Crossroads Planning


Looking to Buy a New Home? Be Sure to Avoid the Critical Mistake I Made

Buying a new home is one of the biggest, most life-changing decisions you will ever make. It’s also one of the most stressful experiences you’ll ever go through. There are so many things to think about – from finding the right location and price range to whether or not there are enough bedrooms for your family size. That’s why it’s important that you do as much research as possible before making such an enormous decision. 

In this blog post, I’m going to share my recent experience of purchasing a new home and the huge mistake that I made that (hopefully) you can learn from.

Let’s jump in. 

In early 2020, my wife and I made the decision to buy a new home to accommodate our growing family in an area that we thought would show significant property appreciation. Since we would be looking to buy again in five years, we wanted to make sure that our investment would grow as much as possible in a relatively short amount of time, or at a minimum, max out our 121 exclusion

But this wasn’t the typical search for a new home. 

Not only did we have to figure out what kind of new home we wanted, find the right location, and then decide if it made sense financially for us — we also had to refinance a rental property and sell our current home in the process.

As you can probably imagine, the entire process was stressful. 

Once we decided on the right neighborhood, I ended up waiting 18 hours in line at the sales office (along with a line of potential neighbors wrapped around the block) for the phase release that weekend. Fortunately, we were able to reserve the perfect home for our family and put a deposit down that day.

From there, the next step was leveraging my VA loan which was currently tied up in my rental property. 

Given the current lending situation, I would need to bring my LTV to 75% — which was not completely unexpected since our lender projected this would be the case when we started the process. 

Unfortunately, by the time the appraisal came back, we would end up having to bring in a significant amount of money to meet that requirement at closing.

To do this we repaid the outstanding balance on a loan from my wife’s 401k and borrowed the $30k needed for the funding. Additionally, we had to make a total of six trial payments and a loan modification to pull the loan out of forbearance — all while we were in the middle of construction on our new property.  

As if things weren’t busy enough, we decided to put our primary home on the market since real estate prices in the area had the potential to provide us with a significant return on our investment. 

Our decision paid off as we were able to sell fairly quickly and receive $35k over market value.  

The proceeds allowed us to put $100k towards my wife’s student loans, modify her loans at a lower interest rate, payment, and shorter loan life — all of which freed up monthly cash flow and gave us a healthy cushion for future remodels. 

But we weren’t completely out of the woods. 

There were a number of missteps along the way that made us want to shift lenders, but we (reluctantly) decided to stay the course. 

The result? 

The week of closing we received a draft closing document for what we thought was going to be a 0% down VA loan where we would only need to cover closing costs. Instead, the paperwork stated that we would need to come to closing with a check for just under $30k — as the appraisal on a new build in a new community came in below our expected amount. 

We found this odd because none of our new neighbors had an issue with their appraisals coming in below expected value but later found that our lender had known about the appraisal issue a few months back but failed to disclose it (probably because we would then shift lenders). 

With the potential of facing a $500/day penalty for each day we didn’t close, we had no choice but to move forward on the week of closing. 

But one last surprise was looming. 

In the final documentation, we were told that we had to come in with an additional $9k on top of the original ~$30k that we were told about in the preliminary paperwork. 

Lucky for us, the proceeds from our home sale provided us with the money to close on the rental refi and the new home purchase. But if it weren’t for that, we would have had to either figure out alternative ways to come up with a significant amount of cash or start the process all over and miss out on our dream home.

To say this was an eye-opening experience is putting it mildly. It has made me take great caution when advising my friends and family on their home-buying experiences. 

For us, the key lessons learned was to have the right lender in your corner. 

Unfortunately, we didn’t and as a result, we had to come in with around $90k to close on these deals. 

Thankfully, in the end we got our dream home and are now all settled but there were so many bumps along the way that could’ve been avoided with the right advice.

If you’re ready to take the plunge on a new home, I hope these tips help you on your home-buying journey. It’s not easy, but it can be a lot less complicated if you have the right partner in your corner to guide you through the process.

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