How did we get here?

Good question, I'm glad you asked!! It all goes back about four years ago, in a galaxy far, far away...

OK, not really. In November of 2004, my family (husband, one daughter, another daughter on the way) and I moved to Northern Virginia to be closer to family. We knew there was a higher cost of living here (as compared to upstate NY) but figured salaries rise to meet that, so it would be fine.

We rented for a year, and as the year was drawing to a close, we realized we needed to think about buying. The real estate market at the time was crazy - no exaggeration, about 20-25% gains every year since 2001ish. We knew that if we didn't buy soon, we would be priced out of the market and would never be able to buy. At the time, my husband made about 56K (I stay home with the kiddos). We contacted a realtor and started looking. We could only afford condos - single family homes, and even townhouses, were way out of our price range. We ended up with a 2-bedroom, 1-bathroom condo, about 950 square feet. We knew that we wouldn't be able to stay here forever, but we thought 5-7 years until the kids get bigger, and then we'll move up to something more. The price for our little piece of paradise? $272,000.

Luckily, we were smart enough to know to stay away from those exotic mortgages (ARMs and such) and just got a plain-old, 30-year fixed-rate mortgage. It was financed 100% through a state program designed to help low- and moderate-income families. Because of this program, we didn't have to pay PMI, and the payments were interest-only for the first 7 years.

So let's stop here for today. You might have some good questions, like:

1. If you were priced out of the market, so what? Maybe that means you picked the wrong place to live or have the wrong job.
2. Why buy when you weren't prepared for it? You didn't have a down payment, so you should have just waited.
3. Why the HELL would you be approved for a $272,000 mortgage on a $56,000 income?

All excellent questions, I assure you. As to 1 and 2, blame that on financial inexperience. We were 26 (me) and 24 (husband) at the time. Just not much time in the "real world" yet. The answer to 3 was that these were the boom years! Anyone and everyone could get a mortgage. We could afford our payments, just barely. Our monthly payment, when you figured in mortgage, property tax, and 2 homeowner's association fees (one for the condo community, one for the HOA in our part of the town) came to $1,830. That means that we were approved for a mortgage payment totaling almost 40% of my husband's gross monthly income. However, I actually worked a small part-time job from home, which added about $1000 to our monthly income. The lender wouldn't consider that income when we applied for the loan because I hadn't worked this job for a full year, but we knew we had it and it gave us some breathing room. (In retrospect, thank goodness they didn't consider it, because we would have gotten a more expensive place, and I truly don't know that we would have been able to afford it.) Also, we figured our income would go up and it could only get easier.

That's it for today! Stay tuned for the next episode...