Episode 125: Your Housing Budget – Volume 2

SUMMARY KEYWORDS

budget, house, housing, dave ramsey, money, month, mortgage payment, afford, hear, homeowners insurance, buy, home, bills, car payment, payment, buyers, spouses, pay, talking, mortgage

Welcome to the MilHousing Nation Podcast where we bring you stories from real military spouses who have been in your shoes, from New spouses to veteran spouses. You’ll get tips, tricks and actionable steps that can help you along your military life journey. Hey, veteran homeowner, have you heard about interest rates dropping? Have you been getting enough mailers to fill a cargo plane? Well throw that stuff away and call the VA Home pros at Aligned Mortgage they will analyze your personal situation and figure out if refinancing is the best option for you ignore the sales pitch and get the facts aligned mortgage veteran owned veteran operated.

**** READER BEWARE: This is an auto transcription and will contain grammar errors and typos. Rather than strive to be perfect, we’re focusing on getting you readable content (that a machine transcribed for us). Connect with us on social (no machines there) at https://www.facebook.com/MilHousingNetwork. ****

Listen on Soundcloud:  https://bit.ly/3g3PILL

Watch on YouTube: https://youtu.be/Z6y3ICkXMeQ

Listen on Apple Podcast: https://tinyurl.com/MilHousingPodcast

Now here’s Ashley Peebles.

Welcome everyone to the MilHousing Nation Podcast. My name is Ashley peoples. And I am so thankful that you are with us this week. So we are going to be doing a series on your housing budget. It started last month, when we interviewed one of our preferred lender partners about housing budgets. But this series is going to get way more interesting to quote my beautiful friend, Miss Katrina gafford. This is what she said she was like, they’re all different kinds of buyers. And they’re all different kinds of budgets. And here are just a few of the ones that she told me. She said, You’ve got everyone from the Dave Ramsey folks, to the cash buyers, to the max out my credit with zero down buyers, the Holy crap, please hold my hand and tell me what I can spend buyers, the please restrain me in my budget buyers, the be the bad guy, for the buyers, and the spreadsheet buyers. So we think this is going to be a really interesting series to dive in, to interview people and to go over really the different ways that you can look at your housing budget, because truthfully, we’ve bought houses multiple on multiple occasions. And we’ve fallen into different categories each time. So tonight, we’re going to go over the Dave Ramsey buyers, right, everyone knows who Dave Ramsey is. He is very big on a budget very big on managing your money. Very big on no debt, right. But he does understand that it’s not always possible to buy a house 100% cash, he definitely gets that. So we wanted to go over the Dave Ramsey, folks, if you will, their tips for what your housing budget should look like and how you should calculate it. And if you are watching this on YouTube, I’m sorry that the ring light is bouncing off my glasses, I’m sure that’s gonna be really frustrating for you all to see me like an alien occasionally. So right off the bat, their first tip is to total up your monthly income. So calculate your monthly income. Let’s say you make 20 $500 a month and your husband makes 20 $500 a month, your total monthly income for the month is $5,000. Now they’re Next, you know sort of tip but it’s also a calculation and it’s a good, it’s a good frame to put around it is they said your maximum mortgage payment should not be more than 25% of your total income for the month. So what you’re looking for is you’re looking for a house payment that doesn’t exceed 1250. So that’s $1,250 for someone that makes $5,000 a month. Now obviously this is not a hard and fast rule, can you push it Yes. If you’ve got more money in savings, maybe so if you are getting a raise, maybe if you are not real confident with the job that you have now, maybe let’s not push it all the way to the 1250. But it’s a really great parameter to start with, right? So that you know that you’re looking at the right house frame, right that you’re looking at the right budget that when you’re googling around on Zillow, or you’re talking to your agent, you know what you’re looking for, and you don’t push your budget too far. Because here’s the deal. If you’ve ever have shopped, if you go above your budget, you’re gonna go above your budget. And what I mean by that is if you start looking above your budget, you are going to bust it out of the water. Because the truth is, you get what you pay for. And if in a market and in a any sort of situation where you get what you pay for, the more money you’re willing to pay, you’re going to get nicer things and you’re going to like it more. So if your budget is 500,000 and you start looking in the 600,000 range, you’re going to like those homes better, because they’re going to have things that you can’t afford in the $500,000 range. The same thing goes if you’re looking at the 150 range and you’re looking in the 250 range.

05:00

So let’s figure out what our our housing budget is. Let’s figure out what we can afford comfortably. And then let’s only look in that range. Will $20,000 completely break the budget? No, but $100,000 probably is right. So let’s figure out what is comfortable. When they say, make sure that your mortgage payment is not above 25% of your monthly income. It’s your total house payment. So think about this. It’s not just what the house cost. It’s not just whatever the house cost minus your down payment, in your monthly budget and in your mortgage payment, you’ve got to factor in other things like property taxes, homeowners insurance, hoa, if you happen to live somewhere with a homeowner’s association, when you’re talking property taxes and homeowners insurance, that could be a couple to several hundred dollars a month, then it affects your budget. So if you only look at the price of the house, and you divide that by your 30 year mortgage, and whatever the rate is that you’re going to get. And you forget about property taxes and homeowners insurance, you’re going to be so shocked when you get your first deal. And it’s a lot more than you think. So let’s make sure that we’re factoring everything in and not forgetting about the HOA. The other things that you don’t want to forget about when we’re talking about your housing budget, is your utilities, or your utilities going to go up from where you’re living right now? Are you going to need to buy new appliances? Think about it. If you need to outfit a whole new kitchen, we’re talking $10,000. Let’s say that you’ve got a really great, you know, Lowe’s credit card, and you’re going to get zero percent interest for six months, well, that’s awesome. But you still have to pay off that 10 grand in six months. So we need to make sure that we’re taking everything into consideration. What about ongoing repairs. So if you’re following the Dave Ramsey tips, then you’re going to have at least three months of your salary saved up into savings. So maybe something big happens, you’ve got it in savings, so that you can repair an AC or you can repair your heat or hot water heater. But what about ongoing repairs, those are things that people don’t think of, there is definitely maintenance and definitely money that goes in to buying a home and owning your home. So don’t forget about that. Let’s leave some room in the budget for that. And then think about reoccurring costs, like pest control, maybe just your regular bills, maybe you’re moving from somewhere, maybe you live on base, and you don’t have electric bills, right now you don’t have gas bills, you don’t have all of those things in you’re moving into a home where you’re gonna have to pay those. Let’s not forget about that, when we’re talking about our housing budget. The other thing that sometimes gets left out when our eyes get really big we start falling in love with these houses, is making sure that we understand that we’re also going to need money for a down payment. And we’re going to need money for closing costs. And those two things are separate. So maybe you’ve got the money to put your downpayment down for your house, but you haven’t factored in closing costs, you’re gonna need that as well, when you come to the table. closing costs average about 4% of the home’s cost. So let’s make sure that we don’t forget about that closing costs are going to include your home inspections, credit reports, homeowners insurance attorneys, all of those fees that it takes to buy the house. So very often, I’ve heard people say that they’ve got, you know, $20,000 saved up for a down payment on them. But by the time they factor in paying the closing costs, that down payment is much lower, or they are mortgaging in a whole lot more. So let’s make sure that when we’re looking at our housing budget, we’re really thinking about what it is that we can afford on a monthly basis. The other things that you just want to consider are what does this house look like compared to the ones around it? Am I going to be pricing out of a neighborhood? Am I going to be pricing out of the military population that’s moving in let’s talk about that for a minute. You know, we owned a home in Navarre, Florida, and it was in an excellent location It was really close to the base, and it was super easy to rent out. But the reason that it was super easy to rent out is the location to the base. The location on highway 98, which is Beach Boulevard, we have a red light and that red light allow you to get on to highway 98. If anyone has ever been stationed at Eglin or stationed at hurlburt Field, you’ll know what I’m talking about. So think about the things that are surrounding that house that are going to make it more marketable when it comes to selling it and when it comes to renting it out. For us, we made sure that we bought a house that would fit into the bH the basic allowance for housing for most of the military population. You don’t

10:00

To buy a house that only you can afford, if you want to resell it, or if you want to rent it out. So make sure that you go online, you look at the bH scale, and you really find the widest chunk for your area, you want to make sure that you can appeal to the enlisted population and the young officer population. But if you buy a house that only three star generals can afford, you are seriously limiting your pool when it comes to resale. And when it comes to rentability, when you’re moving out, and then think of how it compares to the houses around it, is it on a cul de sac, that you’re going to get thumbs up from all of the moms around everywhere, I mean, does it back right up to a railroad job where it’s going to wake up sleeping babies all the time, but you’re going to mark it as this family friendly house. Just think about those things before we go into the big purchase for the home, you want to make sure that you’ve thought long term. And you want to make sure that you’ve not only considered your budget at the time, but the budget of the people that you’re going to be marketing to when it comes to resale value. You know, we interviewed a friend of ours not long ago, who was talking about the fact that they bought their home because it was in a good school district, which doesn’t sound odd at all, until you hear that they don’t have children yet. I just thought it was so brilliant that she was so for thinking that she knew that they are military, they’re not going to be there forever, they’re going to want to sell it or they’re going to want to rent it out. And the number one thing that parents look for is being in a good school district. So make sure when we’re going through things that we take it all into consideration that we take into consideration like for us, we don’t have a car payment. But if something were to happen to our paid for old car that we drive right now, what is my plan for getting a new car is my plan for getting a new car that I’m going to get a brand new car next time, or maybe I’m going to get a new to meet car, but that’s going to incur a car payment, or have I thought ahead of time to where I have the money sitting to the side to where I can buy that car in cash. And the reason you want to think about things like that is let’s say that you know right now you can afford $2,000 a month for your mortgage payment. If you have to add in a car payment, can you then afford bills that go up, let’s say an additional $250. So what I suggest doing to everybody when they’re looking at their budget, my favorite way to go about this is to get out just a regular calendar. A regular wall calendar is great. I go through the month and I write down what comes out on each day of the month. So like the first of the month mortgage insurance transfer to savings. On the second day of the month, I’ve got this bill on the eighth day of the month, I’ve got this bill on the 16th of the month, I’ve got this bill. And what I try to do one is I do try to balance out my month, so that not all of my bills are coming out of just one paycheck, I want them to be balanced out. And if you get really good at paying your bills online, and setting your dates, you can set your dates so that it is spread throughout the month. That’s something that I love to do. But I also love to write it all down, see what I’ve got coming out of my account every month, see what I have going in. So that I’ve got a really good picture of what I have as far as disposable money, what I have as far as how much money we spend eating out guys, that is shameful. In our house, we spend so much money on food, it is ridiculous. And you never know until you write it down. But the best way that we found to make sure that we are staying on budget is to write everything down, that’s coming out, put it on the day of the month, we also see where we’re spending the majority of our money, it’s on the weekends, guys when we’re off. And we make sure that if anything happened, and we lost a car and needed to get a new one, or if I don’t know you need to put braces on one of the kids and you need to have $100 $200 a month payment to the orthodontist that we can afford that. Make sure that you sit down and you outline everything that you get a good housing budget spreadsheet, and you fill it all out so that you don’t end up in this new amazing home. But house poor so that you don’t end up this new amazing home and you don’t get to put your money where you want when you want. Because in my mind and in my belief, true freedom is getting true financial freedom. Let me say that true financial freedom is being able to do what you want with your money when you want to do it. So what I want to do with my money, where I want to spend it and when I want to do that, that’s financial freedom to me. And you want to make sure that you don’t go from complete and total financial freedom in the house that you’re in to

15:00

feeling like you’re in jail to fill in like you’re caged, to feeling like you’re having to put your money toward a home, but you’re not able to put it toward things that matter to you. And for us, that’s travel. I never want to own a home and not be able to get out of that home. Right. So let’s just make sure that when we’re looking at our housing budget, we look at all the different ways that we can do this. So throughout this series, I hope you enjoy it, I hope you’ve enjoyed what we call the Dave Ramsey approach, which is really practical, it comes right down to the numbers, it is an approach that is going to keep you keeping the First things first, it’s going to keep you not accumulating a ton of debt. And then there are other ways to go about it. Like I said, we bought several homes one time, we were up the Dave Ramsey approach. This last time, we may have been maxed out our budget with zero down, but you’ll hear about that later. So I hope that this series is going to be super valuable for you. I hope that you’re going to enjoy hearing all the different ways that you can go about it. One thing that I think you can almost promise yourself is when you’re listening, you’re going to hear a little bit of you in one episode, you’ll probably hear a little bit of your spouse in another episode because from what I’ve seen, you tend to kind of attract the opposites, right? So it turns out that usually the husband and wife are a little bit different on the budget. If you’ve ever watched House Hunters, that happens all the time. So enjoy this series. We appreciate you listening. If you have not already subscribed, please do. You are going to get to hear from some incredible male Housing Network realtors. In the coming weeks, you’re going to get to hear from Super satisfied, super savvy homebuyers. And you’re going to get to hear a whole lot more about how you can structure your budget in order to not end up house poor but end up in the house of your dreams. Thank you so much from everyone at the MilHousing Network. We appreciate you for being a part of the metal housing nation by Thank you for listening to the Milhousing nation podcast. To connect with MilHousing Network, visit us online at milhousingnetwork.com