So last month I told you about how I made it out of the University with a Bachelor’s Degree with almost no debt, and how to graduate debt free. Yesterday I told you about how I became a home owner and landlord at age 19. You probably think I’m great at making financial decisions. Well, I’m much wiser now than when I bought that damn house. (Warning: You may experience multiple *headdesk* and/or *facepalm* moments while reading this post. Continue at your own risk.)
After my freshman year in college I decided it was time for me to move out. So I figured the best financial decision was to buy a house. Because why throw away money paying rent? I shouldn’t throw my money away, instead I should invest* it in real estate. I will be putting my money towards home equity! Brilliant!
So as a naive teenager I set out to buy a house. I loved the 2nd house I toured. And it was in my budget** (barely). I was overcome with excitement and emotion. Which is the exact wrong condition to make the biggest financial decision of my life and foreseeable future. But I was young and
dumb inexperienced. I put in an offer and entered contract. Yes. I bought the 2nd house I looked at.
I thought that buying a house was like declaring my freedom. We settled on the house just 1 month from the date I put in my offer. Wow. The summer of 2007 I became a home owner.
It was the biggest mistake I have made in my life so far.
Recently I have become very interested in personal finance, investing, and saving for retirement. I figured out “my number” – the amount of money I believe I’ll need in order to be financially independent. Then I loaded all my assets and liabilities into mint.com. And to my dismay, my net worth is very negative. How? I don’t have any student loans, car loans, or credit card debt!? Well, because the value of my house has been steadily falling since the day I bought it.
I purchased in 2007 at $136,000 and now it’s worth about $72,405***. I’ve lost over $60k on my house; It’s worth 47% less than when I bought it! Like a clearance, my house is marked down – 47% off! Any way you slice it, It SUCKS.
A Little Relief
Well back in the fall of 2011, I knew I had to do something about my payments and interest level. I had never missed a payment and my loan was not backed by Fannie Mae or Freddie Mac, so I didn’t qualify for a break. I took the FHA Streamline Refinance which didn’t require an appraisal (because I was under water on the house). So I refinanced at 4.5%, loan balance of $130,795. What I did not fix was the fact that I still have to pay Private Mortgage Insurance. 🙁
Today I owe a remaining principal balance of $123,258.38. That’s significantly more than what it’s worth. That’s really bad. Yep, I’m currently $50,853.38 under water. Heck, I’m fucking drowning! If I sold it today I would have to come to the table with $50k! So basically I am completely chained to this house until I can get my head above water, sell the damn thing, and swim to shore. Until then, my net worth is negative and I can’t even fathom financial independence.
So as you see, home ownership is not rainbows and butterflies. It’s not necessarily a responsible financial decision. In fact, for many people right now it just plain sucks. There are a lot of people out there in the same situation as me. I hope that my posts about my house situation will help others who are dealing with this and help me connect with those people. Maybe someone will have a brilliant tidbit of information to help me out? Hey, a girl can dream.
* Buying a home to live in as a primary residence is not an “investment.” It’s hard to categorize. It’s a necessity, a holding tank for your money which will hopefully keep with inflation, a risk, a liability, and an asset.
** My budget was bullshit. 1. I should have had 20% downpayment saved up before even shopping. 2. The banks were handing out mortgage loans like candy – a 19 year old with a part time job should never be approved to buy a home, EVEN despite my dad cosigning.
*** According to Zillow. I’m having a Comparative Market Analysis done, so I’ll update you when I get an estimate from a Real Estate Agent.