Our Experience Buying Our House

Wow.  I can’t believe it’s been almost three years since we moved into our current house.  Those three years have gone by quickly.  I’ve been meaning to write about our experience with the whole house-buying situation, but haven’t done it until now.

We walked through around 50 houses before we finally decided on the one we ended up purchasing, and it was a valuable lesson.  We learned a lot about the different quality of houses out there, and what to look for when buying a house.  We saw a lot of different types of houses in our price range, and finally found one that we saw ourselves in.  We didn’t do everything right, either, and I’d like to share our experience with you.

First of all, we had a house we lived in, but it was too small for us to raise a family.  We were planning on having kids in just a few years (which we ended up with 2 in 3 years), so we wanted to find something big enough for all of us before that happened.

I was on a mailing list for houses that fit my criteria from before we bought our old house.  I could change the criteria, so I adjusted it as time went on.  Every once in a while we’d see a house we wanted to walk through, so we called up the real estate agent to take a look at the house.  We told her up front that we weren’t looking (some of the houses we looked at were just a year after we bought our other house), but we were just trying to get an idea of what was out there so we would be better prepared when we eventually decided to move.  We also kept an eye out for houses on online sites, such as zillow.com and realtor.com.  We weren’t actively looking, but just monitoring the market and seeing what sort of houses we could see ourselves in for the long haul.

So we finally found a house we liked, but weren’t ready to buy yet.  Six months went by with us actively looking, and the house was still our favorite (and still available).  It was a spec home (one that was built from the builder with what they thought others might like), but it was a slow market.  The house had a great flow to the design, was structurally sound, and had some detailed work we didn’t find in the same price range.  So after 6 months, we came back to the house and decided we wanted to buy it.

Unfortunately, we didn’t have a down payment saved up.  We were planning on selling our house and using the equity for the down payment, but couldn’t sell it in the end.  Looking back, we should have put a contingency on the new house, but we were set on that house (another mistake).  I ended up not using a real estate agent for the purchase, and did my own competitive analysis from looking at what houses fit the criteria in the area that recently sold.  That info is all public knowledge, so it was easy to do.  I adjusted things based on the differences between the houses that sold and the house we were purchasing, and ended up with a pretty detailed explanation of facts backing up my negotiating tactics.  Based on my research (and lack of the builder needing to pay a buyer’s real estate agent), we got a great deal on it.  We couldn’t have built it at the price we bought it, so we wanted to move forward.

We found out we could do an FHA that would have good rates, and we would only have to put down 3.5% of the loan amount.  So we went that route.  I looked on a reputable site (bankrate.com) to find the cheapest loan agent I could find, and went with them.  Since we found renters to move into our place, I told them my #1 priority was that they close on a specific date. They told me that would be no problem.

The company was Interbank Lending. I’ll keep it short and say to stay away from them at all costs.  They were unethical, lied to me, and couldn’t end up hitting the date because they dragged their feet throughout the whole process.  Two days before my closing date, they told me everything was going to be fine, and they would have no problem closing on that date.  The morning of my closing, I had three trailers all loaded up and ready to go after we go sign the paperwork, and they called me up to tell me they wouldn’t be able to close that day, and they had no idea when they would be able to get the paperwork ready to close.  They weren’t sure if it would be a few days, or a few weeks, or even over a month!  Oh, and now they were telling me I needed 10% down because it’s new construction (which I told them in the very beginning it was).  Ugh!

Ok, that’s the short version.  I won’t go into all the detail about how terrible of a company they are.  Luckily, I have had some great experiences with a local mortgage broker.  Throughout this process, I told him I was going to try the other company out because their rates were cheaper.  I called him up on the day of my closing, and explained the situation to him.  He said there is a mandatory 10 day waiting period to transfer an existing loan from one company to another, but he could close in those 10 days.  The builder of the house was awesome, and said we could rent it out from him for those 10 days, so we’d have a place to stay.  So I told the mortgage broker I trusted to take over the loan.

So we moved into the house before we actually bought it.  It all ended up working out in the end, with the exception of us not having 20% down for the down payment.  Now I’m kicking myself for that because our monthly mortgage payment on a 15 year fixed loan (you should never go with anything higher than 15 years, and ALWAYS do a fixed loan) is much higher than it should be.

We should have saved up the 20% on our own, put a contingency on our old house, and gone with a conventional 15 year fixed rate.  Even if you are only planning on staying at a house for 5 years, still get a fixed rate.  You never know how your situation can change as time goes on, and an adjustable rate (or ARM) can really move upwards after the fixed period expires.  For more details on buying a house, read my previous series about it.

It all worked out in the end, but we are paying more per month for 15 years than we should be paying.  It’ll be fine in the long run though.  I hope you can learn from our experience, and hopefully yours will be better than ours.

Think You Need a Truck If You Own Your Home? Think Again!

Ever since I bought my first house, I thought I needed a truck so I could haul items like plywood, drywall, 2X4’s, etc.  In America, you’re brainwashed to think that the only vehicle you can use to haul tools and building supplies is a truck.  Recently, I got smarter with my vehicles.  I traded in my truck for a subcompact Honda Fit, and it is almost just as good as the truck, but gets me 40mpg.  The thing I didn’t realize with vehicles is that you should buy the vehicle for 95% of what you will use it for, instead of the 5% you think you might need.  For that 5%, you can rent a vehicle, and save a ton of money in the process.

I had a third vehicle just to drive back and forth to work, because it was cheaper than driving my 20mpg truck.  The car ended up getting 208k+ miles on it, and started getting to the break even point, even with me doing all the work myself.

So I started doing some research, and found out that I could get a trailer, and hook it up to a subcompact car.  This alone would get me about 95% of the hauling capabilities for which I used my truck.  The only thing I wouldn’t be able to do is pull really heavy items (i.e., camper, boat, etc.).  Since I don’t own a boat or camper, I figured I could do without the truck.

For picking out a subcompact car, I strongly recommend reading the Top 10 Cars for Smart People that Mr. Money Mustache wrote.  It’s an excellent article on this topic, and I followed it when picking out my Fit.  Another great article is how to turn a little car into a big one.  Read those two articles, and you’ll understand why a truck is not only not necessary, but highly inefficient and way too expensive for most people.

I have been averaging 40mpg in my Fit over the first 9 fill-ups, and I would expect that to increase by a couple mpg once the weather warms up.  This past weekend, I even drove it pretty aggressively, and still got 39mpg (by doing some hypermiling when I got up to cruising speeds).  The car handles amazing, probably because it’s so light and small.  I would get the manual transmission though, as the automatic feels really sluggish.  You have a lot more control with a manual, too, which makes it easier to hypermile and get better miles per gallon.  I’ve always loved the feel of a small car much more than a big SUV/truck too.  They are much more fun to drive.

As far as the trailer goes, I looked on Craigslist.  I found the perfect one for me for $500.  This trailer has four solid sides.  It even has a removable, vinyl cover on it to keep everything dry if it rains, along with a huge truck box on the front of it for extra storage.  If I bought a new trailer, it would have cost $500 just for the base part, plus an additional $500-1000 for all the extras.  Craigslist is awesome for this sort of thing.

So now I had a trailer, and just needed to install a hitch on my Fit.  Just this past weekend, I got the hitch and installed it myself.  In case anyone wants to do the same thing, etrailer.com is a great source for this sort of thing.  They have decently-priced parts, and online videos for a lot of different vehicles.  I got this Draw-Tite hitch, along with this wiring, and this 5″ raised bar and ball.  I got the 5″ raised bar because the middle of the ball mount on the trailer I had was 16″ from the ground, and the middle of the hitch receiver was 9″ from the ground (the ball is 2″ to the center).

I also want to get a box for the hitch, so I can have extra hauling capacity without bringing the trailer along.  I’m not sure if I need a roof rack or not just yet. I can see some uses for it, but worry about the drop in mpg when it’s installed.  These are the techniques you can use to make your small car bigger when you need it to be, but still get amazing gas mileage for your normal driving.

So if you think you need a truck just because you own a house and like to do a lot of the work yourself, think again.  I do a lot of work around the house, and this situation will work better than a truck ever could, and save you money in the process.

New Year’s Goals – Progress Update – One Month

How is it February already?  Anyway, here’s an update on my 2013 New Year’s Goals:

1) Reduce debt by 68.33%.
Target: .43%, Actual: .43%.  No big surprise here.  When I made the goals, I already knew how much I’d have for this month.  The real tests will start next month.  In typical fashion, here’s a graph of my progress so far (you can’t see it, because it’s right over the line):
Screen Shot 2013-02-04 at 9.49.32 PM

2) Run a 5k.
I’m hoping I can complete this by the fall.  Haven’t started yet.

3) Complete a bike race.
Haven’t started this yet.  It’ll come once it warms up outside.

Perform Your Own Home Energy Audit

I was in Home Depot this past weekend, and got asked if I wanted to have a free home energy audit done.  My house is only 3 years old, and I have done some stuff over the past year to make it more energy efficient, but I’ve always wanted to have an energy audit done, so I said yes.

I’ve done a lot of research over the past couple of years to try to make our home as energy efficient as possible.  I haven’t done all the work necessary, but I have found a lot of areas where we could improve.  I was expecting the guy from Home Depot to show up with a heat camera and a cover for an open doorway with a fan.  I expected him to find the cold spots (since it was about 20 degrees outside) with the camera, and offer ideas on how to fix them.

I was wrong.  In fact, he showed up with a flashlight as his only tool.  He walked through the front door, and his first words were “Why am I here?”  He said that since the house was new, it had to adhere to all sorts of requirements that make it energy efficient.  I was shocked (but I did really try to limit my expectations since it was free and from Home Depot).  So I started asking him all sorts of questions regarding things that I found during my own research.

It turns out that I actually knew more about home efficiency than he did.  He was just there to check the basics (basically, he asked about the insulation in the attic and if we had double pane windows).  He even had a paper checklist of everything they check, and didn’t know a whole lot outside of that.  When I asked him some specific questions, his “expert” opinion didn’t line up with the research I did on my own prior to his visit.

So I thought I’d write up a little post on a basic checklist to do your own home energy audit.  If you cover these 9 things, you’ll end up having a more energy-efficient home than most people.

1) Check your attic insulation.  This is the most important thing you can do to cut down on energy costs, and it’s relatively cheap and easy to do yourself, with a little knowledge.  To find out how much insulation you need, look at the Ceiling R-Value on http://energycode.pnl.gov/EnergyCodeReqs/.  In my area, I need R38.   Use the following formula to determine how much insulation you should have in your attic:

Blown in fiberglass: R value (i.e., 38) / 2.7
Batts (or blankets): R value (i.e., 38) / 3.33

Now that you know how much insulation you should have in your attic, go measure what you actually have.  If you don’t have enough, add more until you get to at least the appropriate thickness.

My recommendation is to get the recycled newspaper blown-in insulation.  It’s super easy to install, and it’s cheap compared to the batts.  You just blow it in with a machine you can rent.  Most places even rent the machine for free with a minimum insulation purchase amount, which you will most likely need anyway.  The recycled newspaper doesn’t itch if it gets on your skin, and insulates at a better R-value per square inch (3.6 compared to 2.7), so you need less of it to fill in the gaps.  I did not include the newspaper calculation above because if you didn’t add your own insulation, you most likely have the fiberglass.

2) Check your window types.  If you have old, single-pane windows, you can probably feel a draft coming through them on cold days.  Replace them with energy efficient double or triple pane windows.  Make sure you get energy star windows when purchasing, and you should be good to go. Unfortunately, you probably won’t be able to do this one yourself, and it will cost you some serious money to replace all the windows in your house.  But if you have single pane windows, replacing them will save you a lot of money you’re paying to heat the outside in the winter, and cool the outdoors in the summer.  A lot of energy goes right through single pane windows, so you will recoup the cost of them in just a few years.  If you don’t want to spend the money on new windows, add storm windows to the outside of your windows.  That will essentially turn your single pane window into a double pane for the winter months, and you can take the storm windows off during the months where you open your windows.

3) Check the seals around your windows.  On a cold, windy day, check around all the corners where your windows touch your walls on the inside of your house.  If you feel cold air coming in from where your windows meet your walls, you should run a bead of caulk around the entire window.  That alone should stop most of the draft from coming through, and is really cheap to do (a tube of caulk is around $2, and you can get a caulk gun for not much more than that if you don’t own one already).  My tips to you regarding this is to use clear silicone caulk, and tape around both sides so you get a nice straight finish.  I also use a tool such as this one to give you a nice, smooth finish.

If you get air leaking through the window portion itself, you might have to replace the window.  You could try adding storm windows as mentioned in the previous point, if you don’t want to spend the money on new windows.

4) Seal all areas where items go into your house.  Go outside, and look at where everything comes into your home (electricity, exterior outlets, air conditioner, hose bibs, etc.).  Go inside your house, and find where each section goes inside (if you have a basement, this will be where your rim joists are).  If there’s a small gap, caulk around it.  If it’s a larger gap, get some Great Stuff (basically expanding foam) and spray it all around the holes.  The Great Stuff will expand to cover a larger area.  Just make sure you get all the holes completely covered.  These open holes are an easy target for outside air to come right into your house without any protection from the outside elements.  My house was brand new when we moved in, and I saw some gaping holes where I could see items outside!  And the overall construction was much better on our house than any other we looked at in our price range. So any house can have major holes in this area.  Sealing them up will save you some money, and drastically reduce drafts in those areas of your house.

5) Insulate your rim joists in basement.  If you have a basement, check your rim joists.  To get a proper seal, you should not use batt insulation in these areas.  Get some 2″ rigid foam, cut them to fit in between each section on your rim joist, and caulk around each edge.  This will take some time, but it’ll give your house a nice, tight seal in an area that typically leaks a lot of air.  If you have batt insulation, I’d recommend removing it and replacing it with rigid foam.  For some more detailed instructions on how to do this yourself, visit this site.

6) Insulate outlets.  On a cold winter day, put your hand on an outlet that’s on an exterior wall.  If you feel cold air, you should insulate those.  You can find special outlet insulation at any local hardware store for a really cheap price.  You simply unscrew the faceplate, put the insulation cutout on, and screw the faceplate back on.

7) Insulate around exterior doors.  On a cold winter day, check for air leaks around your exterior doors.  If you feel air coming through the sides and/or top, a quick and cheap fix is to get some door insulation.  For detailed instructions, read this.  If you feel air coming from under the door, add a door threshold to the bottom of your existing frame.  For details on that, read this.  If you do that and still get cold air coming in, install a storm door.  That will get you a little better insulation as well.  An added benefit of a storm door is that you can open your main door and let a breeze through on nice days as well, reducing your heating and cooling costs on those days as well.

8) Change your furnace filter every 3 months.  This one is super easy, but needs to be done frequently.  Modern furnaces are designed to work very efficiently, but that can only happen if they get enough airflow through the system.  If you don’t change your furnace filter, dirt and dust build up, which restricts the air flow that goes through your furnace.  This will lead to your furnace working much harder, and making your house colder in the winter.  I just buy an entire case of 3M filters online at a cheaper price than you can get in the store, and keep them right next to my furnace.  I write the date I installed the filter with a permanent marker right on the filter when I put it in the furnace.  I have a recurring reminder on my phone to remind me to change my filter every three months.  That works really well for me.

9) Replace all your incandescent bulbs.  Incandescent bulbs take up a lot of energy.  If you want to make the most difference, replace bulbs with LED.  If you get the right kind, it can put out the same brightness and type of light as an incandescent.  LED bulbs can be a lot more expensive, but they are designed to last 20+ years.  They also use about 1/50th of the energy of an incandescent, so you will easily recoup the cost, assuming you want to pay the up front cost of an LED (and can find one that fits each place you are replacing).

If that doesn’t work, or you don’t want to put up as much money up front, at least replace all your bulbs with CFL bulbs.  They still use less than half the amount of electricity of incandescent, put out the same light, and aren’t much more expensive.  If you are replacing a standard 60 watt bulb, you can find CFLs online for 50 cents a piece.

If you follow the 9 techniques above, you will make your home much more energy efficient, and should recoup most of the cost pretty quickly.  It’ll save you money in the long run.