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Why I Decided to Buy My First House With Cash

July 25, 2019
DEBT & CREDIT

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Kumiko Ehrmantraut

Kumiko Ehrmantraut

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Kumiko Ehrmantraut
Kumiko Ehrmantraut

Kumiko Ehrmantraut

Kumiko Ehrmantraut

Latest posts by Kumiko Ehrmantraut (see all)

  • How to Deal with Debt in Collections - April 14, 2021

Making my decision to buy my dream home with cash was not a purely financial determination. In my mind it would be more expensive to buy versus rent for my unique situation at this specific time. After running the numbers, I followed my heart.

Back in November 2018, I announced to the world that I was going be buying my first home with cash. Not just my first home, but my dream and forever home.

Since then, I have been documenting my saving journey towards this massive savings goal on my Instagram.

Over the months, I have received a ton of questions about this personal decision. I also realized that after my announcement, I never really documented my reasoning behind this huge life decision.

Before I can get into the details, I need to lay the groundwork.

I started The Budget Mom, not to just share my story, but to bring awareness to the emotional side of money management. Every money decision we make is related to how we feel. Emotions are what drives us.

Sometimes that means that we need to make decisions based on what we feel is right in our hearts, not just the numbers. Without that feeling of peace, you can never feel successful with your money.

I found that peace.

 

View this post on Instagram

 

A post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on Jul 21, 2019 at 10:02am PDT

LOSING EVERYTHING

I am a single mom to my son James. I am a divorced mom. I know what it is like to lose everything, to leave behind the place you made and called home. To be lost, without a place to truly make your own. After my divorce, I knew that I wanted to buy a home where my son and I could lay down roots – a place that allowed us to grow, but also a permanent place that we could call home.

I knew immediately that I didn't want to move again. Playing the real estate game is not in my life plan. I don't want to fix up a home, buy my next home, only to do it all over again. I knew I didn't want to keep uprooting my son.

That said, I knew that my first home was not going to be cheap. When I started my search for my dream home, I made sure to document the list prices for the homes I liked. Houses that I could see my son and me in.  I looked for the types of homes I wanted to buy, with the land that I wanted, and I made a savings goal estimate around my research.

  • Read: Instant Gratification Wish List: Becoming a Patient Spender

How I paid off over $77,000 of debt in less than a year. During my financial journey, telling myself, "it's impossible" was never an option. You have to believe in yourself enough to strive for the unimaginable.

LEAVING MY FULL-TIME JOB

From the very beginning, I had a plan to save up 20% for a down payment. From my house research, I knew that my dream home would realistically cost me about $400,000 in Spokane, Washington. This meant I would need to save roughly $80,000.

After becoming debt-free in November 2018, I saved enough money where I felt financially secure enough to leave my position in the financial industry.

I started researching the home-buying process. I wanted to know what it would be like for me to go through financing, and that's when I read about some scary news.

Being self-employed can make it more difficult to get approved for a mortgage because lenders have a harder time assessing your income.

When you are 100% self-employed, your income can fluctuate, and there's a chance that it could be so low that you cannot afford to pay your bills. Typically, a mortgage lender will require self-employed individuals to show two year's worth of self-employment income to prove they have consistent income.

There was one huge problem. My business was only three years old at the time, and for the first two years, it made a total of $25,000 net profit. That was not going to be enough to prove to a mortgage lender that I could afford the dream home I wanted.

  • Read: My Debt Story – Accomplishing the Unimaginable

PANIC MODE & FEAR

I knew I had to make a choice. Give up my dream of running my own company that desperately needed my full-time attention, and stay at my day job longer or get financing for a home with the resources that I had, which was only $30,000.

In my head, the only choice I had was to get funding for my dream home while I still had consistent W2 income.

Deep down, I also felt scared. The thought of being 100% self-employed while having a huge mortgage payment hanging over my head made me feel stressed. I would no longer have a consistent paycheck, and I was ultimately self-reliant on my business. It was terrifying.

So, I spent time rushing around, and I even scheduled a meeting with a home-lender. I knew I wanted to go with Spokane Teacher's Credit Union for home financing. I had a special relationship with them, and I have been a loyal customer for the past five years. They also have an amazing free Homebuying 101 Workshop that I was planning on attending.

I had posted on Instagram my fear of trying to find financing while self-employed, and how badly I wanted to leave my job so I could help more people through my business. Then, one evening, another blogger reached out to me and asked, “why don't you just pay for your home with cash?”

To be honest, I didn't even think about it. I also didn't believe it was a possibility. It felt like such a huge goal, which made it feel impossible.

The truth was, I didn't give myself permission or allow myself to dream that big. But that one question changed everything for me.

 

View this post on Instagram

 

A post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on Mar 12, 2019 at 2:53pm PDT

FINDING PEACE

After thinking about buying my home with cash, I felt an instant feeling of peace. I no longer felt rushed or stressed. I wasn't overwhelmed or up late at night fighting other possibilities. I could leave my full-time job, give 100 % of my heart to my business and my passion, and save while I stayed in my apartment with my son.

Yes, I wouldn't have the house I wanted as quickly as I thought, but over the years, I learned that patience gives you the best rewards. Instead of having the mindset of “I want it right now,” I knew that being patient and waiting to buy my home, and doing it without going into debt could open some amazing future opportunities for me.

The fear of having such a huge debt load on my back as I grew my business would no longer be there, and I had a real opportunity to focus on other goals, like retiring early. Not having a mortgage, which, for some, is their most significant monthly expense, gave me a new sense of motivation.

I woke up the next morning after making my decision to buy my home with cash feeling hopeful, happy, and confident. Peace of mind is something you will never be able to put a value on.

  • Read: Lifestyle Inflation: Getting What You Deserve

 

View this post on Instagram

 

A post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on Jul 3, 2019 at 12:04pm PDT

BREAKING DOWN THE NUMBERS

In November 2018, I revealed to the world my home-buying plan on my Instagram. The number one question I received was, “How can you be okay with throwing money at rent for something that will never be yours?” or “You are spending so much more by renting.”

Even though in my heart, I knew I was making the right decision, I still did my research on the numbers. Buying a home does not just mean having a mortgage payment. There are a lot of other costs and expenses when purchasing a home. I currently pay $850/month to rent my apartment.

I sat down with Spokane Teacher's Credit Union to talk about what my situation would have looked like if I decided to go with financing. For this example, we used a property here in Spokane, WA, that was similar to something that I wanted in terms of property.

Let's assume that:

  • $400,000 purchase price
  • $80,000 (20% down payment)
  • $320,000 base loan amount
  • 3.750% interest rate
  • 30 year term

If you look at my rent payment versus a mortgage payment, using the information above, my monthly mortgage payment would be $1,981.97. That's $1,131.97 more than my rent payment. That doesn't include PMI (Private Mortgage Insurance) if you didn't have enough to put 20% down for a payment. If that were the case, your mortgage payment every month would jump to $2,424.51.

Let's not forget the many other expenses that come with buying a home.

  • Expected closing costs would be $10,346, which includes origination charges, appraisal fees, title insurance fees, and the initial escrow charges for homeowners insurance and property taxes.

Those are just some of the upfront costs of buying a home. Let's talk about the increased or recurring charges once you start living in the home.

  • Currently, my apartment is about 1200 sq. ft. I pay an average of $80/mo for utilities, which includes water and electricity. The house I buy would be significantly bigger, which means my utility bill would increase.
  • I also asked Spokane Teacher's Credit Union what the expected home maintenance cost is. They estimated that the average homeowner would spend between $2,000 to $3,500 annually depending upon the age and size of the home.
  • Property insurance would be a new recurring expense, which is estimated to be $2,500 every six months with homeowners insurance expected to be at $1,000 every twelve months.

INTEREST CHARGES

If I decided to buy my house using financing, instead of using all cash, I had a goal to pay it off in three to five years (the same amount of time I was giving myself to reach my house savings goal).

During the time I would be living in the home, with an increased mortgage payment, recurring property and homeowners insurance, increased utility costs, and regular maintenance expenses, I would also be paying roughly $32.88 every day towards interest. That's using the above example values.

Of course, interest charges would decrease as I made larger payments, but assuming I paid the house off in five years, I would throw away $28,000 towards interest during that time.

  • Read: Is Renters Insurance Worth It?

 

 

View this post on Instagram

 

A post shared by The Budget Mom by Kumiko Love (@thebudgetmom) on May 28, 2019 at 9:19am PDT

THE REALITY

I could write an entire article about all of the new expenses that I could possibly have when living in a home versus renting my apartment. Some of them include:

  • Lawn and yard care
  • Regular maintenance
  • Cleaning (your time and energy are worth something!)
  • Appliances and appearance

Your monthly rent payment is exactly that, a single monthly number that replaces all of the traditional expenses of property ownership. There is no additional calculation required.

The cost of homeownership has many variables, and timing plays a role. The length of time you plan to live in the home is also a  factor. One of the most significant benefits many people believe I am giving up is the expected growth in property value. By staying in my apartment, I am throwing away money for something that will never be worth more than it is now. But here is the truth, growth in property value and equity is not a given. It is not a guarantee. The best and the most you should ever expect from any real estate is to simply keep up with inflation.

For my decision, I didn't take into account guaranteed growth in any property. It's not something you can count on, and even if you count on your home increasing in value by the inflation rate, that means your maintenance, insurance, and other expenses must also increase. They essentially cancel each other out.

  • Read: 8 Financial Tips for Buying Your First Home

WHY I DECIDED TO BUY MY FIRST HOUSE WITH CASH

Making my decision to buy my dream home with cash was not a purely financial determination. In my mind, it would be more expensive to buy versus rent for my unique situation at this specific time. After running the numbers, I followed my heart.

In the end, it came down to peace of mind. Even if people don't understand your journey, your journey isn't for them. It's for you. You have to live with the financial decisions you make, and at the end of the day, you need to feel confident in those decisions. Buying a home with cash may not be the best decision for everyone, but I know it was the best decision for me.

I plan to save $400,000 for my dream home, and I plan to reach m goal by the end of 2022. You can follow my entire financial and house savings journey on my Instagram.

  • Resource: Use Gabi to shop for homeowners insurance.
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Filed Under: DEBT & CREDIT, Loans, Etc. Tagged With: HOUSE JOURNEY, REAL ESTATE, SAVING GOALS, SAVING MONEY

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Comments

  1. Kayla says

    July 25, 2019 at 11:09 am

    Such an inspiring decision!!! My husband and I didn’t go this route as we didn’t plan well, but we are working to pay off our school loans, allow me to become a stay at home mom (to eliminate our second largest monthly expense – daycare) and have financial peace of mind. 🙂

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:19 pm

      I love that!

  2. Brandie Blauvelt says

    July 25, 2019 at 3:43 pm

    I love your decision to buy you home with cash. Me and my husband did that 3 years ago. Its freeing but we still have other debt to work on and that is where your system has come into play and I could be more grateful to have found you. I had and still sometimes do have a shopping problem but I only have cash. I cant spend it if I dont have it. Lol. Thank you for all of the inspiration and encouragement every day.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:19 pm

      Thank you!

  3. Guy Ligertwood says

    July 26, 2019 at 12:59 am

    Very cool, love this

  4. Cira Davis says

    July 26, 2019 at 6:57 am

    What a beautiful and inspirational story. It’s real and heartfelt and which many ordinary people can relate to. I so admire you, your determination and drive. It gives hope to many others out here on the road to financial freedom. Keep it up and so super proud of you.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:19 pm

      Thank you Cira!

  5. Joanna Gebhart says

    July 26, 2019 at 7:13 am

    I appreciate all the details you shared. I think your decision makes total sense and I’m surprised you were questioned. I’m 68 and I couldn’t agree more with you. Buying a house and having a mortgage is costly.

    You evaluated all the scenarios and did what is right for you.

    Buying a house is a big undertaking and trying to do that while growing a new business is far too much stress. Especially for a single mom

    Be proud and don’t let people make you doubt your decision

    Well done Miko.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:18 pm

      Thank you so much!

  6. Christina Mims says

    July 26, 2019 at 7:29 am

    I’ve been following you and I’m apart of your group, but just reading your article just inspired me to set out for the same goal of paying cash rather than saving for a down payment. I’m also a single parent and my reason for wanting a house is to upbring my daughter into a home that’s ours, where we don’t have to move every other time when the lease up, and a home where we can have/start our own traditions. Thank you for your inspiration and confirmation to me of wanting now rather than waiting, being patient, and looking at the bigger picture.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:18 pm

      Oh yay!

  7. Daniele says

    July 26, 2019 at 8:20 am

    This is so inspirational! Thank you for sharing your story.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:18 pm

      Thank you!

  8. Valerie says

    July 26, 2019 at 8:39 am

    It makes sense to me, go you! I love following your journey and as a paralegal in a practice that deals with conveying properties I see all the loan packs from banks that come in and it makes me anxious seeing the costs of people’s mortgages in the long term …wow! 🇮🇪

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:18 pm

      Thank you so much Valerie!

  9. Rebecca says

    July 26, 2019 at 9:19 am

    Really appreciate your thorough advice!
    Buying a home will be such a proud moment for you and your son and I like to think safer too, because apartments always have that transient feeling.

    Blessing and best wishes!

  10. Debbie Pasquini says

    July 26, 2019 at 10:39 am

    I loved this blog post. It allowed me to see a completely different side to buying a home. While we didn’t pay cash for our home, we have lived in it for almost 20 years and are now starting major updates. We are paying cash for them. It can be done.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:17 pm

      It definitely can be done! I love that you are paying cash for those updates 🙂

  11. Victoria Beckham says

    July 26, 2019 at 1:01 pm

    You are such an awesome encourager. Thank you for sharing your heart and being real about finances. I am a single mom also (two in college), and for me the journey has been three steps forward, two steps back. I discovered TBM at the perfect time when I needed encouragement and hope to keep moving forward. Thank you, Miko! I pray God’s blessings on your and your son today!

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:17 pm

      Thank you Victoria. I wish you all the best on your financial journey!

  12. Brenda says

    July 26, 2019 at 1:20 pm

    In the end, it’s YOUR decision. Thanks for sharing your real life with us and providing a supportive community.

    • Kumiko Ehrmantraut says

      July 26, 2019 at 2:16 pm

      Thank you so much Brenda!

  13. Danielle Cheramie says

    July 27, 2019 at 6:00 am

    This is so great. I love the way that you break everything down to the bare bones for your readers and allow us to see plainly exactly what you are showing us. I see this on all of your posts and videos. Your TBM Family is great. Thank you for what you have shared with us.

  14. Anonymous says

    July 27, 2019 at 11:50 am

    Good for you. I am hoping you succeed.

  15. Maddie says

    July 28, 2019 at 2:09 pm

    GET IT GIRL! Own that house-buying dream!
    I’ve been watching and following your blog this season as we are in a tighter spot financially. I’m a photographer and income fluctuates a ton for me, it varies every other month. Constantly looking at things to sell, ways to cut back elsewhere, and ways to save every penny. Your information is so encouraging and appreciated! <3

  16. Diane says

    July 28, 2019 at 2:33 pm

    As an empty-nester, I am so excited for you-and me! I plan on using your workbooks and plans to help my hubs and I finish paying off our house, a business loan (closed) and saving for our down-sized life to come!

  17. Astrid says

    July 29, 2019 at 9:51 am

    I’ve only recently stumbled across your instagram and am enjoying your holistic & practical approach to Finance. There need to be more conversation like this article around money so we can all learn how to use it as a tool to build a life, rather than let it become a weight holding us back. Bravo in your business success & adorable son! All the best with your house fund!

  18. Carol says

    July 30, 2019 at 11:33 am

    I have learned over the years to listen to that inner voice for guidance. Your are a remarkable gal Miko and an inspiration to a whole generation of people mired in debt. You have showed them there is a way out if one is patient and resolute to be debt free. Keep listening to your inner voice Miko!

  19. Jack Paul says

    July 31, 2019 at 10:51 am

    This is amazing…

  20. Mariam Early says

    July 31, 2019 at 8:46 pm

    You’re my new hero!

  21. Janice Hinkle says

    August 1, 2019 at 1:45 pm

    A love it as well yesss

  22. Mireya says

    August 3, 2019 at 6:44 pm

    I have a feeling you WILL reach your goal before that date! Keep going! We’re all cheering for YOU!!! And supporting you!!!

  23. Lisa Wilson says

    August 5, 2019 at 10:57 am

    Just an interesting tidbit that I noticed while reading your article. Your rent divides out to $28.33 per day. And the interest per day you would have on a mortgage you quoted is $32.88. Those 2 numbers are closer than I would have expected. I’m definitely a person that has always pushed for home ownership. Maybe rent isn’t “throwing your money away” like I’ve always thought it was. Hmmm…

  24. Sheena says

    August 10, 2019 at 4:41 am

    This has been my goal from day1. Never understood why anyone would want to throw money away on interest. After I paid off my car in 3years I said that was the last time I am paying interest on anything. Good on ya!

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

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