Monday, May 17, 2004

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The big leap

Modern American life has created a staggered series of events for people to acquire the trappings of a grown-up -- graduating from college, choosing a career, getting married, having children, etc.

Having experienced all of these (I did not bear the children, but you get my meaning), I actually think the scariest was the decision to become a property-owner.

Which is why I can identify with Laura of Apt. 11D, who may not be at that location for much longer:

My stomach is in knots. I fear that I might blow chunks at any minute. My brain can not hold a thought for more than a nano-second.

I think we bought a house....

We put in a bid. They upped it by a little and told us about the gutter problem. We accepted. Tomorrow we'll call the bottom crawling lawyers and I suppose that's it. Provided the inspectors don't find bugs. Good Lord, what have we done?

What you've done, Laura, is take a very big leap. Sounds like the right thing to do, but a big leap is a big leap, even when you clear the chasm.

Brad Delong suggests: "I have one piece of advice: fixed-rate mortgage."

posted by Dan on 05.17.04 at 03:01 PM


Our house will be paid for in just a few years. That removes a lot of economic pressure. We will be paying less than 8% of our total income on a place to live. What is the single most important thing you might want to consider? Answer: the size of the house. Many families have trapped themselves into paying for a dwelling which is far larger than they actually require.

posted by: David Thomson on 05.17.04 at 03:01 PM [permalink]

My wife and I had similar explosions of doubt, uncertainty, and upset stomach when we bought our first house. After less than a year of making monthly mortgage payments we decided we couldn't remember why we made such a fuss.

Of course, the stress and budget induced weight loss was awesome!

posted by: steve on 05.17.04 at 03:01 PM [permalink]

As someone who is looking to buy his first home, I can empathize with the stress. About a week ago, I found the perfect place (about a ten minute walk from work and right in my price range) which was literally sold at almost the exact moment I was signing the purchase agreement. Since then I’ve looked at about twenty place each more expensive and not as nice as the first one I saw a week ago.

What makes things more stressful in trying to find an affordable place is not only is there the apprehension about rising interest rates but also I am starting law school in the fall. Which is going to put a double bite in my finances as well as give me quite a bit less time to look for a place while I’m in school.

posted by: Thorley Winston on 05.17.04 at 03:01 PM [permalink]

You're prolly right, because of the money.
But marriage commitment, to one person for life, SHOULD be the most frightening. But most folks prolly do value their house downpayment (all your money, plus some small %) more.
That's what's sad. It's only a place to live, a house. Your home is with your spouse.

posted by: Tom Grey on 05.17.04 at 03:01 PM [permalink]

graduating from college, choosing a career, getting married, having children, etc.

What kind of blogger are you? Picking a domain name should definitely be on that list! :)

posted by: fling93 on 05.17.04 at 03:01 PM [permalink]

Can't necessarily agree with the fixed rate mortgage. Depending on how much you put down, and provided you get a cap, it can be a good deal.

Laurie K,
who is paying $750/month for a 3 bedroom house in So Cal

posted by: Laurie K on 05.17.04 at 03:01 PM [permalink]

I have one piece of advice: 15 year fixed-rate mortgage.

posted by: Steve on 05.17.04 at 03:01 PM [permalink]

Laura - Purchasing a home, and the financing for it, are not as onerous as individuals would have you believe. See this post, and then drop me an email. I'll walk you through it. It can be relatively stressless if you have the right knowledge.


John Venlet

posted by: John Venlet on 05.17.04 at 03:01 PM [permalink]

I'd actually go contra David Thomason's advice in the first post, and say that you should buy as much house as you can afford. First, stuff expands to fill the space it has, so you'd be amazed how quickly you fill up a house. Second, most people buying a house are at least thinking about having kids down the line. Adding more people to the house makes space that much more important.

And finally, if you have a fixed rate (or even with a longer term adjustable rate), your payments will remain constant. But with inflation and normal career progression, your income will increase over time. So the strain the mrtgage payment puts on your finances will decrease over time. So if you want to avoid having to trade up to a bigger house (which is a painful and expensive proposition), or if you just want to have the nicest house you can, you should stretch your finances as much as you can for the purchase price. It will be tougher the first 3 or 4 years, but you'll be much better off down the line.

posted by: Doug Turnbull on 05.17.04 at 03:01 PM [permalink]

Thanks so much Dan and readers. I think you're right, Dan, about property owning being more stressful than the other grown-up hurdles. I'm not sure why. Perhaps it's the fear of the poorhouse. Or the commitment. Or all the unknowns about the costs associated with owning a home. Or the change in a way of life. Who knows? But I just have to get used to the idea. Perhaps by the end of the week, I'll finally get a good night's sleep.

posted by: Laura on 05.17.04 at 03:01 PM [permalink]

I have to disagree with what Doug Turnbull said about buying as much home as one can afford. The reason I disagree is that I do not have boundless faith in the upward mobility of real estate prices. I also have a deep and abiding satisfaction that stems from the security of not having a mortgage, something that is fairly rare among Americans these days.

At thirty-four, my house is paid off. This is not because I am independantly wealthy or blessed with a large salary. I make approximately 35k a year, pretty average for my area.

My house is paid off because it is tiny, one floor, 768 square feet. It's just me and two cats, so what need have I for a bigger house? More to pay to heat. More to pay taxes on. More to clean. Why do I need more? I have plenty of room for me and the cats.

Last year I helped a college friend and her husband move into their first home, half of a duplex. They'd been living in a gigantic rented house with five bedrooms. It was enlightening... they suffered from the tyranny of stuff. They had so many toys* that they didn't have room for them all, so many toys they didn't have time to play with them all. They'd reached the point where the HAVING of toys was more important than PLAYING with any of the toys. Shoehorning their many toys into that half-of-a-duplex was an eye-opener for me, if not for them. My enlightenment was that it was better to have a few well-loved toys that you played with pretty regularly than to have a collection of status-goodies that sat idle in the yard or in the garage or in the driveway while their owners were out busting their asses to make the payments on all of them. Their enlightenment was that they needed a bigger house. *sigh* You can lead a horse to water...

*Toys are things that you do not truly need but that you like having around and play with. My "toys" are things like the sewing machine, the anime collection, the book collection, the laptop, the equipment for tanning deer hides, the cast iron omelet pan, the stand mixer, the apple peeler-corer-slicer... Toys. I'm not just talking about G.I. Joe action figure sorts of things.

posted by: teep on 05.17.04 at 03:01 PM [permalink]

I remember seeing a study made, quite a few years back now, that concluded that moving to a new house was one of the most stressful things you can do in your life. This was made even worse if you were doing it for the first time. Good luck to her, she's going to need it.

Just out of interest what's the property market like around there anyway? Its going a bit nuts over here in Britain.

posted by: sam on 05.17.04 at 03:01 PM [permalink]

Can't agree - the kids put the most grey hairs on my head.

But we bought small & affordable, then slowly moved up - each sale leveraging the next purchase. In this market, that's worked well.

flashback: When my wife & I bought our 1st home (very young), I remember all my friends commenting "Bought a house? You must be rich." My reply: "Listen to yourself. I just bought a house. I've never been more in debt in my life."

posted by: wishIwuz2 on 05.17.04 at 03:01 PM [permalink]

“My reply: ‘Listen to yourself. I just bought a house. I've never been more in debt in my life.’"

It all has a lot to do where you live. Our house was purchased during a serious Houston recession. We literally spend far less for a three bedroom home than most people do for a one bedroom apartment!

posted by: David Thomson on 05.17.04 at 03:01 PM [permalink]

I have to [mostly] agree with Doug. If one comes from an apartment with roommates, a dorm room, or even a rented apartment, it is tempting to think that your new house is *so* much bigger, and you are not going to need the room. Pretty much everyone I know who has bought a house or an apartment as a young family feels that they should have gotten a somewhat bigger one even if it meant stretching finances a little more. In my case it is a guest bedroom or two that I would very much like.

posted by: Con Tendem on 05.17.04 at 03:01 PM [permalink]

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