Becoming the Landed Gentry
October 28, 2010 3:08 PM   Subscribe

I'm having difficulty with the idea of being a homeowner. What are some paradigm shifts, re-conceptualizations that would help me make the transition from long-term renter to homeowner?

We're looking at buying a house in San Francisco in the next few months. Prices are down (for SF), interest rates are down, things seem to be aligning to make it good time to buy, relatively speaking given the market here. I've been a renter for 20 years and the thought of being a homeowner is pretty strange although I do want to do it. My husband has owned a home before so it's not quite as foreign a concept to him and that helps but I almost can't see myself as a homeowner.

Our finances are pretty good, we have excellent credit and generally I think we're in a good spot to make the jump.

We're meeting with realtors, mortgage brokers and a CPA to figure out what's best for us and are being as deliberate and thoughtful and careful as we can be but I still envision myself bolting from the room when we get to closing or even when writing an offer. This must be normal, right? So how do people make it through the process without freaking out?

Practically thinking, I'm also having a bit of difficult figuring out how to just conceptualize being a homeowner. For example, I know that the thought is that rather than giving your landlord your rent, your building equity so even if you're spending more on a per month basis (which we will be doing), the equity and tax benefits somewhat offset that. But I still can't get over the "We'll be writing a check for 1.5 times as much per month!' thoughts. The talk with the CPA is tomorrow so clearly I need to get some feedback from him about taxes, withholding, etc.

Also, the thought of being a Adult and responsible for getting plumbers and roofers, and anybody else to work on problems, rather than having a landlord deal with all that, is a little scary even though my husband will probably handle all of that.

My usual approach to stressful situations is to educate myself and get as much good information as I can. I am doing that and asking as many questions as I can think of to everyone we're meeting with but could use any other approaches or thoughts on making this transition as easy as possible. I don't want to be the crazy lady at the last minute having a crisis about signing on the dotted line. My realtor and my husband thank you in advance.
posted by otherwordlyglow to Work & Money (22 answers total) 23 users marked this as a favorite
You need to figure out the tax implications. If you're well into the 28% bracket, for instance, that 1.5x on your mortgage is almost the same as 1x on rent. The government pays you the difference.
posted by mr_roboto at 3:12 PM on October 28, 2010 [3 favorites]

You do realize that if prices go down and you need to sell, you can also lose your equity, right? Many homeowners have seen their equity disappear as of late. There are many joys of homeownership (and you'll do just fine!), but "building equity" is no longer a foregone conclusion.
posted by Wordwoman at 3:21 PM on October 28, 2010

Do not underestimate the maintenance commitment you are making. As a trusted advisor once put it to me, "A house's job is to break."

Like child-rearing, it will often be tiring and expensive. Like child-rearing, it will yield small dividends of pleasure every day.
posted by Joe Beese at 3:36 PM on October 28, 2010 [2 favorites]

Sounds like a premature case of buyer's remorse. Everyone freaks when they buy their first house. Anecdotally, most people panic at the closing when you're signing your name a million times and you realize there's no turning back now. Just normal jitters when confronted with purchasing something that's worth six figures--betcha never done that before.

One thing that might make the prospect easier for you is to imagine your husband as the caretaker/maintenance guy/handyman, esp. since you mentioned he'll be dealing with plumbers and the like. Also, in your post you didn't mention any of the good things about owning a house (save the presumed financial advantages--which, as Wordwoman said, are not guaranteed anymore). Look, you'll be able to paint the walls any color you want! You can stop wondering if you'll get your security deposit back! You (or hubby) can pick and choose from tradespeople, not just use the landlord's lowest bidder. Et cetera.
posted by scratch at 3:39 PM on October 28, 2010

Owning a house is sweet. You can bang down a wall, re-decorate the place as soon as you feel for it, hang up pictures all over the place with huge nails and replace the kitchen sink whenever it pleases you. You will deal with plumbers and electricians instead of with recalcitrant landlords who replace once-nice broken fixtures with cheap new ones.
After a period of getting used to the strutting proudly around thing, you'll be finer than fine.
posted by Namlit at 3:41 PM on October 28, 2010 [1 favorite]

Response by poster: Yep, I get it that it's an investment that could go south. I'm not saying it's a sure thing that we'll be gaining equity, just that that's one of the "benefits" that gets tossed around. And yes, believe me, in the price range we're looking it, maintenance is going to be an issue. I know that.
posted by otherwordlyglow at 3:43 PM on October 28, 2010

You won't be able to convince yourself that it is not a Big Deal, becasue it is a Big Deal. You're borrowing a lot of money and making what is probalby the biggest purchase of you life. That's a big deal. But -- as long as you're planning on sticking around for a while, it generally makes sense financially, even given the last two years. There's the tax break, potential for appreciation, and the fact that you are, at some point paying principal, not just interest. See 1, 2 for calculators, or just google "rent versus buy."

Equally, if not more, important arethe intangibles involved. I like owning my home -- my home is important to me and I like knowing that someone else cannot decide to take it from me. The security (and I understand that nothing is completely secure) of home ownership is a benefit that for me outweighs the pure financial aspects. Owning the house is a bit less fun -- you do have to be prepared for the endless repairs that are involved (for example, my thermostat broke today, requiring an immediate run to the hardware store and an $80 outlay). But that is outweighed by te fact that I don't have a landlord that can decide for any reason not to re-up my lease.
posted by rtimmel at 3:44 PM on October 28, 2010

Probably the biggest thing you need to settle on is the idea that you are Staying Here For The Long Haul. You're making a commitment here just like you did the day you got married: it's not something to be done lightly, because (amongst other things) it's really hard to get out of. My parents own a house they haven't lived in for over 10 years because they had to move and can't sell it; the renter payments cover about 75% of the mortgage and landlordy costs. It's almost "having a baby" level in terms of personal responsibility.

So, make sure to do the same kinds of things you did before you said your vows. Sure, there are serious tax implications and such, but the getting OK with "this is where we will be for a long time" thing should be pretty similar.

(My parents-in-question made themselves OK with the new place by having it built in a new subdivision, so they could exercise control over the process. At least one of my many parents has owned a house since before I was born; the last one to take the plunge was my dad at age 37, and he did it, like you, with a spouse who had already owned a house before. I think that helps substantially, though he was still nervous, from what I remember, and it took all freaking day for the last bit of working-stuff-out-legally. I got through all my books and a nap and we were still there at least two or three more hours, and by the way, don't be afraid to tell them "let's take this up again in a day or two." Sheesh.)
posted by SMPA at 3:45 PM on October 28, 2010

Yeah, it's the "staying here for the long haul" thing. You can no longer just buy something or have a repairman repair something, you need to understand the long-term implications of a repair and how it affects the value of your home.

e.g.: You need a new water heater. The old one is in the attic and can't be removed via the attic hatch. The solution is to take out a large chunk of ceiling. You have textured ceilings -- this means that you're going to need to retexture, and there aren't any drain pipes leading to the outside. As a renter, you could've just been "Yeah, new water heater." Now you need to know a bit of plumbing code, need to know which types of drywall texture can be replicated and which will be obvious patches later on, and you need to read reviews on water heaters to figure out which one won't leak in three years. It's a whole different level of education.

Then there's the expenses. You're going to want to keep a decent chunk of change in the bank... running slim and living month to month isn't really an option. Need a new roof? $10k. Need a new water heater? $1000 + installation. Sewer line busts between the house and the curb? $8k. You can't finance that kind of stuff easily right now.

Then there's the amount of time you're going to spend. Used to spending three weekends a month going out, traveling, etc? Forget about it. You'll be lucky if you get two weekends a month away from yardwork, cleaning, etc -- less if you choose to take on some renovation projects yourself.

I'd get a subscription to "Fine Homebuilding", start watching Holmes on Homes, and really spend some time educating yourself on the things you can start now that will avoid problems later in your homeownership.
posted by SpecialK at 3:58 PM on October 28, 2010 [2 favorites]

I'm thrilled to have a house. I have some regrets about the house I purchased, but the thing is, it's mine (or more acurately, ours), and I can pretty much do what I want to change the house. If I want to, I can put a hole in a wall. I can paint the rooms without asking permission. Owning the house means you have a lot more freedom than you did as a renter.

Other than that, for me, buying a house was finally a moment to relax. I rented the same apartment for many, many years, but I never once thought I'd stay there seriously long-term. That meant there were things I wanted, but didn't buy, just because it would be a pain in the butt if I moved. I'm home now, and I feel like I don't have to worry about unpacking, about letting myself fully inhabit the space, rather than having some vague future worry about moving at a later date. It's incredibly relaxing, and when I get home in the evening, it's soothing to know that I'm home.
posted by Ghidorah at 4:30 PM on October 28, 2010 [3 favorites]

I am in a terrible situation due to a house purchase. All of my options are extremely difficult and stressful. And I constantly thank my stars for my one "crazy lady" crisis moment, which may have saved my ass.

I'm glad to hear you are dealing with stress by gathering information. My advice is very similar: do not look at nervousness as negative, or even as its own phenomenon. Take yourself seriously. You're worrying and under stress, yes. But what are you worrying about? You may be worrying for no reason, sure. You might have jitters and cold feet. But you may also be worrying for a very good reason. You might have that gut feeling that something is wrong and that this is too much to take on. The nervous part of you deserves your consideration. So do not say to yourself "this decision is making me worry" and try to calm down with some chamomile tea. Examine the root of the worry; do not treat "worry" as a symptom. If you decide rationally that you are worrying for no reason, check again; why are you still worrying? Do not override your own concerns lightly, as you will have to live with the decision. Trust yourself and also find some other trusted advisors.

Homeownership is great. It will most likely turn out wonderfully. But homeownership is hard. Some situations are much harder than others. In this climate with home values falling, it is more difficult to get out of a bad situation than it would be if values were rising. If you're facing an option that has some downsides, consider how very easy it would be to let that one pass you by and wait for one whose potential long-term implications are easier for you to live with.

I hope this advice does not discourage you. I hope it empowers you to take yourself seriously and make a decision that you fully support.

posted by slidell at 4:40 PM on October 28, 2010

I'm a relatively recent homeowner. The good: a sense of place about which I can say "that's my home, and will be for as long as I can foresee" is kinda cool. Ghidorah expresses it better than I do.

The bad? All that tax savings stuff hasn't really worked out for us because that sense of "home" means we're constantly replacing something for the 50 year term, which means we've spent a bunch of money that isn't coming back to us on making the place our own.

A house can be an investment. If you can make it cash-flow positive, if you want to bet on the market, all that stuff.

A home is an expense. If you can afford it, it's really nice to continue renting and have someone else deal with all that crap.

Having said that, I'm betting on some pretty hefty inflation, so making a big chunk of money at 5% someone else's problem seems like a really awesome idea right now, and if you don't have the discipline to save independently, a mortgage isn't a wonderfully efficient way to do that but it is a way to do it (Alone, I used to put a lot of money aside, in conjunction with my partner it's nice to have the discipline of the mortgage).

And if you're in the Bay Area, at Bay Area salaries, the 1.5x really does work out because of taxes. You're paying it to the bank rather than the government. Just be aware of the home improvement trap.
posted by straw at 4:46 PM on October 28, 2010

Would it help if you looked at the huge pile of money from the other side of time? Assuming that you will stay in this house for the long haul, how great it is not to have a housing payment anymore. i don't worry about losing my job because the only thing I need to live is money for food/taxes. No house, no car payment - they're all paid off. I love it.
posted by CathyG at 4:48 PM on October 28, 2010

Good news: you are also more or less locking in a rent payment for 30 years. Yes, it is 1.5 times today's rent. But what will that payment be compared to rent 10 years from now? Chances are pretty good rent will be more. And then in 30 years, rent is free.
posted by gjc at 5:19 PM on October 28, 2010

Expect to spend a lot of money fixing things. Budget at least a few thousand dollars per year for maintenance and repair.
posted by qxntpqbbbqxl at 5:38 PM on October 28, 2010

But I still can't get over the "We'll be writing a check for 1.5 times as much per month!' thoughts.

Uh, what?

You'll only be writing a check for 1.5 times as much per month if you get a place that's more expensive than one that would only cost the same amount per month. Which is to say, this is completely and utterly within your realm of control, if you so choose. The market is down, you say? Great, prove it by getting a place that won't hurt your pocketbook any more each month (not including any leaking roofs or replacement hot water heaters or other random joys of home ownership you can't predict).
posted by Civil_Disobedient at 5:38 PM on October 28, 2010 [2 favorites]

After renting for several years, I bought a house in 2001, and am now in the process of closing on a newer, niftier house and selling this one.

Really, the big change is the upkeep--everything from the predictable stuff (the annual furnace check) to the how-did-that-happen stuff (why is it raining...inside?). Some of that will be offset by the deductions for mortgage interest and property taxes. The flip side of the financial investment, though, is your personal investment in the space. It's your house; you get to do what you want with it.

Although I've had to break with my usual pattern, because things low on my priorities list all needed doing to put the house on the market, I've made a point of making at least one upgrade per year. (Incidentally, this is the downside of buying a fixer, which is that you will be fixing it for the next decade.) New front vanity and lighting in the bathroom...refinish a hardwood floor...whatever.
posted by thomas j wise at 6:02 PM on October 28, 2010 [1 favorite]

(Incidentally, this is the downside of buying a fixer, which is that you will be fixing it for the next decade.)

That said, it can be done!
posted by Civil_Disobedient at 6:36 PM on October 28, 2010

Seconding, when you are talking to financial advisor and drawing up budget, figure on at least a few thousand of maintenance costs a year, and probably more at the start when you move in. Budget for maintenance! Oh yes!
posted by LobsterMitten at 7:46 PM on October 28, 2010

Think about every interaction you've ever had with an asshole landlord and how you'll never have to do THAT again.
posted by Jacqueline at 9:19 PM on October 28, 2010

Congratulations :)

I bought my first flat two years ago, and I still get a little thrill every single time I walk in the door to my home after a lifetime of renting. My approach might be born of naivety, or of being lucky enough to own a newbuild which has had relatively few maintenance issues so far. But my approach is that, given that I'm committed to this thing now, I figure I might as well find a positive way of framing the money issue. So I choose to view it that when I pay my mortgage, I'm really just paying myself money instead of a landlord. OK, there's mortgage interest, taxes, whatever, but in 30 years time, this place (or whatever place I buy next) will belong to me as a result of the payment I've made. Likesay, might be naive, but it works for me.

The other good thing for overcoming the freakout is building up some savings if you can. If something breaks and you have no cash, it's a disaster. If it breaks and you can cover it, it's just an inconvenience.
posted by penguin pie at 5:10 AM on October 29, 2010

Remember, in the long term your mortgage payments should stay relatively static, whereas inflation will gradually grow your income. So in ten years' time your mortgage payments will be much more manageable, whereas rents will have been going up with inflation the whole time. By the time you pay off the mortgage the monthly payments will seem trivial. Then after that you will have ZERO mortgage payments for the rest of your life.

I suggest asking around all your friends for recommendations of plumbers, electricians and handymen. Once you have a good address book full of people you trust, you may feel less vulnerable to home repair disasters. You could also find some courses on really basic DIY tasks - even if you choose not to do the jobs yourself, knowing how they should be done might give you more confidence in dealing with the people you hire in.
posted by emilyw at 6:09 AM on October 29, 2010

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