Buying a First Home: Tackling the Biggest, Semi-Dumbest Expense Ever

I'm gonna buy this place is what I said,
blame it upon a rush of blood to the head...

The floods is threatenin'
My very life today
Gimme, gimme shelter
Or I'm gonna fade away 

************************

The woman and I are in the market to buy our first house.  We're not buying one of those rinky-dinky RV's, nor are we buying a mere double-wide trailer.  No, sir.  We're pushing all of our chips into the middle and buying a full-blown, brick-and-mortar, suburban New Jersey single family home.

Since we started looking in earnest a couple of months ago, we've entered more strangers' homes than in our entire lives combined before this point.  We've opened cupboards and medicine cabinets, inspected toilets and furnaces (this was mainly me), and had the incredible experience of spending a few quiet minutes contemplating what our future lives would look like in each of these houses.  On the other hand, we've also walked into houses where the current owners were not only home, but actively showering.  We've been duped by houses that back to major highways (this is a major no-no), we've walked through vacant lots and knee-high drifts of snow to enter houses that repulse us, and been so tired of the process that we've decided to take an entire week off from discussing house-hunting and have witnessed each house we've seen fall into a blurry haze where it's impossible to tell one from the other.  (Oh wait, that was the past two weeks.)

In case you weren't aware, buying a home is super serious.  If you buy a car and it stinks, you probably have lemon laws on your side and even if those fail you, you're only out a (relatively) small amount of money.  Additionally, someone else might think your car stinks less than you do and purchase it from you, thus cutting your losses a bit.  If you buy a home and it turns out that any of the following is true:

• The sofa in the living room was hiding a giant hole leading to the basement;
• The above-ground pool leaks incessantly and will cost thousands of dollars to replace;
• The neighbors are knife-wielding psychos, or even worse, from Staten Island;
• The bathroom walls and doors are paper thin and everyone in the house gets to hear everything that goes on in there;
• Your basement is infested with house centipedes (or, as I like to call them, "Hellbugs")
• The previous owners were involved in a ghastly murder-suicide incident and haunt the house, constantly throwing pots and pans around the kitchen in the middle of the night and drawing in blood on your walls...

Well, sorry, bub.  You better hire yourself a damn good contractor or exorcist or something, because you have just made a terrible decision with a four hundred thousand dollar price tag attached to it.  And don't worry about the price, because you'll be spending the next thirty years paying it off.  (As a morbid aside, I only have an 88% chance of living another thirty years, which - at my most pessimistic moments - is an oddly comforting thought.)

*********************************

It says home is where your heart is
But what a shame
Cause everyone's heart doesn't beat the same
It's beatin' out of time

This is not to say that I'm not super excited about buying a home: I am.  Buying a home is lots of fun, if you are the kind of person who likes to pore over reams of data (again, I am).  Comparing and contrasting homes (or trying and failing to do this; see below) is fun; budgeting is fun; going to open houses is fun; and - although we haven't negotiated a price yet - negotiating prices is (for me) always fun.  I guess you could say that trying to figure out the whole puzzle is fun, because - either through choice or competence level - no one in the industry is equipped enough to tell you everything.

You can work with a realtor, but they don't know a whole lot about mortgages.  Mortgage brokers know a lot about mortgages, but don't know a lot about the law.  Real estate attorneys are supposed to operate with your best interest in mind, but may be in cahoots with the realtors and the mortgage brokers.  The Internet is a goddamned minefield of inaccurate information when it comes to buying a house - some of the information is so outdated (i.e., greater than three years old) that it might as well be tailored to a completely different planet.

I shall call this planet Earth: 2006, or Bubbletopia.

*************************************

Open doors so I walk inside
Close my eyes, find my place to hide
And I shake as I take it in
Let the show begin


I'm too young to remember 2006, but - from what I understand from stories told to me by my parents and real estate agents - it was a glorious time when every American felt rich and consequently needed to "upgrade" their primary residence.  Thanks in part to permissive lending policies and lack of regulatory control/taking a deep breath by, well, anyone, everyone who wanted to buy a house was able to, even if they could not afford it.  Hell, even if they had no income, they could buy a house, as long as they were willing to lie through their teeth about having an income.

I do have one relatively fuzzy memory of 2006.  I had recently inherited a smallish sum of money from a relative who passed away, and my dad and I had considered taking some (actually, almost all) of this money and putting it as a down payment on a townhouse.  The conventional wisdom at the time was that housing was a fantastic investment, that homes were guaranteed to steadily increase in value, and the only reason we put the plan on hold was my decision to begin graduate school in Boston in the fall of 2007.  Had we gone ahead and done this, we could have been easily approved for a home that I would have bought at the very apex of the modern era's most insidious housing boom, and I would be crying into my Spaghetti-O's right now in a home I would both (a) hate and (b) be unable to sell.

What is there prohibiting us from making the same, terrible decision in 2011?  I suppose we can be comforted by the fact that the Great Recession of 2008 has ended, and the US economy at long last appears to be improving.  Both of our jobs are secure, and home prices have fallen so far over the past four years that it's reasonable to say that what we can buy at $400k is - historically speaking - a great value.

But the market forces that influence why a house costs what it does are so damned variable.  If you buy a Honda Civic, like I did a few years back, you pay a price that is easily comparable to the Toyota Corolla, the Hyundai Elantra, and other equivalent models.  It's actually quite easy - especially when buying your second car - to compare these models against your priorities and make an informed decision about which is "best."

When attaching a value or a price tag to a home, however, you hear vague terms like "updated kitchen" and "great school system" and "not in a flood plain."  That updated kitchen is great, but how do I know the contractor who put it together wasn't baked out of his mind when doing so?  I love the idea of a great school system, but what happens when the current superintendent retires and is replaced by the former superintendent from someplace horrible, like Middletown or Camden or something?  And "not in a flood plain" means that there's a statistical improbability - not an impossibility - that the house will flood.  When the Great Hurricane of 2029 absolutely tears up the entire Jersey Shore and turns everything within 50 miles of an ocean, river, or other meaningful body of water into a freaking Duck Boat tour, you go ahead and complain to your insurance company, because you, my friend, are boned.

*****************************************

Take that look of worry, mine is an ordinary life
Working when it's daylight and sleeping when it's night
I have no far horizons, I don't wish upon no star
They don't think that I listen, ah but I know who they are

I am the kind of person who likes to manage risk, and who prides himself on his ability to master risk intuitively.  As a result, the prospect of buying a house scares the living shit out of me sometimes.

You have every right in the world to tell me to shut the fuck up.

But as with every major life decision, many calculated risks need to be taken in order to pull this off.  First-time homebuyers will find themselves poring over many different types of minutia - IRS regulations, mortgage yield spreads, and budget calculators - if and only if they are smart about the decision.  And the magnitude of dollars involved in a home purchase is a really unique thing.  For instance, at some point over the next few months, I will walk into a room carrying a dark leather briefcase with several stacks of hundred dollar bills inside.  (I already know which briefcase I'll carry, and I am contractually obligated to wear a suit and dark sunglasses while I do this.)  After taking out a single Benjamin and lighting a cigar with it (because, at this point, why the hell not?), I shall sign over the money to the bank and they will consequently trust us with a mortgage worth more than both of our combined net worths.  (Do banks send hitmen?)

So that's my "home buying overview."  Depending on how interesting this is to other people, I'll periodically update over the next four months with our progress toward the ultimate goal: a two-story beer bong at the Housewarming Party.

I just hope it turns out better than the last Housewarming Party, where I consumed many questionable substances and threw up in the sink at 3 AM.  And I'll let the blog-reading public define "better..."