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How Do People Do It?

We’ve just begun the house-shopping process. Just begun, and it has already been an emotional rollercoaster. Hope, fear, elation, disappointment, resolve, disappointment, back to fear, and now on to pure bewilderment.

This past weekend we drove to town, both for doctor appointments and to begin our house hunting in earnest. We met with a lender and then a realtor on Saturday, which was our first foray on both counts. We are just feeling our way along here.

Our lender approved us for a mortgage on a $200,000 home with three percent down. We were encouraged by this news, because we quickly discovered that the housing market in Fairbanks is unreal. Houses in Fairbanks start at $160-$180,00 for a 1950’s two bedroom, one bath in a depressed neighborhood. There are a few 3/2’s for $180,000 and they go up quickly from there.

The afternoon with the realtor was exciting because we were seeing real houses for sale that we could really buy. Maybe. As we set out, I didn’t have any intention of finding one to settle on.  I figured it would be a long process. The first few were real dogs that confirmed my initial feeling, but then the last house really sparked our imagination. So much potential. So much we could do. We knew we needed to guard our hearts against falling in love with something that is clearly out of our reach, but like falling in love, it sometimes happens despite our intentions. As excited as we were about that last house, once we got home and put pen to paper, we quickly realized just how out of reach that house is, despite what the bank thinks.

What we’ve looked at this weekend is buying every last cubic inch of house we can afford, or perhaps can’t afford. We could almost do it, we think, but even that is if everything in life goes just right and our financial position only gets better. But what happens if real life intrudes, and things don't only get better?

We want to make smart decisions that will put us in a sound financial position in the future. I have long outgrown the desire to be rich, but I do think that there are things we can do to ensure our financial stability. And in this case, time and interest are our enemies. Over thirty years a $200,000 house will cost over $400,000.

And so we’ve begun to reconsider our initial strategy and look again at smaller, older houses. But there simply aren’t that many, and the few that are around are just not ones that our family of six could realistically inhabit. We’re looking again at our monthly budget and our long term goals. And we’re bewildered.

How do people do it? Aren’t there middle class, single income families who do this successfully? Is what I make really not enough?

A house is so much more than a place to live. It is our home, a part of our sense of self, a part of our identity, an expression of who we are. And we try to balance our desires for material comfort with our other values regarding neighbors, consumption, debt, family life, etc. There is so much emotion wrapped up in it. So much emotion expressed over it. It’s that much harder to make thoughtful, rational choices. Especially where there aren’t that many options to decide from.

I know that finances are a personal matter and discussing them is impolite, but this is the mental and emotional journey on which we are embarking. I am neither proud of how much nor ashamed of how little all of these numbers are. They are what they are, what we have to work with, and what we have to manage.

How do other people do it?

Posted on Tuesday, May 6, 2008 at 01:53PM by Registered CommenterBrian Rozell | Comments6 Comments

Reader Comments (6)

I know how that is!! It's a difficult process. After you get your house, if you're thinking about doing any remodeling do this:
1) Read my blog
2) Don't remodel!!

How I long for our ugly bathroom after spending 3 months with practically no bathroom!
May 6, 2008 | Unregistered CommenterBarry
Typically realtor steers you to an ugly house, then a house you want but definitely can't afford, then the one he/she thinks you can (usually the last one). You'll find it eventually, but don't look at what you'll be paying in 30 years. It will make you feel depressed. Instead, go ahead with a 30 instead of 15, AND make extra payment anytime you can. The contract should allow this, and that extra will be applied to the principal, thus in a way you are accelerating your mortgage. In tough times, you then have the option of not doing so, and you'll be glad you have a lower payment. Love, Dad
May 7, 2008 | Unregistered CommenterDad (Opa)
Yesterday, Bryan's google homepage spat this quote of the day at him:

Our houses are such unwieldy property that we are often imprisoned rather than housed in them." - Henry David Thoreau

We have to agree, after our first year of homeownership. We love the house and the property, but the amount of work and upkeep is sometimes overwhelming. And then there's the pesticide issue which is another topic for another blog...

My sister and her hubby bought a starter home 5 or so years ago, in very good condition. She just finished remodeling the kitchen last week, and then yesterday found out that the sewer line between their home and the sidewalk is broken and will cost $6000 to fix. And oh, they'll have to tear out the landscaping they spent a couple grand on last summer in order to fix it. While this has not been our story (yet) with homeownership, this is not atypical for them. (New gutters led to a new roof which led to 3 huge trees having to be cut down 3 summers ago before the roof could be warrantied). So definately, a extra cushion is important because things do happen, and even painting a room isn't free.

It is getting harder and harder for the middle class to make it today, especially with food and energy prices rising with no end in sight. But I agree with your Dad that you can't look at the value of a 30year loan when all is said and done. First, $400,000 in 30 years may be the equivalent of $350K now with inflation rising like it is. Second, towards the second half of the loan, you will be able to pay more monthly because you'll have a much different financial picture. Its ok to assume your income will only increase over time and things will get easier. But man, its such a big decision, you can't short yourself in the first 5 years, either. Also, look into a home warranty. These cost maybe $500-$1000, and you can sometimes get the seller to cover it. That will protect you from any major repairs, appliance failures, etc for teh first year. Also, the thing about FBK is that you have to live somewhere, and renting is not a great option either... So if that's where you see yourself in the long run, bite the bullet!
May 7, 2008 | Unregistered CommenterCarissa
I remember this same struggle when Shea and I went through it a couple of years ago. It is very overwhelming and frustrating, and no, the mortgage lender and the realtor are NOT as helpful as they could be because they are too busy trying to make their own way. We were lucky that the land is so cheap in Texas if you're willing to live in a suburb, allowing us a lot more space for less money that you are facing. All we had to give up were the little architectural things, like a house that doesn't look the same as every other house on your street...

I can only offer the advice that we chose conservatively, taking everything, including property taxes, mortgage payment, insurance, and increased utility bills all into account before making the decision of what to buy. We also had the good fortune to be able to choose a new house to avoid the costs and frustrations of home repairs and remodels...

But then again, that only bought me 18 months at home with Owen while working part-time before I had to go back to work full-time, so I don't know how a middle class one income family can survive for long... Only one family I know is a single income family, and they lost their house to foreclosure and are renting now. They are just getting back on their feet after several years of struggling, though she has continuted to stay home with their two kids.

Good luck.

Love, Jennifer
May 7, 2008 | Unregistered CommenterJennifer
Man if we had it to do over again...well I won't go there. The only advice from me is get a FIXED rate from a STABLE bank/mortgage company. One that won't sell off your loan and try to readjust your rate. Good luck!
May 7, 2008 | Unregistered CommenterMel
We went through similar stuff 4-1/2 years ago when we made our first home purchase. The amount that we were approved for (I guess I should "Steve" was approved for, cause I don't work and didn't back then either) was much larger than we were willing to commit to for a 30 year stretch.
Your dad offered very good advice. DO go for the 30 year mortgage even though it sounds depressing to look at the final payout amount. Just pay the extra when you can afford it. We ran the numbers when we bought our home and discovered that if we paid about an extra $250 a month we would decrease our mortgage term significantly. We are now looking at having our home paid off in about 15-20 years instead of 30 by simply doing that small extra amount. It is also nice that when we have unexpected expenses...we can just not pay that extra and it gives us a little wiggle room in our finances.

Also, be sure to look into an 80/10/10 loan...here is a link that will tell you a little about it and then you can look into it more if it seems like something that would help your situation.
http://www.forbeginners.info/mortgage/80-10-10-loans.htm

Good luck! Such a scary and exciting time!!

May 9, 2008 | Unregistered CommenterDayna

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