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Heading Home (II)

Kristine Hayes  |  October 4, 2018

WHEN I FINALLY made the decision to apply for a mortgage, time was of the essence. Mortgage rates were rising daily and I wanted to lock in a reasonable rate as quickly as I could.

Luckily, I’m one of those people who pride themselves on being well-organized. The loan officer at my credit union sent me a lengthy list of financial documents I would need to provide before she could begin processing my loan application. Having online access to my financial accounts, and digital copies of my tax returns, made the whole process easy. I was able to upload all my documentation to the credit union website within an hour of the request.

A couple of days later, I got a text from my loan officer. I nearly choked when I read the message. She told me I’d qualified for a $403,000 loan, with as little as a 5% down payment. I’d been going on the assumption I’d qualify for no more than a $200,000 loan and was figuring my overall house-buying budget would be no more than $250,000.

In hindsight, I probably shouldn’t have been surprised. I have no debt, a credit score that’s labeled “excellent” and more than $300,000 in my retirement accounts. With about $80,000 in liquid assets that I could use toward a down payment—and a $403,000 loan—I realized I could purchase a house costing nearly half-a-million dollars. But since I make just $71,000 a year, taking out a loan that large seemed ill-advised. Between the mortgage payment, property taxes and insurance, well over 50% of my take-home income would be going toward housing.

In looking at my loan options, and what my monthly payment would be, I ultimately decided to look at homes in the $380,000 range. At that price, I could afford a 20% down payment—thereby eliminating the need for private mortgage insurance—and still be able to find a house in a neighborhood that would allow me a reasonable commute. My monthly payment would be higher than what I was paying in rent, meaning I could put far less money into my retirement accounts than I had been. But it was a tradeoff I was willing to make to have a place of my own to call home.

Kristine Hayes is a departmental manager at a small, liberal arts college. This is the second in a series of articles about her recent home purchase. Her previous blogs include Heading Home (I)Happy Ending and Material Girl.

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