July 2009: Net Worth Update and First Time Home Buyer Plans

Published 7/31/09 (Modified 3/8/11)
By MoneyBlueBook

It's time for my monthly net worth report. As long time readers know, for months now, I've been calculating my networth changes and posting an analysis at the end of every month to chart the step by step progress I've been making in my lifelong financial journey. The purpose of such networth updates is not to necessarily boast about monetary successes or lament about the investment mistakes made during the preceding month - but rather, it's to serve as a routine reminder that the daily decisions, actions, and inactions in one's life truly have a ripple impact on one's long term financial health. While I post my own financial net worth reports throughout the year for my own statistical benefit and to share with readers a little about about what I've been up to during the previous weeks, this habitual exercise is also to encourage others to do the same as well.

It's About Time - I'm Finally Looking To Buy A Home For The Very First Time

This month has been a bit more hectic than usual. For one thing, I'm in the early stages of becoming a first time home buyer. Right now, my anticipated home purchase date is still likely months away, but I can already envision the prospect of finally moving out of my longtime apartment rental after all these years and into my very own single family home or town house for the very first time. If you've been following my previous networth reports, you probably already know that I've been mulling the advantages and drawbacks of buying a single family home or townhouse, versus a condominium. After much thought and back and forth debating, I've finally decided to focus exclusively on town homes and single family houses at this point. My goal is to find a nice home where I can reside for many years - at least 5-10 years or more. I think a condominium is well suited for single young professionals or busy working types who live in an urban setting and desire maintenance-free living with a kick-ass commute - but I don't think it's as appropriate in terms of investment upside or as a long term dwelling for individuals like myself who work from home and anticipate future family plans. I'm not presently married, but that stage in life is something I can see see and taste in the not too distant future. I think a house and particularly a single family residence, will better suit the future plans I have projected for myself.

In terms of housing location, I've yet to come to a definitive decision. As a long time resident of the Washington D.C. suburbs, I would very much like to stay in the same relative metropolitan area. However, due to the fact that I run my network of businesses from home, proximity to work and commuting time are not factors I have to really take into account. Thus, I am amicable to the prospect of moving out to the less crowded and less traffic jammed boonies of Maryland - areas like Ellicott City, Gaithersburg, and Germantown. For now at least, I'm passing on the resales, and focusing exclusively on new housing developments. There's something sparkling refreshing about owning a brand new home that greatly appeals to me. Particularly in a down housing market as it is now, due to all of the amazing closing incentives and free options that new home builders are shelling out for prospective buyers, it makes a lot of sense to purchase a new home instead of buying an existing one. As I don't have any immediate plans to move out of my current rental as of yet, I'm willing to be extraordinarily patient in my housing search - intending to move on to the next housing prospect if I can't sufficiently price gouge the prospective home builder to my utter capitalist satisfaction. Sure, I'm being a rather greedy profiteer about this whole thing, but I'm just doing my part to ultimately and forcibly put the pricing equilibrium back into this housing market. I still think housing prices remain grossly overpriced in most areas.

Hopefully I can work the plunging home value and foreclosure supply pain felt by the major home builders to my advantage as I negotiate prices, option upgrades, and improved floor plan bump outs. As a prospective first time home buyer in the aftermath of the worst real estate market collapse in decades, I'm so thankful to have dodged the housing bubble bullet just a few years. I almost purchased a starter condominium home a few years ago at the height of the boom. I missed out big time on the housing surge, but thankfully also wasn't locked in for the pricing collapse that ensued. My hope now is to snap up a great deal at the present time as housing prices are in the doldrums - and ride the price elevator up when the market recovers years from now. Those of you who are also prospective home buyers, don't forget to take advantage of President Obama's $8,000 tax credit incentive for new first time home buyers (assuming you qualify and aren't phased out due to your income).

My Current Net Worth and Financial Status Update Compared To Last Month

Assets Balance $ Change % Change
Cash $125,069 $91,101 268.20 %
Stocks $350,596 -$41,460 -10.58 %
Bonds $0 $0 -
Retirement (401K, Roth, IRA) $14,650 $67 0.46 %
Car and Vehicle Value $0 $0 -
Real Estate and Home Value $0 $0 -
Other Real Estate $0 $0 -
Total Assets: $490,315 $49,708 11.28 %
Debt and Liabilities Balance $ Change % Change
Credit Cards $1,749 -$3,863 -68.83 %
Car Loans $0 $0 -
Home Mortgage $0 $0 -
Student Loans $26,686 -$150 -0.56 %
Total Debt $28,435 -$4,013 -12.37 %
Total Net Worth
$461,880 $53,721
13.16 %

Planning Ahead and Saving Up For A Home Mortgage Loan Down Payment

In anticipation of my upcoming home purchase (hopefully sometime in the next few months), I've been saving up cash for the 20% down payment I'll inevitably need for a 30 year - 20% down - home mortgage loan within my approximate price range. If my dream of purchasing a brand new home at pre-construction comes to fruition, chances are I will probably only need to put down around 5% as a contractual security deposit for now. The rest of the money and even the mortgage application won't be needed and processed until the home is actually entirely built 6 months from the date that I authorize the home construction to begin.

Usually, the vast bulk of my savings are duly invested in stocks, exchange traded indexes, and mutual funds. However, to ensure that I set aside the necessary amount of funds for a potential mortgage down payment sometime in the near future and to protect myself from unwittingly investing the funds away, I've transferred a sizable amount of funds from my discount broker accounts into various high yield savings accounts at a number of online banks for more liquid access should I need to call upon them at the desired time.

Boosting My FICO Credit Score To Qualify For The Best Home Loans and Mortgage Rates

In my earlier days, I used to take advantage of the availability of free credit report and free credit score trial offers to check my FICO score and credit report history (promptly canceling each individual trial offer after I had obtained the desired information for no money down). But now that I'm more financially established and can actually afford to purchase more advanced credit management applications, I've been using the MyFICO Score Watch tool to track my FICO credit score updates and changes on a regular basis. The MyFICO tool automatically monitors my triple credit reports and FICO credit score - emailing me instant alerts whenever my FICO score changes due to sudden updates to information on my credit reports (doubling as a useful identity theft prevention tool as well). The best part is that whenever the online credit score tool informs me of an increase or decrease to my credit score, it also informs me of the reason why my FICO score changed the way it did. For example, about a months ago, my FICO score suddenly and rather inexplicably dropped 15 points. The culprit (as was automatically reported to me by the online tool) was a sudden increase in my overall credit limit usage due to several large credit card purchases I had recently made.

Because I am now on the verge of purchasing a new home and anticipate the need to take out a home mortgage loan in the coming months, I've been taking appropriate actions to improve my credit report history and boost my FICO score to the highest it can reasonably be. Because one's overall credit utilization ratio is such a major component piece of the FICO credit score pie, by making frequent extra payments towards my existing credit card balances and reducing balance transfer loads, I've been able to essentially reduce my credit usage ratio to nearly zero. As a result, my FICO credit score has recently enjoyed a very positive and significant spike. Due to aggressive and corrective actions I've been taking, my FICO score now stands at 813 - on a scale of 300-850. Generally 750-775 is sufficient to qualify for the lowest prime interest rates. My goal is to keep that number high - at least until I have completed the home mortgage loan process (whenever that may be). As home lenders rely heavily on an applicant's credit scores and credit reports to gauge risk level and to assess interest rates, it's in my own self interest to keep my credit rating as pristine as possible for the next few months.

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9 Responses to “July 2009: Net Worth Update and First Time Home Buyer Plans” 

  1. Emily says:

    Raymond,

    I'm from the DC area as well. You sound like you grew up or live in a nicer part of the DC Maryland side. Have you thought about moving to areas like Bethesda, Rockville, Chevy Chase, or even Potomac. I know those areas are more expensive, but the schools there are nationally recognized and highly ranked. If you're looking at future resell, choosing the right school district is very important. Not sure if that's within your budget but based on your networth income, it seems like you are doing very well for yourself

  2. Raymond says:

    Emily,

    Yes I grew up in the DC area. I did consider moving back to where I grew up - the Rockville-Bethesda area - however, the homes available for sale there are much too expensive and greatly exceed the budget I have set forth for myself. The homes there are also too old and the area is much too crowded and traffic congested for my liking. The schools there are definitely quite exceptional however - which is why that area remains so desirable and highly sought after by many.

  3. Scott says:

    Based on your 2009 income, are you disqualified from the $8,000 tax credit for first time homebuyers? Also, I cannot account or fully understand how your assets rose $49,572 from June to July 2009? Was this capital gains from your stocks' investments, and if so, do you have about 25% for your federal income tax?

  4. Raymond says:

    Scott,

    Yes, I am disqualified and completed phased out from the $8,000 tax credit for first time home buyers due to my income.

    My assets rose so quickly due to a momentary spike in monthly income. I generate ordinary income from a few sources - namely my legal practice, my online businesses, and a few other ventures I've been working on. I'll talk about them all sometime in the future. I believe in diversifying one's income and have been working hard at accomplishing this objective the past few years.

    I use a cash basis form of accounting, so no.. my asset increases don't immediately reflect my federal or state income tax witholdings. As I am fully self employed, I do have the quarterly tax payments that I must make. Four times a year, my monthly income reports will reflect this sudden asset dip - attributed to the quarterly estimated tax payment I must make.

  5. Gina says:

    Don't buy a house in Maryland or DC. I heard the market in CA is good. Why don't you move over here and teach me how in the world to blog myself RICH like you.

    Good luck with your home purchase. And, btw, what kind of stocks did you invest in? I need some financial insight Ray.

    Thanks. Hope things are well. Let me know!

  6. NightTrader says:

    Based on what I've been reading from the blogger's other posts, it doesn't seem like the author generates the bulk of his income through simply blogging online. It's just not financially possible to generate that much income through a mere blog methinks. I think he makes money online as a side part time business but gets the vast percentage of his revenue from his legal practice and other real life businesses. I wish he'd share more about his regular day time job business though. Working from home is great but I have no idea what he does to make it so big. So mysterious!

    Do you run a franchise or a real estate business on the side? How in the world did you manage you generate so much income quickly. Inheritance? Lottery windfall?

  7. AMH - Life & Annuity Quotes says:

    Congrats on buying a new home. Your tips are useful for those of us who are thinking along the same lines - especially the credit score info.

  8. Grasshoppa says:

    Hmm...Nighttrader, people can make millions by blogging...so it is quite financially possible to generate an insane amount of income through a blog. However, I agree - Ray, you are quite mysterious! I'm an attorney, and I definitely know I am not bringing that much cash home with me.

    Well based on Ray's financial advice through his blog, maybe he's just GOOD with his money, i.e. in terms of spending, investing, saving, generating. He just knows something we don't. I have faith that you'll share all your secrets with us one day.

    So where can one go to meet you in person??

  9. Laura aka Green Panda says:

    Congratulations! It seems as you're going about this home buying process correctly: running the numbers, saving a down payment, and keeping to a price range.

    We're in a similar boat and we're taking this step by step. I wish you the best!

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