

With this list in mind, I spoke to my realtor and downloaded an app to my phone that will tell me when homes meeting some of these requirements become available.

My realtor immediately sent me to 850 sq ft, 2 bedroom, $55,000 house they were about to put on the market. This house was near perfect for my family. But it did not have a bath tub and it did not have room to add a bath tub. True, I take a shower 99% of the time. But when I want to soak in the tub I want to soak in the tub! And years from now, I think it will be much easier to bathe my grandchildren in a tub than it will be to hold a slippery little one still in the shower.

Step 6: Let the dream home find me! … July 2015

After spending $2,000 on car repairs and watching three houses I was interested in go off the market, I decided to put the house hunting on hold.

A few weeks later something amazing happened. I was visiting my grandmother when a lady approached me to say that her house is for sale if I know anybody who is looking. … Hello. I am looking!!

She wants a few thousand more than I can afford. But I have liked this house since I was 7 years old. So I contacted a handful of lenders (including the USDA Direct, USDA Guaranteed, and FHA programs mentioned above) and am seeing if we can work something out.