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September 12, 2019

Why We Chose to be Debt Free Before Buying a House

 

This post was written by Kaila of Successfully Simple Sisters. Successfully Simple Sisters is run by Kaila and Eryn, twin sisters living in the Midwest. In the last 4 years, they’ve paid off $225,000+ of debt and began personal journeys toward financial freedom. 

 


 

A year ago, my husband and I became debt free. We paid off $75,000 of debt in 4 years while never grossing more than $70,000/year as a family. You can read all about our journey in my post here.

Becoming debt free was our #1 priority once we got married. We knew that our student loans and car loan would loom over us if we didn’t take care of these bills immediately. Plus, we had future plans in mind that would be more achievable without our debt.

I heard a quote during our first year of marriage that has stuck with me ever since: “You’ll never regret becoming debt free.” We used that mantra to motivate us as we worked toward paying off our debt.  

What We Did Immediately After Becoming Debt Free

Many people have asked us how we celebrated paying off all of our debt. To be honest, we didn’t even think about doing anything for a celebration. I’m so frugal that I have a hard time justifying spending money on something that isn’t essential (this isn’t always good, by the way).

Anyway, after some thinking, my husband and I took an overnight trip to a local Amish community, which is something we’ve wanted to do for years. We stayed at an Airbnb overnight, then in the morning, we shopped around at the local Amish stores. We bought some coffee and spent the beautiful day walking from store-to-store. It was the perfect, low-key celebration for us.

After our celebration, we moved onto planning for our next BIG goal, buying a house.

Throughout our debt-payoff process, we rented a two-bedroom townhome in a small town outside of Des Moines, Iowa. We knew we wanted to start building equity, so we decided our next step once becoming debt free would be to purchase a house of our own.

We also knew that buying a house would mean that our expenses would increase. From our electricity and water to property taxes and homeowner’s insurance. That’s in addition to the maintenance costs of owning a home, such as buying a lawnmower to mow our yard, or paying an electrician to fix the wiring in a broken outlet.

In the metro where we live, it’s reasonable to buy a house for $200,000 – $300,000. That’s what many of our first-time homebuyer friends were paying for their homes. We decided we were comfortable purchasing our first house for somewhere between $200,000 and $225,000.

We knew we wanted to put at least 10% toward a down payment, so we knew we wanted to save around $20,000 for it. We also wanted an additional $5,000 of savings to cover moving costs and other maintenance costs that would inevitably pop-up. We made a goal of saving up $25,000 to buy the house.

Our goal was to purchase our house around September 2019 which would give us a year to save up.

The year prior, we had put $31,000 toward debt, so saving $25,000 in a single year was incredibly doable for us, even on our modest income.

What We Did to Save for Buying a House

Since we no longer had debt payments, every dollar that was once going toward debt now went into a savings account. Because of this, we took a look at different banks to see if we could get a higher interest rate on a savings account to help our money work for us.

After some research, we found an online-only bank which provided us with 22x higher interest on our savings account than our previous brick and mortar bank. We went from earning 0.10% interest to 2.20% interest on our savings account. That was a no-brainer switch for us.

Much like when we were paying off debt, we did everything we possibly could to optimize our income. I continued picking up as many opportunities in my side hustle as a mystery shopper as possible and my husband hustled to get more work for his construction business.

Since we can only make so much money in a year, we also took a closer look at our budget and continued to find ways to cut our expenses:

Unexpected Direction

Just a month into saving for buying a house, we found out we were pregnant with our second child. We found out that our baby would be due in June 2019, so we had to decide whether our goal of buying a house in September 2019 was still reasonable.

After crunching the numbers and looking at what we had already saved up, we decided to push our timeline forward and started looking at houses in early 2019. We realized our tiny two-bedroom townhouse would be very tight for our soon-to-be family of four.

We altered our budget for a house from around $200,000 – $225,000 to $160,000 – $190,000 in hopes we could save enough to purchase a house by May.

With our new budget, the houses we were finding needed at least a little work. Luckily, my husband is a General Contractor, so nothing was too scary for us.

After a few months of searching, we found our dream home in April for $180,000. By the time closing day came around, we had exactly the amount of money we needed for a reasonable down payment and $5,000 in the bank to cover additional costs.

How Being Debt Free Made Buying a House Easier

We couldn’t have come up with the money to buy a house so quickly had we not been debt free.

Some of the advantages we had in purchasing a house because we were debt free were:

I can’t stress enough how freeing the last year has felt by being debt free. I hope you, too, can experience that freeing feeling of becoming debt free one day as well.

 

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