Buying A House and Maintaining An Emergency Fund

20 05 2008

In 8 short days I will make the biggest purchase I am ever likely to make, I will be purchasing a new house.  And the closer we come to closing, the harder it is for me to practice what I preach.

Everywhere I look small “upgrades” are popping up that I know I can find cheaper elsewhere, or that I can do myself without having to pay the builders up charge for, and it pains me every time I give the go ahead for them to do something else when I know I’m being ripped off.  I can’t haggle with them, I’m not in a position to.  I already signed the contract to build the house and put down earnest money, so I’m at my builders mercy.

Why would I voluntarily get ripped off you might ask?  Because as I plan ahead for all of our upcoming expenses like drapes, blinds, rugs, random furniture (although we have most), deposits on utilities, moving costs… It’s easier to lump it all in and finance it so that I’m not out anymore cash after I seemingly drain my accounts at closing, because I will not allow us to dip into our emergency fund for these items.  Really the only thing we aren’t having them do that they can is hang our drapes and install our doggy door ($350 for something I can do myself in a hour is too much for me to bare).

At the end of the day, and especially as our country is testing the waters of economic uncertainty, emergency funds are too important to tap into for non emergencies.  And I’m proud to say that even though we may be paying an up charge on these items, our emergency fund will remain in tact and actually grow a bit due to the rolling in of some of our closing costs, so in the case of an actual financial emergency we will have money to keep us afloat.

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5 responses

22 05 2008
Philip

I understand completely on just having it included in the cost of the loan. I know that it is not best because interest will be paid on it, but I consider some of it to be just part of the house. Fortunatly the house I just purchased had most appliances included in it, almost brand new. Just had to purchase washer/dryer. Now I keep running across all the other things in the house that are adding on expenses. I just put up some wood blinds in one room, and will add more as I budget for them.

22 05 2008
danielb

Philip, I actually forgot to include that we still have to get a Fridge AND a Washer/Dryer! However, I planned ahead and differed all of my Christmas Presents from family members until we closed on the house, and my birthday is next week, so guess what I’m getting for late Christmas and Birthday gifts? 🙂

Unfortunately it is to easy to include a bunch of stuff in the cost of the loan, this is where builders make a ton of extra dough.

Thanks for stopping by!

28 05 2008
ontrider

What do you mean there are no lights in the bedrooms? Three thousand and what for those upgraded cabinets!? You mean I actually have to upgrade this underpadding!? $$$$$

Builders get you coming and going… Trying to sneak some extras in the offer is always good, upgrades always seem to be a ripoff, but a lot of the time you have no choice. At least if you decide to get a brand new home again down the road you’ll know most of the tricks.

I tried to get a few strategic upgrades that I couldn’t do myself and then things like floors, counters, basements, furniture… those can be upgraded along the way when the savings are there. I think one of the worst things people do is get the nicest “everything” right off the bat on their first home, when they aren’t really in a position to do so. They end up feeling stretched every mortgage payment just so they can have those nice stainless appliances, 50″ flat screen TV and gleaming new hardwood floors – which kind of goes back to the point… “Does the size of your image equal the size of your debt”

Good luck with your new home!

29 05 2008
danielb

Thanks Ont. Great point! Though I must admit, I financed in a 46″ LCD. It was a promise I made to my wife before we got married, and saving my cash was a much better decision, because as I found out yesterday…I miscalculated a few grand of closing costs so of course my emergency fund isn’t as big as I thought it was!

Holy Crap I’m a homeowner!

29 05 2008
Finding Opportunity in Disaster « Young and Frugal

[…] wrote last week about how once the builder had my earnest money, I had no negotiating power.  This leak allowed me […]

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