Wednesday, May 14, 2014

Detour to the Express Lane

June will mark the official end of my first year working my three-year plan. When I look at the goals I set for myself I'm pleased at how well I did during year one, despite more than a few complications along the way.

Year one was challenging for a variety of reasons, but the biggest one was the kids didn't move out with their mom as originally planned last August. Instead, their mom moved in with us. It was great for the kids and I'm glad it worked out this way, for their sake, but it really put a wrench in the works as far as my plan to move to a cheaper apartment went. Not only did I not reduce the amount of rent I was paying, not moving meant another winter grappling with a huge heating bill; I spent nearly $3,500 on heating oil and electricity in only four months.

Even though things didn't go as planned with the living situation, I thought I still had time to catch up. After all, my three year plan had two more years left to go. That is, until a chat with a local realtor revealed that housing prices were finally starting to rise. She showed me what was available around here in my price range, which turned out to be exactly nothing.

After digesting that information I decided it was time to move on to "Plan B," which is to buy a home in Florida where the cost of housing is more reasonable. That might sound a little drastic, but I have family there and know the area well. But there was a problem with "Plan B," too. Inventory in my price range was moving fast and prices were rising.

The problem wasn't just the slow speed of building up my credit rating or saving for a down payment. The bigger issue is I'm a single home buyer with a modest income. Even if I save for two more years and have stellar credit, the maximum amount I can spend on a house isn't going to change much.

The reason for this is something called a debt to income ratio, which a lender uses to calculate how much house an applicant can reasonably afford. Lenders look for the debt to income ratio to be below 28% of the applicant's gross monthly income. When I do the calculations for myself, I can afford a monthly mortgage payment of no more than $950. In other words, my maximum price range is about $125,000 for a single family home, or $90,000 for a condo (HOA fees count as part of the monthly maximum payment).

The writing was on the wall: if I stuck to my three year timeline, it was very likely that I'd find myself priced out of the market by the time I was ready to buy.

Talk about a majorly depressing revelation.

Things get even more depressing when you consider I'm currently paying $1,525 in rent every month, an expense which will only continue to rise over time. My best strategy to reduce my housing costs and break out of the hand-to-mouth lifestyle (or the Slow Lane, as I like to call it) was still buying a home of my own, but could I pull it off given this new information?

I considered giving up, I really did. The thought of trying to come up with the additional down payment funds I need before the end of the year was daunting, to say the least. I wasn't sure I could pull it off. But something kept niggling at me and wouldn't let me quit. It was the fact that the only reason I could think of not to try was fear. Fear of failure, fear of looking like an idiot, fear of asking for help, fear of rejection.

I've never let fear stop me before, and I don't plan on starting now. It is time to shift gears and get serious about purchasing a home as soon as possible, before my narrow window of opportunity closes for good.

So put your seat belts on because we're about to merge into the fast lane, ready or not!

Watch for my next blog post, where I'll lay out my plan for beefing up my down payment on an expedited timeline.

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