I bought my house back in the summer of 2004. At the time, I was pretty naive concerning all aspects of finance. Even though I knew the decision of buying a house is a good investment in the long run, I made several mistakes as a first time home buyer.
My top mistakes as a first-timer homebuyer:
- Not looking for the best rate
- Not knowing my credit score or history
- Went with 100% financing on a 30 years loan
- Got a house that is not proportional to my income
- Long term effects of having a house
In hindsight, there were things I wish I could have done differently. Looking for better rate should be the top priority. There were many different rates online that were much better. At the time, the mortgage rate was the lowest in history. I got 6.125% fixed rate for a 30 years loan with Countrywide. There were also a few dents on my credit history that needed to be fixed before making a major purchase. By doing so in advance, I could have had a much better rate with my loan. Being 24 years old at the time, I didn’t know the effect of financing 100% of my loan. My thinking was all about “I need to buy a house now, and I’m sicken tired of living in an apartment” in a state of mind. There were adverse affects such as paying for a PMI, paying property tax in advance, and a 30 years term.
Luckily, with the help of my parents. I refinanced my house later the following year. I put 20% down, hence I no longer pay the PMI. Instead of a 30 years term, I went with 15 years with paying the taxes at the end of the year. The monthly payment came down to $983 a month (*not including property taxes) from $1485 earlier (*with property taxes included). The rate came down to 5.125%. If you add in the current property tax, it would have been the same monthly payment.
Even with the better terms, I was living paycheck to paycheck due to the burden of owning a home. I don’t know if I would change my mind on purchasing a home thinking back. Having a house with a secured job, I feel complacent. Maybe if it weren’t for this house, I might have gone to Law school.
However, there are the intangible benefits of owning a home such a sense of ownership, taking care of one’s house, and the spacious space it provided. One thing I know for sure, it would have been much better with two incomes instead 😉
Good for you Hu$tler. A 15-year mortgage is fantastic, especially for your age. I always thought homes are better for couples than for singles. I would have probaly still be renting if I was not married.
I plan to also do a 15 year mortgage on my next home.