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How We Built a House and Kept the Payment Low…

May 1, 2011

Here is a little “house history” and so info on how we were able to keep our new house payment reasonable.

Our old house (the one we recently sold and moved out of) was the first house we bought. We actually had that one built. Almost 14 years ago we were pregnant with our first child (we now have five children), I was a few years into my job, J worked full time as a nurse, and we had very few expenses. The grand total for building that house (including the land and everything) was  $83,000. The land was only $11,000!!! We moved into that house in January, 1998. It was a small, 2-bedroom, 1-bath home with an unfinished basement and a small yard (.18 acre). My brother-in-law built the house and did a great job and gave us a really good deal. In fact, having him build it was one of the reasons it sold so quickly this past year.

Our house payment was modest, but I also was receiving a very modest salary. We eventually took out a small home equity line of credit and finished the basement. We tried to put a little extra money into the basement bathroom so that it would be as nice as, or nicer than, the upstairs bathroom. Finally, every square inch of our home was “finished” except the basement laundry room, which never got finished. Not going too cheap when finishing the basement made our house sell quickly as well.

We started with a 30 year fixed mortgage, but quickly switched to a 15-year fixed mortgage when rates were relatively low. We stayed on the 15-year loan for many years and were able to pay down the loan on that house. At some point, when our children were starting to cost us some money, we switched back to a 30-year loan (fees were pretty low, but it was still a lame move). We needed extra cash every month, and switching back to a 30-year loan, with the low rates, netted us almost $300 a month. If I could go back and do it again, we would have stayed with the 15-year loan and had that thing nearly paid off…


For the last few years, we felt quite squished in the old home. With the basement finished, we had four bedrooms. That was adequate. But we just had no room for storage. We got rid of everything we could, but still had no room to put anything. I suppose that is what happens when you have five children. I still think we could have continued living there, but here are the things we started considering:

  1. The home loan rates were really low (this was last year, when rates were incredibly low).
  2. Existing homes were selling for cheap.
  3. Not many homes were selling (good for buyers).
  4. New homes were being built for less than normal.

To make a long story short (and get to the good stuff), after a few failed attempts to purchase existing homes, we decided to build a new home and hired my bother-in-law to do it again (He really is that good).

Here are some factors that went into our being able to do this:

  1. We sold our old home quickly (in four days), and for a decent price.
  2. Our old home had appreciated in value, plus we’d paid off many thousands of dollars on the loan, so we had pretty healthy equity to put down on the new house (Maybe $60,000).
  3. Since we had a low house payment on our old home (under $500/month) we had been able to save a pretty good stash of cash.
  4. We had no other debt beyond the loan for our house.
  5. We emptied J’s old 401k account. We paid heavy penalties for doing this, but the account was a modest one and the cash would help us have a much larger down payment. Not sure if that was a good move, but it is done now…
  6. Between selling our old house and moving into our new house, we lived with my in-laws. We were able to save even more cash. That was a huge blessing.
  7. Though we wanted to build a house we could live in for the rest of our lives, we also were not building our dream home. No one could afford our dream home! So, though our square footage was increasing, we, in no way, built a large or overdone home. We really had the goal of keeping things understated and modest. Having a stress-inducing house payment is never worth it.
  8. We had a target monthly mortgage payment we were shooting for. Some people say your monthly payment shouldn’t be more than 36% of your gross income. We had no intention of getting anywhere close to that. We wanted it to be more like 20% of gross, or 25% of net monthly income. Our goal was to have a house payment that was well under $1000 a month. Actually, we were able to get it down into the $800’s.
  9. We negotiated on the price of the land and felt like we purchased a piece of land at a very fair price. We bought land that was exactly double the size of our last property. We don’t need acres and acres, but we wanted space to have a significant garden area and a lot of fruit trees. We wanted to have enough weeding to do to keep our children busy.
  10. My brother-in-law built the house and gave us a great deal. He has the reputation for building some of the best homes in Northern Utah.
  11. We did not finish the basement. We did finish one bedroom in the basement for two of our boys. The rest of the basement will be finished using cash only.
  12. We tried to put money into parts of the house that mattered more to us than others, and that would be hard to change in the future. For instance, instead of granite counter-tops, we found some normal formica that looks kind of like granite. We like it a lot, but saved nearly $3000 on counter-tops doing it that way. Instead, we added a foot or two to the total footprint of the house, and then added two feet to the upstairs mud-room/laundry and two feet to the master bed/bath. If, in the future, we want granite countertops, we can do it. But adding more feet to the house would be very, very expensive.
  13. We did some of the work ourselves. With the help of friends, I tiled and did the wood flooring myself. We painted the garage ourselves. That saved us nearly $1000. just in the garage. I wish we would have done more work ourselves, but time was an issue.
  14. We bought “remnants” for carpet. We have a carpet lady. She is awesome.
  15. We didn’t do any landscaping. That will be done this year, cash only. That did not go into the loan.
  16. We negotiated a few of the things inside of the house like cabinetry, etc.
  17. We put more than 20% down for a down payment. I don’t want to pay mortgage insurance.
  18. In fact, we put nearly 40% down. That includes the proceeds from our last house and a bunch of cash we’d saved up.
  19. Our loan amount is much smaller than I thought it would be, which was the goal. People kept telling us, “Do _______ now and just put it in the loan. If you don’t do it now, you never will”. We don’t care about that. We wanted to take out a relatively modest loan. That thing will be on our backs for 30 years! 
  20. The rates for our loan slipped down into the 3’s for a few hours one day. This was about 30 days before the house would be finished. Our mortgage person called and begged us to come and try to lock in at the rate that day. We sped down to her office and signed everything. Our rate is 3.875%. Killer. Totally awesome. Still can’t believe it. The rate was there for about 4 hours that day. Then it climbed back into the 4’s. Which still would have been good.
When I look back at our experience, I realize that much of the reason we were able to do this came from things that were out of our control. It certainly wasn’t our fault that rates were so low. Not our fault that land was reasonable and building materials were reasonable. We tried to do some smart things in the past that really have blessed us now. Living in that small house with a small payment for as long as we did was a great idea. It was a bit of a sacrifice, but not much, and it saved us a lot of money over time. Now our house payment is very reasonable and we’re able to actually pay a little extra on principle each month, which will shave time off of our loan. Now, the goal is to have this thing paid off before I retire.
3 Comments leave one →
  1. Debbie Hom permalink
    May 1, 2011 8:13 am

    You guys are awesome!!

  2. Desi G permalink
    May 9, 2011 9:15 pm

    Whos your bro-in-law? We own land and are always debating if/when to build.

    Like you blog.

    • May 9, 2011 9:53 pm

      Hey Desi!!! Leonard Hill is J’s bro. He has been building a loooong time and has a spotless reputation. If you ever get curious, I can send you his contact info and you can ask him any questions you have. Nice to hear from you!!!

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