Recommendations on How to Pay for Both at the Same Time

Spoiler alert: For those of you who are in the market to buy a house, houses don’t come with blinds- mind blown!

Almost 20 years ago, when my husband and I were newlyweds, this insignificant fact threw a total wrench in our carefully orchestrated plans. How could we not think of this? We budgeted for appliances, estimated utility bills, etc. but somehow this simple fact flew right under the radar for us- and little did we know, blinds are expensive! So we did what any other respectable young couple would do, we had a temporary fix. Blankets and sheets for the windows in the back of the house and fancy paper blinds for the windows that everyone could see in the front. We weren’t exactly candidates for the cover of Architectural Digest, but we were as happy as we could be! The causes of our limited funds (1) we were fresh out of college, barely starting our new jobs and (2) we were buying a new home and paying for a wedding at the exact same time. We had nothing saved and were paying for our future with each bi-weekly paycheck. Over my 15+ years as a wedding planner, I’ve realized that there are so many couples that are living this exact same reality. I meet couples who are plagued with the decision of choosing between having the wedding of their dreams at the detriment of living their worst nightmare- never becoming a homeowner. If this dilemma is your reality, today’s post is sure to lift your spirits.

What can you expect to spend on a house?

According to the website Zillow, the average listing price of a single-family home in Houston was about $348,000* in July 2018. Based on a 30-year fixed mortgage with a 5% interest rate and assuming a 5% down payment, this equates to a monthly mortgage of about $2500/month.

What can you expect to spend on a wedding?

The amount spent on a wedding is a little more complicated to evaluate. Multiple sources have average wedding prices in the Houston area ranging from about $20,000 to $40,000. However, based on the current spending trends that I’ve observed with my clients over the past 3 years, I believe that these estimates are very low.  By the time that every cent has been properly accounted for, my estimate is that you should expect to spend a minimum of $60,000 for a wedding with about 150 guests in the Houston Metropolitan area. These numbers are based on (1) selection patterns of products and services that couples are commonly requesting and (2) what local vendors are currently charging for these services.

Weighing the 1 to 30 Decision

Your wedding may be the most personal event of your entire life. There may not be another time when you will receive so much attention and be catered to by your loved ones in such an amazing way. As a bride myself, I cannot think of any other time in my life (with the exception of maybe childbirth) where I felt so special. Your wedding is an opportunity to have just one day that is all about you (and your fiance of course). Your wedding is one magical day where you can physically see your dreams come to life.   

On the less “magical” side, buying a home is practical, responsible. When you are “adulting” it just seems like the next logical step. Want to review lots of paperwork with dozens of places for you to initial and sign? Does selecting of the best crown molding or shades of “greige” for the walls sound like fun to you? If not, don’t worry, you are not alone in your “enthusiasm”.

In comparison, the process of planning a wedding seems to be so much more rewarding than the home buying process. Wedding planning may seem like a party while buying a home may feel like doing homework on a Friday night- until you begin looking at the financial details of both. You may have noticed in the wedding paragraph my repeated use of the word pairing “one day”.  This is no coincidence, this is to emphasize the fact that your wedding is typically one day. This is in comparison to the most popular type of mortgage, a 30-year fixed mortgage, meaning that it will take you and your partner about 30 years to pay for your house in full.

SO WHY IS A WEDDING PLANNER EVEN TALKING ABOUT HOME MORTGAGES?

About 2-3 times a year, I am approached by young couples who ask me what I would do if I were in their shoes. Would I finance a large wedding now and wait to get a home later? Or would I go for the starter home now and postpone the formal wedding? Gasp and swoon if you must, but this is probably going to be one of the most “un-wedding coordinator-like” responses that you’ll ever hear from a planner- I almost always tell them to go for the house.

As a wedding coordinator, I not only care about one special day in my clients’ lives, I also care about how well they live in their “ever after”. It brings me no pleasure seeing couples struggling with mounds of credit card debt after a gorgeous event while their living situation is less than ideal.

I want my couples to not only be happy, but also at peace with their decisions.  Their decisions also include hiring me. I find that the working relationship between client and planner is so much more rewarding if the couple is not under financial duress to plan their event, no matter what their budget is. I want my clients to be relaxed and confident in making their upcoming financial plans. I want them to be assured that the decisions we are making together will not jeopardize their financial future.

This is the “1 to 30” question: Should you put most of your financial efforts towards one day or towards the next 30 years of your life? Believe it or not, this doesn’t have to be an either/or decision, but it is definitely a calculated compromise. It is completely doable to become a new homeowner while becoming a newlywed if you plan carefully. Now that I’ve provided you with some basic spending projections for both major events, let’s discuss the schedule for how these funds are often requested.  

Typical Payment Schedules

Contrary to popular belief, B-U-D-G-E-T is not a four-letter word. Although some recent sources have touted the use of a budget as limiting and antiquated, let’s just face it- they work!

I find that determining how much and when you are going to spend money cures a multitude of problems. Having debilitating credit card debt and not having enough savings accumulated to cover unexpected expenses are the most common obstacles for many young couples to overcome.

By nature, both buying a home and financing a wedding will involve the introduction of miscellaneous expenses that unfortunately cannot be avoided. Often, these expenses are not apparent  until the time has come to pay them. No matter how precise you are, there will be incidentals that you will have to leave room for in your budgets. That being said, I believe in minimizing the incidentals as much as possible and carefully planning for the things that you are aware of.

Since you are dealing with two very “fluid” events in your life, it is so much easier to figure out how to make the two “play nice” while you are in the development stages as opposed to waiting to a point where your options are few and you are locked into a financial bind. Figuring out the timing and projected expenses for buying a home and paying for a wedding is the key to finding your perfect solution.

WEDDING PAYMENT TIMELINE

Based on prior experience, almost 80% of your entire wedding budget will involve the use of a vendor. Working with vendors and vendor contracts is much different than DIYing it and/or purchasing onshelf items directly from retail. In exchange for providing professional, reliable products and services you must abide by their contracted requirements for payment.  Professional vendor contracts involve very specific payment terms, but rarely include options for “refunds” that do not involve some sort of penalty fee.

In order to secure or book a vendor, a deposit or retainer is required to hold your date. While some vendors may do a “courtesy hold” on your wedding day for a few days, most require the full retainer amount at the time of your inquiry. Typically, vendor retainers/deposits can range from 20-50% of their total fees. Some vendors may allow you to make a smaller deposit for a nominal fee; however, they will typically require that you make installment payments based on their required amounts and according to their specific payment schedule.

If you decide to select your perfect vendor but wait to make a formal booking (with a contract and payment), it is very likely that you will be disappointed to find out that your vendor of choice is no longer available for your original date. Vendor calendars book fast and are typically based on a first-come, first-serve basis. Here are a few guidelines on when to book your vendors:

• Wedding Planner & Venue- at least 1 year prior

• Photographer/Videographer- about 9 months prior

• All other vendors- about 6 months prior

After all vendors are confirmed, hopefully 6 months or more before your wedding date, you should experience a brief financial moratorium from large vendor payments for approximately the next 4-5 months. This is an appropriate time to purchase smaller, retail-style items such as wedding invitations, gifts for the wedding party, jewelry and shoes, your ceremony sign-in book, printed programs, unity candles, the ringbearer’s pillow, etc.

You will then experience another round of large payments somewhere around the 6-week mark.  From this point onward, the remaining payments for all of your vendors are typically due within 6 weeks of your wedding day.

HOUSING PAYMENT TIMELINE/STEPS

Now let’s look at the housing payment timeline.  Throughout the home buying experience, you should come into contact with the following housing professionals as shown below:

• Loan Originator

• Realtor

• Home Builder (for new homes)

• Title Company

• Underwriter

Step 1A: Application

Although it’s tempting to immediately begin your process by going house hunting, you should always be aware of  what your home-buying budget is in advance. Rodolfo Cooper, Loan Officer with Nations Reliable Lending, LLC (NRL Mortgage) recommends that any couple looking to buy a home should start the process by locating a Loan Originator such as NRL Mortgage.  A Loan Originator will be able to help you determine how much you can afford to spend on your home through a process called Prequalification. At the end of Prequalification, you will receive a letter estimating how large of a loan you will be able to take out or borrow.

Step 1B: Selecting a Home/Making an Offer/Executing a Contract and Initial Fees

After Prequalification, the Loan Originator can then assist you in selecting the perfect Realtor. Alongside your Realtor, you can then begin searching for properties that match your needs as well as your financial abilities. For new homes, you may also work directly with the Home Builder.

Typically, you will not be paying the Loan Originator or Realtor directly. They will receive compensation based on a percentage of the total loan amount and a percentage of the total cost of the sale respectively. However, you may be required to make an earnest payment to the Realtor and/or Home Builder as a security deposit. This ensures that the Realtor and/or Home Builder are both compensated for their efforts in the event that the transaction is not completed.

Once you have selected a property, made an offer and signed a contract to purchase, if applicable, you will be required to make a the earnest payment through a Title Company or broker. Earnest payment amounts are commonly negotiable and typically range between 1-2% of the home purchase price. FYI, miscellaneous upfront costs to the buyer may also include appraisal and inspection fees.

Steps 2 & 3: Processing and Underwriting

Processing is the next step. This occurs between your Loan Originator and the Title Company. After your file has been reviewed by an Underwriter and your loan has been approved you will then begin the Closing process.

Step 4A: Closing/Paying Closing and Down Payment Fees

At Closing, you will be required to pay your closing fees as well as your Down Payment. Closing fees are typically between 3-7% while Down Payment amounts can range between 5-20% of the total value of the home.

Although this concludes your loan process, this may not be the the final group of large payments that you will have to make before move in.

Step 4B: Paying Miscellaneous Fees After Closing/Making Monthly Mortgage Payments

Depending on the physical state and the amenities included with your home, you may also have some one-time fees to pay for such as a refrigerator and/or a washer/dryer as well as fees to pay home inspectors, etc. Your first monthly mortgage payment should begin approximately 45 days after move-in since the first month’s payment is typically automatically included in your closing costs.

Also be mindful of when annual property taxes and home insurance payments are due if they are not escrowed or lumped into the monthly mortgage payments.

COORDINATING THE PAYMENT TIMELINES

Every couple’s solution to “multi-financing” is going to be different depending on four major factors:

1. Budget for housing

2. Wedding budget

3. Target move-in date

4. Flexibility with wedding date

Consider these major factors as you read through our tips. Hopefully, this will help you develop a strategy for you and your mate to reach the perfect compromise.

4 Tips for Great Compromises Between Home and Wedding Budgets

4| PURCHASE A LESS EXPENSIVE STARTER HOME TO AFFORD THE WEDDING OF YOUR DREAMS

A starter home is defined as a smaller, economical home, townhouse or condo that a couple may purchase knowing that they may outgrow it in five years or less with the expansion of their family. Because the cost of your starter home may be much less than the cost of your dream home (depending on the location), your upfront costs and monthly mortgage payments should be less than what you originally anticipated.  With more disposable income, use that money and apply it towards the cost of your dream wedding. Once your wedding is paid for in full and you and your partner have more time to save up, apply those funds to the down payment on your forever home.

To coordinate payments using this scenario, I recommend having the estimated amounts of your Earnest, Down and Closing Payments in savings (1) before you select a final wedding date, if possible and (2) prior to paying vendor deposits/retainers. This would mean that most of your wedding payments would occur at the time of and/or shortly-thereafter you begin seeing consistency with monthly mortgage payments and fees.

Pro:

• You may be able to make payments for your home and your wedding at the same time, depending on the cost of your wedding

Cons:

• It may take longer to pay off your wedding than anticipated

• May include lots of credit card debt (and higher interest payments) if your monthly mortgage payments do not leave enough expendable income to pay for your wedding

• May take you longer to get into the home of your dreams; original “5-yr starter home plan” must be reevaluated if you have children and need more space sooner than 5 years after you’re married

3| PURCHASE YOUR DREAM HOME AND HAVE A SMALL, INTIMATE WEDDING

With most of your funds going towards your new home for this plan, some creativity will be required to plan your small wedding. Although you may be working with a limited budget, intimate weddings can be incredibly beautiful and romantic. The best way to pull off a fantastic, small soiree is to (1) keep the logistics simple and (2) spend your wedding budget on categories that will give you the most visual impact.

Venues for small gatherings

Logistically, you will want to keep your wedding guest list small, around 50 people max. When securing a reception venue, look into restaurants, small boutique hotels and country clubs. These venues are ideal if they have private party rooms for the reception and offer the complimentary use of other scenic areas for a quick 15-20 minute ceremony.

Outdoor weddings

If you are having an outdoor wedding, make sure that you are flexible with either braving the weather and/or moving the event inside. Neighborhood parks, clubhouses, public beaches, ponds, or even your own backyard are all great options for outside weddings. Please note that the costs of renting basic necessities such as chairs, tables, additional restroom facilities, flooring, tent coverings, lighting, fans, alternative power, etc. can add up very quickly. Additionally, some public spaces may also require permits. Parking and noise sensitivities are other hidden obstacles, more specifically for backyard events. Having 25+ cars parked in front of your house and having 50 people at your home at once may upset your new neighbors and/or violate your homeowner’s association stipulations, make sure you do your research in advance.

Destination wedding

Having a destination wedding that doubles as your honeymoon is also a great option. Invited guests typically understand that they are responsible for their travel and lodging expenses.  In reference to your wedding budget, this leaves only your own travel and lodging expenses, food and drinks for guests, decor and other small incidentals.

Don’t forget to consider domestic destinations. Plan a fun-filled weekend get-away with close family members and friends. Even some ornate US city halls provide a gorgeous backdrop for couples in love at a fraction of the cost.

Visual impact

Emphasizing visual impact creates the illusion of a posh, larger scale wedding and photographers are essential to creating this illusion. Regardless of the wedding size, couples typically go over budget on decorative elements and floral arrangements because they are trying to ensure that spaces don’t look sparse, baren or unintentionally minimalistic. This is particularly important for a smaller wedding.

With a smaller wedding, you will have fewer guests to fill up empty spaces and typically a smaller floral and decor budget. If not planned carefully, your final wedding photos may look cheap and plain. However, if photographed correctly implementing photography techniques such as using interesting positioning or point of view, providing excellent lighting and perfecting camera settings can make even the most basic wedding set-up look like a million bucks.

If you can splurge on one thing for your small wedding, make it the photographer. In order of priority, I would then focus on finding a venue with interesting architectural elements such as a colorful or textured wall, interesting flooring, large windows, or stairs and/or a venue with an abundance of natural elements.

Begin creating Pinterest boards to determine your style and find a photographer that can replicate the look that you are trying to achieve. Your photographer and wedding planner should be able to give you some tips on color palettes, attire, the use of props, flowers, and greenery to help you achieve “bridal magazine status” photos. They can also help you select venues that photograph well and determine the best lighting solutions. Answers to such questions as ‘When is the golden hour? Can we add inexpensive uplights to obtain better photo quality?’ will guarantee picture-perfect results.

Pro:

• You will be able to purchase your dream home and have a small wedding

Cons:

• If you’ve always wanted a larger wedding, you may feel as though you’ve missed out later on in life

• Everyone won’t be able to attend; some family members, friends, and co-workers will not make the final cut of your abbreviated guest list

2| BEGIN PAYING FOR YOUR WEDDING NOW AND ONLY PAY THE UPFRONT COSTS FOR YOUR HOME

Based on the Estimated Wedding Spending Schedule listed above, this scenario involves the payment of ALL retainers/deposits for all wedding vendors 6-12 months before the wedding. Your upfront home costs (Earnest, Down and Closing Payments) would be paid during your wedding financial moratorium, approximately 6 months to 6 weeks before the wedding.

Pros:

• You will not be financing the “heaviest” portions of both your wedding and home at the same time

• Due to the timing, this may be one of the best scenarios for couples who do not want to live together before getting married

Cons:

• Adherence to wedding budget is mandatory

• When selecting vendors, signing contracts and making deposit payments to vendors, going over budget may not have leave you with enough funds available for your upfront home costs

1| POSTPONE BUYING YOUR HOME AND YOUR WEDDING DATE UNTIL YOU HAVE ENOUGH FUNDS SAVED UP

If you don’t have a target wedding date in mind, I think this is by far the best option. I like this option because it affords couples the time required to do any necessary research before any financial transactions are made.

With this scenario, I would advise couples to begin the cycle of consulting with two critical people- a wedding planner and a Loan Originator. For a nominal consultation fee, a professional wedding planner can provide you with an itemized budget, projected vendor list, sample contracts and a payment schedule. These items would then be aligned with a payment plan based on your prequalification letter, created by your Loan Originator. Your Loan Originator could also give you estimates on what your Earnest, Down and Closing payments would be as well as your monthly mortgage payments. Based on these findings, the wedding planner would then be able to provide you with target dates for your wedding based on your ability to save in addition to possible contributions from other family resources.

Pro:

• High probability of completing this experience with little to no financial debt

Con:

• May create a longer engagement period than originally anticipated/wanted

Final Thoughts

Ultimately, simultaneously buying a home and paying for a wedding is a leap of faith for any young couple. However, the journey doesn’t need to feel overwhelming. With the proper professionals by your side, your choices can be a little less scary.

Need more specific help? Reach out and we can figure out what options work best for your timeline and budget.