We are just WEEKS away from moving into our new home, and I am over the moon. We close on our current home next week and will prorate rent it from the owners (who happen to also be some of our BFFs hehe) until we get the keys to our new place. To be honest, this transition couldn’t be easier and I know it won’t always be the case if or when we ever move in the future, but dang I am thankful. It’s been so fun walking this building journey together, and I wanted to put the most asked questions here about it for a reference sheet in the future if ever you build.
I wrote about picking your builder and location here a while back. Today I wanted to focus a bit more on the logistics and financial side of it all! Of course, there are many different avenues in which you can buy and build, so do note as you read that this is just one of many. We are buying with an FHA and closing in advance on our current home sell so we don’t have any looming contingency clauses of any kind. Those aren’t bad by any means, but since we could sell to our friends with such flexibility it REALLY made this all so much better. If a seller is flexible, you can ask about a contingency as well for in between buying/selling. Often times, people will do a contingency with 60 days if they put an offer on a home but need to sell their current one to be able to actually purchase the home. For us, we are stoked that we can pay off our current home loan, have our equity sitting in our account and pull the trigger the moment our builder tells us the home is ready for us to move in.
What did you have to put down? We had to put down 3.5% of the home as our earnest money. Your earnest money is essentially a down payment that you can’t get back if you back out of the build at any point. It’s securing your home and tells the builder you are serious about building. Fully custom builds require more down because it’s more customized and in theory tougher to sell if you were to back out of your contract. Make sense? The best part about it all though is we paid our earnest money (and over 3 months, which we totally didn’t expect the option for!), and instead of having a check written to us at closing of that amount, we are opting for it to transfer to the builder as our down payment. So when you buy an already built home, you need your down payment AND closing costs all at once. But, since we’ve really already paid our downpayment, we’ve had this entire year to put money away for our closing costs *which is far less than the down payment.* You tracking?
How did you save up for the home? We have been on a financial journey for a couple of years, and it’s actually been fun to be honest. I like to say we’ve been doing the Dave Ramsey-ish plan with virtual envelopes. Paul is far more educated on all things Dave Ramsey than I am. But, I took the envelope system and ran with it. You can read about our banking system here. It always has felt odd to me to talk about money, but I genuinely have learned I love it and have enjoyed helping my friends reach their own goals. This post about our banking hack has been one of my most read and asked for posts ever. I believe that says SO MUCH about you and this community – we mean business with our finances! So even though it feels taboo to talk about it, I have learned talking about money is really helpful for us. So, top thing, the banking hack has been HUGE for us. In addition to that, we started paying massive payments toward debt (appliances we’ve purchased/medical bills/cars/etc). This has freed up our monthly income as well as heavily spiking our credit scores. For the first time in my life, I have a credit score over 700 and I feel like I can take on the world hehe. To reach our goals, we’ve been living entirely on one income as best we can for over a year and putting all surplus into our savings.
So… I have a savings… now what? TBH this part is hard for me and where Paul is smarter. If it were up to me, I would keep my savings account untouched and save it for a rainy day. BUT, there are far wiser things to do with it.
We have had money off and on in stocks, and it’s been a huge help as we’ve prepared for buying our new home. We basically start with a number and continue to invest that amount, sending the surplus to us as an income. Though we have chosen not to has investments running for a while due to the state of the market/world, we will be starting this back up once we move with some of the money we have saved up. Paul trades with MT Options.
Paul has a plan in place for us *with Dave Ramsey* to do what he calls the Debt Snowball. We have really big plans for our savings to put toward debts like paying off cars and school in the next 3-5 years. Ultimately, putting what we’ve saved toward those assets and debts will free us up from monthly payments early in life and be essentially worth more than owe. Two years ago, I would have thought the idea of paying off a car in two years sounded like insanity… now, it’s very digestible to think about when you follow the plan. *But… trust me, I would be lying if I didn’t challenge Paul on it multiple times a week because it DOES feel scary to pay such large amounts* But, honestly, it’s just true… Dave Ramsey is onto something. Our whole life shouldn’t be paying debt… It should feel weird that our society has made it so normal to live in debt and on payment plans.
Our NEXT big goal that I am dreaming about *and I mean dreaming, hehe* is to start property investments! We will see… it’s a very early stage thought. But, my BFF and I have some plans 😉
I hope this helps you navigate your own finances! What are your goals? Write them out and start taking steps TODAY toward them.