FREE NEWSLETTER
WITH MY OFFER OF $375,000 accepted, I was faced with coming up with $80,000 to cover my 20% down payment and other closing costs. I had additional expenses as well: There was a home inspection, radon test and sewer assessment that all had to be paid for. And because I’d be breaking the lease on my apartment, I would also need an additional $1,800 for that.
Coming up with the first $50,000 was easy. Six years ago, when I got divorced, I walked away with nearly $50,000 from the sale of our home. I invested the money conservatively, because I assumed I’d use it to buy another house one day. I had put $30,000 in inflation-indexed bonds and kept $20,000 in my credit union money-market account.
I had an additional $15,000 in a savings account, but I didn’t want to put all of it toward the down payment. I’ve always had some type of emergency fund and wanted to maintain at least a $5,000 balance to cover any unexpected costs with my new home.
For the remainder of the money, I turned to my investments. In the six years I’d been renting, I had managed to save a large amount of money, which I’d invested in a variety of ways. I had contributed to a Roth IRA every year. I’d also set aside money in a Vanguard brokerage account, where it was invested in a growth stock mutual fund. In addition, I’d been contributing several thousand dollars a year to my pretax retirement account at work.
In deciding which accounts to liquidate, I went first to the Vanguard brokerage account. I’d initially earmarked the money for a future car purchase, but I was willing to use it for the house purchase instead. My 11-year-old Honda CRV has just 104,000 miles on it, so I feel confident it’ll get me through several more years of commuting before I need to replace it.
Next, I withdrew funds from my Roth IRA. But I was careful to take out only the money I’d put in as contributions, leaving all the earnings in the account, so I wouldn’t have to pay any penalties or taxes on the money. I wasn’t excited about tapping my retirement accounts. But because the Roth represented a very small percentage of my overall retirement nest egg, I felt it was a legitimate use of the money.
To pay for the inspections, lease-breaking fee and various costs associated with moving, I temporarily suspended contributions to my employer-based retirement accounts. That increased my net pay enough to cover those expenses.
Will my decision to buy a house pay off financially? I hope so. My mortgage payment is higher than what I was paying in rent, but the pride of homeownership easily compensates. I’d love to see Portland’s home values increase at the same rate as Seattle’s. Between 2012 and 2018, the median sales price for a home in Seattle increased an astonishing 93%. If the same thing happened in Portland, my humble ranch house could be worth $700,000 by the time I’m ready to retire.
For now, I enjoy the endless little projects that need to be done and I spend countless hours contemplating how best to upgrade the house without breaking the bank. Whether I ultimately make a profit on my house or not, I’m simply happier being a homeowner again.
Kristine Hayes is a departmental manager at a small, liberal arts college. This is the final article in Kristine’s series about her recent home purchase. The previous installments were Heading Home (I), (II), (III) and (IV).
Want to receive our weekly newsletter? Sign up now. How about our daily alert about the site's latest posts? Join the list.
What term for the loan? 15, 30, other?
I opted for a 30-year fixed rate.
My wife and I also had the problem of not being able to find the money for a down payment for a house in Honolulu. So we continued to rent until our 50s. With retirement looming and our rent going up, we were getting desperate. We decided to buy a older house out the sticks and to spend all our savings, $250K, on a down payment. We still needed a $90K 10 year mortgage.
That was a lean 10 years, but we did finally get it paid off. It has worked out well for us.