Neefer Sews, Crochets, Crafts, Swims, and Blathers about Kids

Acorns to Oaktrees

December 7th, 2001 at 3:20 pm

Real Estate

in: General

You can buy a house with only $20k in cash. I did, and I did it in the SF bay area in 1993. That $20k paid for everything, not just the down payment. I decided that we could do it with 5% down, but both of us are working and the payments really weren’t an issue.

We paid mortgage insurance for several years, but I figured that was a better deal than paying rent for several years. We also did it at a time when the interest rates were low; that was the real motivator. I didn’t see a time when we would have more than that 5% down with the way house prices keep going up around here. So even if we saved, we wouldn’t have been able to get rid of the PMI.

We have put in over 100k in improvements to the house, but it has paid off for us because our house ($205k + $10k fees (I think – it was a while ago) + $100k << $451k our last appraisal so that we could refinance at the latest low in interest rates) is now worth a lot.

However, that isn’t why I did it like that. I figured that if we stretched to get as much as we could where I wanted and diligently paid off the loan, in the end, even if we only made small strides in gaining equity, we would still have those gains in equity. A kind of enforced saving program. For a while, it didn’t look good because the value of our house dropped for the first several years that we owned it.

If you think that the housing market will be growing in your area during the timespan you plan on being in the new house, I think it is totally worth it to stretch yourselves and buy.

Of course, I also know several people who did that and sold their houses (leaving CA and divorce were the common reasons) right after we bought ours. They lost money. Timing is everything, but very few land purchases lose money over the long (decades long) haul.

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