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Initially, we had no plans to buy our third property anytime soon (in Utah). My wife Shan and I were going to wait until after I graduated with my MBA.
One day we were looking around at different home builders, but just for fun.
One of the builder’s sales agents wrote down our contact information. Within one week, he told us new lots were being released soon.
Since the new community of homes being built was close to my parents’ house, only a 3-minute drive away, we decided to go and check it (still, just for fun)!
The agent told us two days later there would be an increase of $5,000 to the base prices of all new homes within the next few days. He explained that any contract signed soon will keep the current price and not be increased.
This news impacted our decision to go under contract! After discussing with my wife, we realized if we kept our original plan (to wait), it would become difficult to afford a nice home with the constantly rising prices!
Turns out we made a good decision since our house increased in value by over $100,000 from the time we went under contract to when we closed!
Construction started on our new home in July of 2020. The building process took about ten months to finish. We officially closed on our house / third property in May of 2021!
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Price of Third Property
The total price of our new single-family home in Utah was close to $340,000 (with a few upgrades included). The square footage is 2,300, and the lot size is 0.12 acres.
We put 5% down, which was $20,000. Our interest rate is 3%, with mortgage insurance around $35. In total, our mortgage payment is just $1,600 a month!
Our previous post How To Become Time Landlord In Your 20’s (Our Story) explains why we needed 5% for the down payment.
Also, reach out to at least three different lenders so you can compare rates and get the best deal at closing.
One of the lenders we spoke with told us they would beat anyone else, even if it meant lowering their commissions.
We went with him because he could give us the best deal for closing costs and interest rates.
Here are the most commonly required documents when applying for a home loan or refinance. Your lender may ask for additional documents on a case-to-case basis.
Common documents when applying for a mortgage or refinance:
- 2-year tax returns
- Pay stubs, W-2s, or other proof of income
- Bank statements and other assets
- All of your debt monthly payment history
- Credit score, credit history
- Gift letters (if someone helps you with down payment etc.)
- Photo ID, SSN
- Rent history if you are renting, mortgage/HOA history if you are a house owner
- House insurance company if you have a preference, usually it will cheaper when you bundle with car insurance
- If you have tenants, include rent payment history & current lease agreement
Why we decided to buy our third property.
These are the three main reasons we decided to purchase our third property –
- 1. Higher annual income
- 2. Low-interest rates
- 3. Family expanding
1. Higher annual income.
By reading how I graduated debt-free, you will see how I moved up to a new job as a Product Development Specialist after starting the first semester of my MBA program.
Having a higher annual income helped us qualify for a nicer house. It’s important to always make sure you budget and don’t restrict cash flow when purchasing a house.
Just because you can make the monthly payment doesn’t mean you can afford it.
Dave Ramsey
2. Low interest rates.
Covid-19 was just starting when I switched to my new job. Due to bad economics, the government approved near-zero interest rate plans to help the economy. See HERE for more details.
The interest rates became amazing to buy a home but also sped the housing market prices like crazy. We are so grateful to have built a house at the beginning of the market housing market boom.
We also took advantage of the lower interest rate when we refinanced our second property.
3. Growing Family
We started to expand our family. Now we have one baby boy and a baby girl on the way. We needed more space in the house and also need a nice sized backyard for them to play and run around.
We also wanted to move nearby my parents. Living close to them would be convenient when we needed their help taking care of kiddos and family events.
Regardless of if you have a family or not, it’s vital to understand one’s finances and follow a monthly budget.
Are you looking for a robust app to help you gain awareness of your spending habits and stay on top of budgeting? If so, we highly recommend Rocket Money (formerly Truebill). Their app is extremely easy to use and can help you gain better control over your finances and know your net worth. Feel free to check them out today!
Advantages of building a brand new house.
- Locked in Price
- Extra time to prepare a down payment.
- Choose your own design.
- Less fixing and maintenance costs.
1. Locked in Price
We could lock in our home’s final price at the beginning (once under contract). Even when it took 10 months to build our house.
No matter how crazy the house price increased, our price was 100% locked in and would not increase. During these 10 months, our house increased by almost $100,000!
By the way, we did see some news that some builders weren’t honest and broke the contract to increase the price. Luckily we did not have any such issues.
2. Extra time to prepare a down payment.
We only needed to pay $3,500 to go under contract. The building process took around 10 months. That means we had an awesome 10 months to prepare everything.
We sold our first property, rented our second property, paid off student debt, and saved up the rest of our down payment by closing!
3. Choose your own design.
The most fun and exciting thing for us was being able to choose your upgrades for both the exterior and interior. At the design center, you can choose the flooring you like, paint colors, and much more.
We didn’t do a lot of upgrades because we didn’t want to max out our loan. We had to work hard to stay calm in the design center because everything was so attractive and made you want to spend more money!
4. Less fixing and maintenance costs.
The second-hand houses we bought before always had small problems (sometimes big problems!) that needed to be fixed.
Compared to the old properties, the new home we purchased would not need repairs for a long time. This is a big relief having everything inside just new and fresh!
We officially bought our third property this year in May 2020. During the building period, I was taking Maser courses, and we had our first kid.
It was so fun and exciting to see the whole building process of the house. We just went and checked practically every week. 😀
Now we enjoy living there and recently got a Samoyed puppy after moving in. Her name is Tofu. Our baby girl is due at the end of February next year (2022)!
Our lives are becoming better and better! We are excited to share more of our FIRE journey with you in future articles!
Disclaimer:
We hope the information in this article provides valuable insights to every reader but we, the Biesingers, are not financial advisors. When making your personal finance decisions, research multiple sources and/or receive advice from a licensed professional. As always, we wish you the best in your pursuit of financial independence!
