Frugal Living: Housing

What kind of place do you live in? There are many to choose from--apartment, duplex, house, trailer, condo.... This post will focus on renting vs. buying, how to prepare for buying a house, as well as what goes in to keeping up a house inside and out.

One "rite of passage" for a teenage to become more of an adult is to move out of their parents' home. A common first step is to have roommates, or even live in dorms at a university. Inevitably the time will come to branch out on your own and get housing in your own name, on your own credit. Credit is a whole other conversation, but for the sake of argument here it is something you will NEED if you ever want to buy a home.

I was a sort of early bloomer and bought my first house shortly after I turned 18. Since I had no credit, they used my job history/income and my husband's credit. It was a HUD home that was cheap and needed some fixing up. It was a good starter home and we lived there almost 2 years before we sold it and bought our second home. I do have a few regrets about how we went about things---I was very excited to be out of nursing school and we basically bought a house at the top of our budget right before the housing market crashed. It took us 6 months to sell our first house and we paid 2 mortgage payments the whole time. I had to learn as I went and I am happy to share some tidbits of advice for those about to head that direction.

1. Renting--This is basically where someone else owns your house/apartment and you pay them each month to live there. They are responsible for maintenance but YOU are responsible for damage, cleanliness, and following the rules of the contract (roommates, animals, etc). There is almost always a lease that has to be signed saying you will live there X amount of months and if you break that lease you have to pay big money. You will have a deposit to pay upon moving in, and if it doesn't look the same when you move out then you might not get your deposit back. This is a good starting out option to begin building your credit/rental history but in the end you are not earning any equity in the housing.
2. Buying--This is the big step to adulthood! You are the owner of the house and the land it sits on. You are fully responsible for its upkeep, repairs, appearance, and everything else until it is paid off. In some cities it is the norm to never buy a house but to live in an apartment for your whole life, but that is not the average situation in America. If you sell the house you might make a profit, you might owe the bank. You can even rent it out. I highly recommend saving up several thousand not only to put as a down payment, but also to have available upon moving in for all of those unforeseen costs that always pop up when you lease expect it. Fortunately the monthly payment when buying is a lot of times cheaper than if you were renting. Approximate monthly rent = $800 vs. $600 when buying same house.
3. Mortgage/Interest--The mortgage is the loan from the bank to buy your house. The more money you put down, the less your mortgage will be! Interest rates are always changing so shop around for the best deal. Buying a house comes with fees and you should be ready to pay up to a few thousand just toward those costs. Any house with a mortgage must have homeowner's insurance and that cost is usually worked into your monthly payment through your bank. On my second house my initial interest rate was 6.6% and I was paying around $1,000 PER month just for interest. I finally refinanced this year and dropped my rate down to 4.4% which cut my monthly payment $400.
4. Repairs--This can be a costly part of being a homeowner. If you live in an older house then you will more than likely have to fix, replace, or update things in it. The most frugal way to do this is DIY. You can find countless instructional videos on the internet for just about any project you can think of. Hiring a contractor can cost big money. We have done several DIY projects around our house and saved thousands of dollars in the process. Rebuilding our deck cost only $500 where a contractor was going to charge $1,000 in labor alone! Ripping up carpet and laying wood laminate cost us $1,500 where hiring someone to do it for us would have cost twice as much. We are currently in the process of updating our kitchen ourselves! Average savings from DIY = 50% of cost to hire contractor.
5. Appliances--These can add up very quickly when you are moving into a house that doesn't have them. Washer, dryer, fridge, stove, etc. are all necessary. Obviously the cheapest option is buy them used, and there are great deals to be had if you hunt around. I have been a homeowner for almost 10 years and just this year I got my first NEW fridge and stove! Washer and dryer are still used though. If you are going to buy new appliances I highly recommend saving up the cash to pay for them in full and shopping around for the best deal. Average cost of used washer = $100 vs. new washer = $500-$1000.
6. Furniture--Anywhere you live needs furniture and thankfully there are tons of deals out there to be had. Check out craigslist or garage sales for nice used pieces when you are starting out and getting situated. If buying new, I again recommend saving up cash to pay for them in full and shopping around for the best deal. It is easy to get seduced in a furniture store with a salesman whispering sweet nothings in your ear--be strong! You can still get very nice furniture that has barely been used. Average cost of used couch = $200 vs. new couch = $500-$1500

I hope you enjoyed reading these tips! Feel free to comment with questions, and check back soon for more posts! You can check out my other posts about frugal living HERE.