Looking ahead pays off until “boom”!
This reader story comes from JenB. Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks with all levels of financial maturity and income.
I thought I had it all figured out, but the middle-of-the-night panic attacks have started again as a result of a little piece of mail I received this week. You see, I'd finally made the scary decision to quit my job and stay home with our first baby (for at least a year) when — BOOM! — our annual escrow account disclosure statement arrived in the mail.
I didn't even know this could happen, but our mortgage payment is going up $600 a month starting in three weeks with our next payment. “What?” I thought I had looked ahead for every possible snag in my plan. It turns out you may not necessarily see everything that's coming … and sometimes you don't even know what you should be looking for until it arrives in the mail.
Here's our story: My husband and I got married in July 2012. In 2013, we chose to fast forward and buy a house and have a baby. We were able to save enough cash for a ring, our wedding, and a 10 percent down payment on our first house, thanks to my husband's lucrative pay structure at work. However, we knew his income would take a hit when new management took over in less than a year. So we looked ahead and it paid off — we lived simply and saved enough to do the big things we wanted to do and a little extra for an emergency fund.
When the cut in pay came, it was really hard to swallow, but we were in a good place. We had our house, a six-month emergency fund, two paid-off cars, and a small student loan that I have been chipping away at steadily. We wanted a baby right away because, while I'm still seriously young, according to the doctors I'm of advanced maternal age. Despite that, we were blessed with a baby boy at the end of 2013. I teach outdoors in my full-time job and we live where there are cold winters, so I make all my money from April to November, even though I collect a small salary year round. Having a baby in September was great because I was off work until March of this year.
Then — “BOOM!” — my company was bought out in December and my new company was not exactly tolerant of my relaxed winter schedule. As they pushed me to come back to work earlier and I attempted to juggle the baby and working more with occasional help from my in-laws, it hit me that I really wanted to stay home with this adorable guy all day long instead of going back to work, at least for the first year. I feel like I've waited my whole life to have this baby in my arms and I'm not ready to turn him over just yet. I wish I would have seen that coming!
That's when I tried to see if quitting my job was feasible now on my husband's reduced salary. We could have done things a lot different if this was our plan from the beginning — smaller ring, smaller wedding, smaller house — the list goes on. But that's a whole other article that young people won't listen to anyway. (You have to make your mistakes, right?)
So I whittled away at the budget, figured out how to bring in a part-time income with a side business to cover the shortfall, and faced the sacrifices I'd have to make in luxuries — done.
Then that dreaded letter arrived. I cried after reading it. Apparently, we had a shortage in our escrow account after the first year of our mortgage that resulted in the mortgage company increasing our payment by $600 a month. It seems to be a result of our county property taxes being higher than anticipated when we closed on the house. From what I've read, that often happens on new construction because the original estimates are based on the land, not including the dwelling you've built on it. I had already figured out how to bring in an additional $800 a month working part time (while the in-laws watch the baby twice a week).
Where am I going to find another $600? Well, I don't have the answer quite yet. Here's my plan to start:
- I'm going to call the county tax office and confirm that our mortgage company has properly estimated our 2014 property taxes.
- I'm going to see if the entire escrow shortage and extra cushion can be paid in full up front and not added to our monthly mortgage payment. (Goodbye tax return.)
- I'm going to research at what point our PMI can be removed from our mortgage. (We needed a 20 percent down payment to avoid this in the first place.)
- Then I'm going to call the mortgage company and see if they can spread the amount over a longer period of time, like 24 to 36 months instead of just the 12-month period.
- Finally, it's back to the drawing board to see where I can squeeze in a few more part-time hours to make up the difference OR where I can sell some things to bring in extra money (like the boxes of hockey cards hidden under the bed).
If anyone has suggestions for how to tackle (avoid) such a hit from the mortgage company, I would love to hear them. I have one month to figure it out before I'll be expected back at work full time. Hopefully there aren't any more surprises!