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House Hunting on Pause

It was a short daydream, wasn’t it?  Just last week I was talking about house hunting and/or using the equity in our house to get a HELOC loan to possibly make some improvements on our current house. Now I am back to my original thought for at least right now – uh-huh, no way, not gonna happen.  And here’s why:

Self Employment Ain’t All Rainbows and Butterflies

There are a bunch of things that I have learned lately about self employment.  Did you know that banks really do not like the self employed?

Banks

  • Banks want 2 years of tax returns and they need to show the income from the current job.
  • We’ve only been making reasonable money online for about a year so we look bad on paper.
  • It is a red flag to make 30% more from one year to the next.

And if banks don’t make it hard enough, there’s the actual day-to-day financial stuff of working from home jobs to deal with.

Life Finances

  • Income is far from guaranteed.
  • Even if we make enough, thanks to the mortgage issues, we will need to save all of the extra for buying a house in cash or along with a home equity loan.
  • During the bad months, I want to have a hoard of cash and investments to look at to make me feel better.

And even if I got over the weird income stuff, I keep remembering why I thought I’d never buy a house again anyway.

Regular House Hunting Crud

  • Old homes have maintenance issues quicker usually.
  • Newer homes are even further out of the city than we are already.
  • Mr. BFS and I can afford to be really picky now, so even browsing can be a nightmare.
  • We would have to stage, repaint, and fix up our current home for rent or sale.
  • Moving sucks.
  • We really don’t have time right now to look properly or move if we found a dream home.

So good investment or not, I do not think we will be buying our next home in 2012 but maybe I will feel way more secure in 2013. If we do we will be looking into better home warranty plans since we definitely see the value now.  Mr. BFS is okay with waiting too even though he doesn’t have all of the same fears.  He does agree that being able to buy the next home in cash would be awesome.  🙂 We do want to compare the best home security companies next time we get a house since we both agree this would give us more peace of mind even in a nice neighborhood.

38 thoughts on “House Hunting on Pause”

  1. Money Beagle

    Sounds like you’re being realistic. Keep your options open, though, you never know when the right opportunity might come your way and it will certainly happen when you least expect it.

  2. Steve Mertz

    Moving does suck! My quaint 20’s bungalow that was my first purchase soon needed: insulation, upgrade electricity, new furnace and new roof….Good Luck!

    Banks and self employed-not so friendly, which is so weird because of all we do for the economy….

  3. Andi @ MealPlanRescue

    I was afraid of that. Since I had two self-employment side businesses, my mortgage info was a nightmare, and the verification process nearly gave me an aneurysm. At the rate you are currently able to potentially pay off your house, I wouldn’t worry about how quickly you’ll be able to purchase a new one; it will happen sooner than you think and you may be able to get an even better deal with cash in hand.

  4. Modest Money

    Sorry to hear this, but paying cash will be that much more satisfying. If you are still eying the property prices, it might be worth talking to a mortgage broker. Originally I talked to a mortgage rep from my bank and he basically told me to come back when I had more employment history with my home business. Later that year when I talked to a mortgage broker, he pulled some strings and I qualified for a mortgage at a very low interest rate.

  5. Michelle

    I agree with the others, it’s good to be realistic. I didn’t even think about how banks might not like you guys because you don’t have 2 years of income. Makes sense.

  6. Brian

    Yep, lots of people pay lip service to self employment, but when it comes to doing anything meaningful, they make it a real hassle.

    I had a *higher* income when self-employed, but it didn’t matter to the banks (even the credit union) when I wanted to refinance. Not to mention that self-employment income (at least for this geek) is far more steady than the 5 imploded tech startups I’ve been laid off from over the course of my career…

  7. Aloysa @My Broken Coin

    I agree with you – loads of cash and investments are important for feeling secure when income is not guaranteed. It is one of the reasons we are not buying any house now, and staying in our small condo. I want to feel secure, because I remember how I freaked out I was when we moved in our now condo. I don’t want to go through this again. Kudos to you to toughening it out.

  8. Elizabeth

    I wrote an article about my current house hunt last week on one of Suba’s blogs – and I’m going to tell you the same thing someone told me about the bank’s “income rule” regarding freelancers: your income is WAY more stable than someone with a full-time employer! One of your customers drops you, you’re not in major trouble. My husband’s boss fires him, he is in BIG trouble. You get your income from multiple sources, as opposed to a traditional W-2 employee who gets their income from a single source. To me, that’s way more stable!

  9. Thad P

    Being self-employed can have challenges, but I’ve read enough of what you have written to realize it can have amazing opportunities too. Besides, start a new savings account to set aside money as if it were your house payment (assuming you can do that now). When you meet the criteria you’ll have a huge down payment!

  10. mycanuckbuck

    It’s a lot of work to buy a new place and sell your old one – and it’s exhausting. And since you work out of your place, it’d really suck if you didn’t have somewhere to live for a bit. Sounds like you’ve thought things through and have made a good decision.

  11. Steve From Texas

    I’m glad you are taking a break. However, you can also just save the cash up, you will have extra each month.:) Then just write one check and be through. I like not having a house payment.

  12. Jai Catalano

    Yes I am self employed and the banks don’t like me. It’s probably because I fight with them and try to make viral videos about them sucking.

  13. Savvy Scot

    It makes sense to focus on your business just now when it is doing so well. Keep hard at it and you will be able to buy a home with cash in no-time. Forget the banks 🙂

  14. Kraig @ Young, Cheap Living

    Cheers to buying your next house in cash! That’s what I’m aiming to do as well. The thought of a mortgage scares the crap out of me and I figure, I can do this. I actually think I can, on my own. It’s going to be a long process and I’m going to have to be very patient. I love the patience you and Mr. BFS have. That will help a lot throughout this process for you two!

  15. Denise @ The Single Saver

    Good decision. If things go according to plan, I will be paying off my house this year… if not this year, for sure next year. And I don’t ever want to have a house payment again. Once your house is paid off soon you will have so much financial freedom you will be giddy. In tougher economic times you will have the peace of mind of knowing no one can take your house away. Trust me… you made a GREAT decision right now.

  16. WorkSaveLive

    It sounds like you’re making a great decision. Being self-employed does suck when it comes to getting financed for a house!

    I was helping my boss get things together when he was trying to buy a $400k+ house. It took FOREVER and required him to visit multiple banks.

    Good luck Crystal! There isn’t anything wrong with waiting.

  17. Little House

    Yes, having a self-employed income makes banks wary. But, just think – if you put off buying another home for a year or two, you might just be able to purchase it for cash and avoid the banks altogether. Who needs the stinking banks anyway?! Right?!

  18. Nick

    Yeah, you’re definitely thinking it through for sure. And as a bonus you could end up just getting ahead of the mortgages by saving up for two years and paying cash (or close enough to cash that the two years of records will make it really easy to get a small mortgage).

    I was curious how your house hunting was going to play out down there… now I guess I need to keep reading BITFS for two years to find out 🙂

  19. Jessica

    Sounds like you had a lot to think through, and I think you’ll make a better purchase by not rushing into it. Plus, even if you buy the perfect home right now with a bank loan, it would be difficult to enjoy your new home if you are constanly worrying about income, and about having enough cash when things break down or need to be replaced.

  20. Rachel

    I think your making the right decision too. Paying with cash for your next house will be so fulfilling!!! Keep on paying that mortgage and save save save!!

  21. Shondell

    I agree with buying your next house cash! There will be such a freedom!

  22. Jenna, Adaptu Community Manager

    Thanks for keeping us updated on your short lived dream. Don’t worry I won’t let you pessimism hold me back. I’m still on the hunt!

  23. Hunter - Financially Consumed

    With your cash flow and the price of homes in Houston you’ll easily be able to pay cash in a year.

    We applied for a mortgage last week and the bank took my income off completely as my self-employed job title threw them completely. I’m not earning like some in the major leagues but I was proud of my little contribution to our househole income 🙂

  24. Young Professional Finances

    Seems like a good idea – plus you’ll definitely be able to pay cash in the near future! Dealing with a mortgage and lenders is a huge headache so I think it will totally be worth it.

  25. Julie @ Freedom 48

    That’s a tough break… but I can understand why banks would have these rules in place. It’ll just give you that much more time to shop around, plan, save and anticipate the purchase of your next home.

  26. Thomas - Ways to Invest Money

    I actually like this plan better for you any ways. I used to work at a bank and it is tougher when you are self employed. The funny thing is the make a lot of the money off of business owners.

    30% increase income is hard for banks to swallow but makes sense. Buying a home with cash is a goal I have as well. To think you two could have two homes completely paid for.

  27. Bryan

    Good to hear that the two of you are on the same page. Just keep plugging away and stashing all the cash away that you can for the future house and what will be needed to fix the current one you have. Banks are bogus anyway.

  28. Dr Dean

    House hunting is such a drag. You sound too busy to do a decent job of that. And the bank stuff-what a nightmare. A small local bank would probably give you a second look, but you’d still have all the other reasons to put this giant step off until another day (year).

  29. W-at-Off-Road-Finance

    Given that Case-Shiller is still falling for most markets, there’s no economic reason to buy a house right now. Personally I have no intention of inconveniencing myself just to suffer a capital loss a housing prices keep falling.

  30. Darwin's Money

    Buying in cash would be awesome; or perhaps would banks lower their strict criteria a bit if you had more skin in the game, like a 50% down payment?

  31. Dannielle @ Odd Cents

    I thought that it was only the banks in Barbados that gave you strict guidelines for loans. But if you can buy your house with cash, that would be sweet.

  32. ODWO

    Buying all or at least well over 1/2 of the cost of a (dream) home … yes, that would be awesome. 😉

    The only question I could raise is …. would that “sum of cash” be put to better use elsewhere (for higher growth)? If not … go for it! Good Luck.

  33. Evan

    The Wife and I are looking now and man is it tough! The looking and selling our place is draining at best.

    With your ability to save and considering the area you live in you may be able to be mortgage free on the next home.

  34. SB @ One Cent At A Time

    The realities of self-employment. All of these things are no-issues for salaried employees.

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