Reader Question: Locked In and Nervous

by Kevin on April 9, 2008

I received a reader comment a few days ago asking me to address an issue.

I was thinking about this: our closing date is 10 days away and I’m starting to panic about the whole 30 years of debt in the middle our our sucky economy. Will you write a piece about how you felt when you signed the deed of trust and in the days before and after?

Alright, so your closing date is now 9 days away. By the way you wrote your statements, I’m guessing this is also your first house.

I’ll do my best to describe all of the emotion and feeling that went into buying our first house last fall, but I’m not sure I’ll do it justice.

For starters, don’t panic. Panic and worry will only encourage you to start thinking irrationally. You’ve also probably got some money in the deal that you won’t be able to get back at this point, so backing out due to panic and fear doesn’t make sense either. Granted, if you suddenly re-ran your numbers and discovered you won’t be able to make your first mortgage payment then by all means back out.

This highlights the key of planning. Are you using a budget? Did you run a guestimate of how much it would cost to operate a house over an apartment? Do you know how much cash flow you have at the end of each month? If you did, and I hope you did, then great. All you have to do is go back and look at the numbers.

It is an extremely scary decision when we signed the initial contract. Closing was also a bit nerve wracking. I would go as far as to say it was very surreal. There was a big stack of papers, but our closing went very smoothly. Everyone there was very helpful and patient — we read a lot of what we were signing. Note I didn’t say we read everything. You really should read every line, but there are some things we just glanced over because we had either read them ahead of time, or since we had two mortgages we signed two versions of essentially the same paper.

It was also kind of odd because our real estate agent and the home builder’s agent were there. They didn’t seem to do a whole lot other than sit there. I don’t think we asked either of them a question. Moral support?

When we walked out it was just weird. One of those “Did we just do that?” type feelings. However, we had run the numbers and were getting a house well within our means. We didn’t buy a 5,000 square foot mansion; we knew we could afford to pay (and even pay principle faster than normal).

As to buying in a recession, I would again point you back to your data. I won’t say there is no better time to buy a house — it depends on your area and in three more months prices may have dropped again. But, generally speaking, you are definitely not buying at the top of the bubble. If this home is truly within your means, you shouldn’t have a problem.

Some questions I would be asking myself right now:

  1. Did we go over a budget? Is it still accurate? (Much can change in your life between when you sign the contract and when you close.)
  2. How much wiggle room do we have budgeted each month?
  3. Did we estimate all of our housing costs (moving, utilities going up, insurance, taxes, etc.) correctly?
  4. Is my job stable? Am I likely to lose it and be unable to find similar work?
  5. Do I have an emergency fund? If so, how big is it? (Six months of living expenses — at your new living expense level — should go a long way in helping you feel better. If you don’t have it, even a small one will do.)
  6. Are we staying here long term?

Hopefully you did a budget, the house payment is well within your means, you’ve got some wiggle room, we estimated new costs correctly, you’ve got a stable job, you plan on staying long term, and you’ve got an emergency fund!

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Week in review | Pinching Copper
April 12, 2008 at 6:44 am

{ 6 comments }

Shel April 9, 2008 at 12:24 pm

Thanks! <3
This is awesome!
We crunch numbers always before we choose a new place to live. I always choose the “worst case scenario” numbers so I can be pleasantly surprised when our wiggle room increases. We want to live there until we’re carried out in body bags, so we’re going to pay down as many points as possible. (It sounds irrational for a first home, but it’s also bigger and we’re not going to reproduce).
We’ve been saving like crazy for over a year, so we’re used to living like this; we even have a plan for after the move – lower, but consistent savings goals. I want to build up a six-month+ blanket as soon as we can.

Permit me one more question: Have you ever felt guilty for having a nice place to live?

Mom @ Wide Open Wallet April 9, 2008 at 3:44 pm

Oh man I remember how nervous I was when I signed our mortgage. The mortgage company kept delaying and I was secretly hoping they would just cancel the whole thing. (shh… don’t tell my husband that) But I’m so glad we bought this house. It was a great decision.

Kevin April 10, 2008 at 7:06 am

@Shel: It is stressful and terrifying and awesome all at the same time. I’ll never forget walking into our new house — empty of furniture — and just sitting down on the carpet and looking around. It was nuts.

Then we got to measuring for our furniture 🙂

@Mom: Uh-oh! It ended up working out in the end?

Mom @ Wide Open Wallet April 10, 2008 at 9:09 am

@ Kevin: Oh yeah, it worked out great! My nervousness was nothing more than cold feet.

@ Shel: This is my first home and I also plan to live here til old age. At least til the kids are grown and moved out.

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Tim April 10, 2008 at 12:48 pm

I was nervous too but you get to a point where the debt becomes oldhat. Ok, it still is a bummer to shell out a check for a mortgage payment, but the act becomes more and more second nature after a while. You cope with it and move on.

As for papers, I’d recommend you also stay on top of the various (if you have any) companies you need to contact to set up new payments. I got bit by this with my association. They were sending to the wrong name and charged me a late fee, which, after looking at the closing docs, confirmed that they didn’t have to waive.

You just tend to gloss over the fine-print details that you need to take care of yourself. Just fyi.

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