Fears of Being a First Time Homeowner

My wife and I just purchased a house…it is still settling in.  I can’t believe I am taking the plunge into home ownership.  This is the largest asset we ever purchased, and it most likely will be the largest one for the remainder of our life.  Last week, I tried to give an in depth account of the purchase in an article. Some of our frustrations, how we stumbled on our house, and the bidding/acceptance process.  At the end of the article, I left a cliff hanger about some of the parts of being a first time homeowner that I am still struggling with.

pay down the mortgage or invest

What is going on?  I’m typically a happy-go-lucky, excited guy.  Why I am feeling some hesitations with the process?  That is the question I continue to ask myself.  And the only response that I can tell myself is that this is normal when purchasing such a large asset for the first time.  The process happened so fast and there are so many decisions involved, it is easy to pick apart each decision with the benefit of hindsight.

With hindsight, I have some big fears about the process that will continue to be eased with time.  The following fears have been at the front of my mind a lot over the last week.  Every time my wife and I talk about paint colors, another fear pops up after the conversation.  Every time we walk around our new neighborhood and love everything about it, a fear manages to creep its way back in when we return home to our current apartment.  This feeling is unnatural for me, and I can’t figure out how to shake it.  Even with Lanny’s motivational piece  the other day about going for it and doing whatever you need to do to achieve financial freedom, and his motivational pieces always get me motivated to act now, I still have this feeling.   Here has what has been on my mind a lot over the last week.

Fear #1 – Watching My Free Cash Flow Vanish – This one is the low hanging fruit right here.  For the past three years, I have enjoyed below market rent of $650/month for a very nice apartment in our area.  We have been fortunate and I am fully aware of that.  The hardest part is going to be trading in the rent for a significantly larger monthly mortgage payment.  I’ve very happy with the mortgage/institution we were able to negotiate and believe it is the best possible mortgage, but that doesn’t mean there isn’t a large increase in our current monthly payment.  Oh yeah, and don’t forget about the taxes, insurance, and other monthly expenses that also come along with owning a home.

Guess what, reading Lanny’s article about 3 painful housing expenses increases he recently experienced did not help ease my fears, because I am going to have the same experiences going forward.  I’ve known the monthly expenses were going to increase when we finally found a home. I wasn’t naïve about that fact, especially given our wish list.  But the reality of it all settled in as soon as we were told that our offer was accepted.  It went from a “one day into the future event” to a NOW event, and the reality hit me hard.   Expenses will jump from $650/month to closer to $2,000/month (an estimate) when all is said and done. Also, we need a new car for my wife, which is another monthly expense to add on top of that.  That is a lot of freaking cash, which is a great segue to point number two.

Fear #2 – What Does This Mean for Our Current Goals? – At the end of 2016, I set some aggressive goals for 2017 with the prospect of home ownership looming.  I wanted to pay off my wife’s student debt in six months.  I wanted to have forward dividend income over $6,250.  With the purchase of our home happening so quickly, it makes the prospect of achieving these goals that much harder, that much more difficult.  Until my wife finds a new job and increases her earning power accordingly, achieving these goals became that much harder with purchasing a home.  After Q2, I may have to take a look and consider re-racking my goals for the period.  And of course, I am going to continue working my tail off side hustling and doing what I can to increase my cash flow and still achieve the goals. I’m not going down without fighting and turning over every freaking stone that I can to make every dollar count.   But again, this hit me hard as soon as our offer was accepted and the reality set in.

 

Fear #3 – Did we Overpay? – I mentioned that we offer $9,900 below market value and the offer was accepted without a counter offer.  Once I heard that our initial offer was accepted, the thoughts of “Why didn’t I offer lower?” or “Did I pay too much?” came rushing through my head. With interest and a 30 year loan, the cost of overpaying is quite expensive.  Despite countless reassurances from our real estate agent and plenty of reminders about the crazy market, bidding wars for other homes in the same neighborhood, I don’t think I’ll ever be able to answer that question.  Even worse, without an answer, this question will constantly be up for debate.  Only until more homes in the neighborhood are sold (hopefully for a high price per square foot) or my wife and I sell the house one day for a gain, will I maybe have an answer to these questions.

 Fear #4 – What if This Isn’t The House of Our Dream? – My wife and I talked about our desire to purchase one home in our life.  One house that will fit our future family and will be sufficient going forward.  But what if it isn’t the house we thought of?  What if we don’t enjoy the neighborhood like we envision?  What if we want to move again one day and have to go through this process all over again?

Again, all of these items continue to swirl in my mind.  Luckily, these fears were somewhat calmed in an article authored by Mustard Seed Money and his mom.  It was a great story talking about their families experiences owning a house, and his mom’s opinion about the whole home ownership process.  I left this article feeling a lot better about this decision and everything.  I’ve viewed this process as a large, one time transaction.  But this transaction isn’t permanent.  It is important to remember that the needs of our family may change one day.  If they do, then we will adapt.  If this doesn’t work out, we can always make a change.  I wrote this earlier in 2017, but just like many other, less significant items, nothing about our financial statement is permanent.  This was a great, great read at a time when I needed to read something like this.

Fear #5 – I’m Not Exactly a Handy Person – I mentioned that my house will need to be updated, but mostly cosmetic changes at this point.  One of the most common things I read about home ownership on personal finance blogs, especially in regards to investment properties, is that the real savings come to those are handy. One day down the road, the changes or problems won’t be purely cosmetic in nature.  This isn’t an “if” question, but a “when” question.   When the problems arise, if you can cut out the contractor, the cost savings will be huge.

That’s the problem, I’m not exactly a handy person.  With this house, I promised myself and wife that I am going to be a student of home ownership.  For each problem that arises, I will study Youtube, articles, and whatever else I need to try to educate myself about how to fix a problem or make the cosmetic change myself.  My fear is that I will one day have to incur significant expenses if a problem becomes outside of my scope.  I know this sounds stupid, but it is something that continues to sit in the back of my mind.  I don’t want to incur significant costs when I don’t need to.

Summary

This hasn’t been the easiest article to write, and I’m sorry to all of you that it has a darker tone than almost all the articles written on this blog.  I’m sure each of these items are prevalent in most first time homeowners and I’m not the only person to realize these (or similar fears).  I know time will heal these fears of home ownership and the trickle down impact, but I still wanted to share them all with you since Lanny and I try to be as transparent as possible on this website.  I thought it was important to share that this process wasn’t only filled with the excitement of home ownership.

But I know that I will work through each of these items one by one, and find a way to fit this massive piece into my financial freedom puzzle.  It is a challenge, and I’m looking forward to taking on this challenge.  With my feet to the fire, I’m expecting some exciting and very interesting ways to generate income to achieve financial freedom.  Now, it is on to the next step and going back to the daily battle.

-Bert

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39 thoughts on “Fears of Being a First Time Homeowner

  1. I have similar feelings. We just bought a new home. One consolation is I did not stretch myself to make this purchase. Put in the 5%. My overall payment (principle+interest+insurance+taxes) comes out to be almost 60% more then what I payed for rents. I am planning to start renovating my home as soon as possible, if it means learning new trades … so be it. Still scared … but hopeful. I have been told buyer’s remorse is quite common in these situations.

    • Geek,

      Wow, congrats on the house purchase! Sounds like you made the right decision financially and will reep the benefits once you complete your renovation. Love the attitude and willingness to learn and pick up a new trade. Gives me some inspiration and fight to do the same myself.

      Best of luck with your buy!

      Bert

  2. The article may have a slightly darker tone but it also relays transparency. No one said FI is easy or everyone would have it. You know it’s a lot of frugality and hard work. The goals may have to be reassessed but those challenges make the journey that much more exciting and the achievements that much more satisfying. It’s only stressful because it is new. Once you get everything down and reallocate the budget, you will be right back to throwing cash at your portfolio. You got this!

    • Thanks Daze, you helped out a lot and gave me some nice inspiration tonight. You’re right, once the dust settles with this transaction and the cash flow will be regular/predictable again, I will return to my ways and just fight that much harder to reach financial freedom. I won’t suddenly stop being frugal , hustling, and saving just because I now bought a home and are no longer renting. Boom – thanks for the pick me up!

      Bert

  3. Hey Mate,

    Congrats on the purchase! Wish you a long and happy life in the new home!

    I recently bought a home as well. I am not handy either 😉 The math for buying over renting just makes sense in the midwest, if I can stay put for a decade.

    DGI

  4. Congrats on your new home!

    I’ve owned 2 homes so I understand some of what you’re going through. I don’t own a home anymore because we retired early, became empty nesters, and downsized into an apartment.

    Fear #4 – If it’s not the house of your dreams, you will eventually move. We went from a starter home to a bigger home once we had 2 sons. It’s not that big of a deal.

    Fear #5 – You can figure out how to fix pretty much anything on youtube. You’ll be an expert in no time if you’re motivated.

    Good luck!

    • Thanks MR Freaky Frugal. I’m going to bookmark Youtube and get used to having very specific searches haha I’ll keep your advice in mind about moving if needed. I just hate the process and know that you can run into a lot of additional costs each time you move, finance a new home, etc. But if your house appreciates and you need the space, the move will pay off.

      Bert

  5. Hey Bert,

    first of all, congrats! Don’t put too much pressure on yourself. Buying a house for a family is no small step, but i’m sure you did all the proper research and did not buy something way out of your “reach”. I can understand that a reduced free cashflow for investing is bothering you. But on the other hand you didn’t spent the money on some luxury toys which loose value fast. Just the opposite. You bought an asset which can be much more expensive in two or three decades (especially if you “care” for it)… and for not being “handy”: some things can be done by friends and some things are easy to learn. The few which need to be taken care of by professionals won’t hurt you over the years. Investing, budgeting, frugal living is your circle of competence for sure and in 20 years your monthly income will be so high that the costs for renovation etc won’t bother you at all. —and fear Nr.4: you won’t get a guarantee, but you can only make decisions here and now. You can’t know what will be in 15 years, but life is happening now – you have to take some (small) risks. –Enjoy buying the house and being a homeowner!! – Wish you and your wife all the best, tx for sharing your thoughts.

    Greetings from Germany,
    DividendSolutions

    • Dividend Solutions,

      Thank you very much! I always tend to put pressure on myself, especially in these kind of situations. One of the things I wish I could change haha Great take on the purchasing an appreciating (hopefully) asset. I’ll be building equity with each monthly payment, which is huge. Thanks again for your response. Definitely helping calm myself down and I have to thank you and the others in the community for that. Very fair point and I always forget that I can use my dividend income for stuff one day in the future haha

      Cheers all the way in Germany. My mom’s side of the family is from Germany, so I have some German blood in me!

      Bert

  6. I hope the best for you. When I bought my home, I did not know how to do anything. Just watch a lot of youtube videos and soon enough you will be a handy man 😀

  7. Thanks for the shout out!!! Glad my mom’s advice could help out!!!

    I think I read in B-School that during the negotiation process that people feel better with a counter offer even if they pay more in the long run than in the studies when a person accepts the offer without a counter and end up paying less.

    Funny how psychology works like that 🙂

    • Mom knows best Mustard Seed Money! I showed that quote to my wife and she just gave me a stare. That quote seems to sum my attitude up perfectly. You are right, psychology is an amazing thing.

      Bert

  8. I’m not a homeowner but after reading about your fears it kind of reminds me why I want to stay on my current route towards FI via renting. Not that I’m against buying a home I just don’t want to see our monthly expenses balloon when things are really clicking in place currently. I’m sure those fears will subside over time. It’s a large and very new experience to say the least. After a few months, you’ll feel more comfortable I’m sure. You’ll know what it feels like paying that mortgage and other expenses and you’ll adapt to your new reality. Bottom line, it’s a great step you have taken and even though it may change your 2017 goals a bit you are still, on the whole, headed in a positive financial direction.

    • Divhut,

      The beauty of it is that you found out which situation worked best for you and your family. I can’t blame you at all for deciding to rent and forgoing all of the headaches associated with homeownership. Hopefully you are right about things settling down and reverting to a normal pattern once we move in in August. Just excited for the move and for the rest of it all to transpire. My goals will change, but I am going to reassess this once the dust settles.

      Thanks for the comment!

      Bert

  9. We are now 11 years down the road of owning a house… I recognise some of the fears you have. I can now do more things in the house than before. And my gardening skills increased. And yes, there are some things I will not do myself like water and electricity. that is an intentional choice…

    With the attitude that you display on your blog, I do think you will do fine.

    Just as people who go with the 4pct rule need to be flexible in spending in case of a market drop, so do we, who are still accumulating, need to be flexible with pur saving and goals. Major life events can not be planned up to the minute. When they come, they come and skrew up the plan. SO what… Enjoy it.

    • Thanks for the advice. I just read your last two lines to my wife and she had a big smile on her face. Her response was “I agree, life is not all perfectly planned out and we have to go with the flow.” I’m hoping to share your successes of homeownership too and I cannot wait till the day when I look back and say “Man I cannot believe that I couldn’t do X” That will be the day haha

      Thanks again for the great comment!

      Bert

  10. Your first fear is the main reason I haven’t bought yet. I live in an area where it is cheaper to rent than to buy, so we continue to rent. We definitely want to own at some point, but we want to wait until the difference between our rent and our monthly mortgage payment would be relatively small. The big gap that currently exists is definitely a fear of mine as it is of yours.

    I would try to view Fear 5 as more of an opportunity than a problem. Like you said, you can become a student again and learn and grow. Everything that goes wrong becomes an opportunity for new growth, which in turn is an opportunity to increase your happiness by overcoming a challenge.

    • Matt,

      If it doesn’t make sense for you at this point in your life, then enjoy the cheap rent, keep saving, and keep on investing or building your net worth. The beauty is that each person has a different story/situation where our rules of personal finance may not apply, and you then get to develop your own personal strategy.

      Love the positive spin on fear number 5. I am very excited to expand my repertoire of skills one small project at a time. Thanks for the great comment!

      Bert

  11. Thanks for writing this Bert. Don’t apologize for it being dark; this article is important. There’s so much rosy literature out there urging people to buy homes just because “renting is throwing money away”, and I saw more than a few of my friends go gung-ho into homeownership when their free cash flow wasn’t in a good situation at all and their pre-homeowner expenses were still maxing out their income- or more. They hit a cash crunch on maintenance due to poor prior planning. Obviously you’re not that person. You’ve clearly thought this through. You’re frugal, stable, and most importantly, adaptable. Any big change is scary- but you know you got this!

    • Of course. I was glad to write and try to give everyone a fully transparent version of my housing search. You’re right, the process isn’t all fun and games. There are a lot people that are telling you the fun and ignoring the bad. I appreciate your kind sentiments at the end of the comment. I also know many friends that have fallen into similar traps financially and I determined hat I was going to try and do everything I could to not repeat what they did.

      Thanks again for the great comment!

      Bert

  12. 1/ That’s an observation, not a fear. What’s the fear — leaving yourself open to “not having enough”? But didn’t you specifically set yourself a reasonable, doable budget on how much you’d pay? I suggest this trigger actually verifying you will have enough.

    2/ Figure out what’s most important and plow into just one at a time, in priority order. I’m guessing (from order of mention) that the house comes first, then debt pay-down, then extra investing. I recommend you do what I did the first few months after buying my first residence: I suspended all my taxable investing, dropped debt payments to their minima, shoveled excess cash into beefing up the emergency fund, and kept on fully tracking income and expenses. After three months, I could confidently adjust our budget and restart extra debt payments.

    3/ Not enough to affect your decision, it sounds like. And, by definition, you did pay market price — you willingly bought from a willing seller. Put your attention to what you can control and change, like “bringing it” to your side-hustle.

    4/ It’s likely not “the house of your dreams”. You get to start somewhere, and this will help you get clear on what a “house of your dreams” might become over the years. Again, seems like a trigger for observation, on what you value together and how you want to express that as a household.

    5/ Another observation. Seems like the fear is of spending unnecessarily. Your skills will grow, so what’s “unnecessary spending” will change. Another trigger, it seems, this time to choose how much you’re willing to budget (time and money) towards improving your skills, and acknowledging your limits will grow over time.

    Taken together, these all seem to say that you’re a normal new home-owner. Congrats! Keep on learning, growing, and enjoying life with your wife and future family!

    • aha you’re right. I think I am your standard first time homebuyer that is nervous about the entire process. I probably would have felt this way regardless of which house we ended up selecting. Thanks for breakdown each of the fees and giving your take on them. You gave me a good laugh and number three has me pumped up today to keep on hustling and trying to find new income. My wife and I are going to probably do a modified version of what you did in response to number 2. I can’t keep operating at my normal levels right now because this isn’t a normal situation. I need to get the capital strong and focus on letting the dust settle from this. We have our few things we want to do before we move in, but all other projects will be assessed and ranked. I’m assuming I will begin working on them starting 2018.

      Thanks again for the very thoughtful and detailed comment. Very much appreciated here.

      Take care,

      Bert

  13. This was a good, honest article. Everyone wonders if they overpaid- I can actually laugh at our purchase price and I still feel like I overpaid. For fixing things, start small, like painting. Go to the free seminars at Home Depot, they give good basic understanding. Get how to books form your library, Youtube, etc. I could do some basic landscaping when I first moved in, now 4 years later I’ve rebuilt 2 rooms fully, 1 totally by myself, built a fence, walkway, installed doors, fixed toilets, done carpentry…. It’s a great feeling of accomplishment doing things yourself

    • Thank you very much Geoff, glad you enjoyed the article. I’m assuming Youtube is going to be my best friend here. Thanks for letting us know about Home Depot. We had no clue places like that offered classes. You’re right, there is so much knowledge out there and so many resources available, there is no excuse why I can’t teach myself these skills. I cannot believe all that you have done in the last four years. Wow, that is freaking amazing. Cannot wait to try and replicate that.

      Bert

      • Just remember to know your limits. I was going to replace a couple of loose shingles on my roof, but i chickened out big time and called a roofer. Paint, drywall, basic carpentry, no problem. Fixing my steep roof-hell no!!

  14. I’m really looking forward to buying my first house. Hoping to have that accomplished before I turn 23. Although I would be purchasing it by myself so then I can take advantage of open rooms for renting out to assist in the mortgage. Then eventually purchase a second and rent out the first in its entirety. I look at it this way: interest on the mortgage is your rent, the principle amount you keep in the long run. As long as the interest I am paying is lower than what I could pay in rent elsewhere then I am winning (excluding taxes). Luckily I pick up handiness pretty well. With most home improvements my parents did when I was growing up, I had a helping hand with.

    Don’t forget home appreciation. You may have less money to invest, but if the value of the home goes up that is very big as well.

    • Andrew,

      Thanks for stopping by. I cannot wait to hopefully see values appreciate. Another huge benefit will be the taxes and unlocking the deductions and benefits that homeownership provide you with. Very interesting way to think about the P&I payment process. I’ll never stop investing, but I keep forgetting that buying a home is a long term investment as well.

      Take care and best of luck with your home buying experience.

      Bert

  15. My wife and I bought our house about two years ago, so understand where you’re coming from. Yes, it is going to be EXPENSIVE, at least initially. But you’ll get used to it. I had to grin and bear it as we spent thousands upon thousands on things like new couches, washer and dryers, etc in addition to buying the house. Not to mention we needed new cars. But you’ll get through it eventually, just stay committed and keep the long term perspective.

    One bit of advice, if you need to do any painting in your house, do that yourself. Its the one thing that most anyone can do without much expertise, and literally saved us $5000 by doing it ourselves. Sure it took days and required 3 family members helping, but again, we paid about $150 instead of $5000.

    • Your first paragraph reminds me of how I am going to be throughout this entire process. I can only imagine haha What’s funny is that we also had to buy my wife a car the week we bought the house based on when her lease ended (article to come soon), so yes, our situations are very parallel haha

      Appreciate the advice, and my wife and I were just talking about the painting process today. We’ve never done it, but some family members will be there to guide us and help us out as we transform our place. That is a heck of a lot of savings and trust me, we are going to realize every penny of that!

      Take care and thanks again for your comment.

      Bert

  16. I’m currently experiencing a similar crisis in looking for a new house. I live in a relatively high cost of living area so my apartment rent is ~$1750 which I split with my g/f. I recently looked at a house that we kind of liked in the low 300s range which would mean a ~1200 mortgage payment if we do 20% down but the problem that I run into are the property taxes which are one of the highest in the US in our region. This 300k+ house would mean a near $10k property tax which really eats into the potential cost savings when I have a 830/month property tax payment that will likely increase.

    This house is in one of the higher property tax towns in the area but even the lower ones will have a 6-7k tax on a similarly priced house and you’ll get lose house for the price in those areas.

    The other thing that comes with a house is all the other costs like added heating and cooling costs due to the larger size versus an apartment and then all the stuff we have to buy like a mower, a snow blower, etc.

    I do think we’ll end up buying a house sometime soon because I do want a yard and something to call my own but the prices around here are rough!

  17. In my personal opinion, I would recommend buying a house after making so much money in affiliate marketing and blogging. And I would also recommend not only buying your first home after you’ve accumulated affiliate marketing wealth, but also pay the house off as fast as you can so you have nothing to worry about in terms of having a 20 to 30 year mortgage. If I was making good money like that in affiliate marketing, I would certainly be a homeowner being that I’m single with no kids. It’s a good investment to make while you’re young and a good move to make also just in case you get married later down the road. 🙂

  18. You made the right choice. Buying a house versus paying rent (even below-market) is a no-brainer and the surest path to the American dream. Housing prices will only rise in good neighborhoods. But much more importantly, you just hedged yourself on rent inflation. No matter what housing prices do, rent ALWAYS goes up. Now, you have a a steady rent for the next 30 years. But obviously, I hope you pay it off earlier. It is also an insurance policy for adverse life events. Once the mortgage is paid off, you will have so much cash flow that you will not know what to do with it.

  19. You need to accept it for what it is. One of the most stressful things you will ever do. It’s great to dream about, but a daunting reality.

    That being said I find it very rewarding. I am not handy either but YouTube has a video on how to do EVERYTHING. That has really helped. To me home ownership is a warm blanket. Your mortgage payment seems intimidating but remember (other than taxes) it doesn’t increase. So as you make more it will offset as time goes on. Apt rent (typically) continues to increase year over year.

    You guys gave yourself a great springboard by saving so early. Now it’s time to enjoy some of the fruits of your labor.

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