Monday, January 25, 2010

Dumb Financial Choices Part 1: Teeny Tiny Down Payment

Don't let the fact that this is a personal finance blog fool you. Unlike many of the other personal finance bloggers I follow, I still make plenty of monetary mistakes. Plenty. At any given time, Suze Orman or Dave Ramsey could sift through our finances and have a field day. They could invite us onto their shows and yell at us. Then we could parlay the trauma into a book entitled How to Make Dumb Financial Choices (Based on a True Story).

Dumb Financial Choice #1: Purchasing a house without a 20 percent down payment.

Or even a 10 percent down payment.

Or... um... even a five percent down payment.

Actually, it was way less than even five percent. But the bank didn't seem to care, so we figured it was okay.

We purchased our home in April of 2008. Had we waited a few months - until the global financial crisis was hogging the headlines - we probably wouldn't have gotten away with this particular loan. But we managed to make it under the wire. Yay.

Unfortunately, we've come to realize that we don't actually like owning a home (I know, I know... That's so very un-American of us). For our entire married lives (10 years), we've been vagabonds, changing location every one or two or three years. Whereas other people might find such upheaval disconcerting, we enjoy it. New places, new faces, new experiences, new atmospheres, new challenges... We thrive on change. It makes our toes tingle. We've been aware of that fact for a long time. Looking back, I'm not sure why we decided to make such a permanent choice. We'd have been better off buying an RV.

The bottom line is that right now, we are stuck. Stuck with our 6.875% interest rate. Stuck with $150 in PMI every month. We can't sell this place. Housing prices in our area are in decent shape, but at this point, even if we received our theoretical asking price, we couldn't make enough of a profit to cover the Realtor commission, let alone the remaining balance on our home loan. Plus, any savvy buyer would demand less than the advertised price. Any savvy buyer would probably also demand that we cover closing costs and foot the bill for replacing the scruffy carpet and the on-the-fritz refrigerator.

But had we put 20 percent down, we would have been able to afford listing our home if we wanted to. Sure, maybe we would have taken a hit, but that would have been our choice to make. At the very least, we could have refinanced and obtained a lower monthly mortgage payment.

Now we're at the mercy of the housing market. Hopefully, if we wait five years, the market will bounce back. Maybe we'll even make a small profit. It just seems like a long time to wait, especially when I'm stricken with such a chronic case of Wanderlust.

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