The Basics
Ready or not, I'm buying a house

"A Renters Story"

I did the math and decided, like many people, to ignore the numbers and do what my gut tells me. But I've also found a way to buy my first house without walking off a financial cliff.


I have no business buying a house. I'm single. I rent. I don't have a kid or a car or a dog. In short, I have no earthly reason to buy my own home, except … I want to.

I've wanted a house since I was 5 years old. It's a long story, but for some reason I got it into my little head that my parents were going to buy a house in Williamstown, Mass., near my grandmother. They weren't, but they thought it was pretty funny that I was so clear about it. I didn't think it was funny. I was devastated. And since my parents never did manage to buy a house, ever, at all, anywhere, you could say that I never quite recovered.

So I'm buying a house.

Joining the real-estate bubble
I know. You think I'm just buying a house because the entire country -- now cowering in fear at what the stock market will do next -- is taking shelter in the seemingly safe bosom of real estate. July new home sales topped a million for the first time ever; a 15.4 % increase over last year. From June to July, new and existing home sales combined jumped over 11%. In one month.

But my impulse to buy isn't part of the whole real estate craze. This desire to own my own home isn’t about fear or profit; it's far more ... primal. Elemental. Cosmic, even. People talk about how single women in their mid-30s can hear their biological clocks ticking. I think what I'm hearing is my real estate clock, ticking off the roughly 270,816 hours since I saw that house in Williamstown, and asking me what the heck I'm waiting for.

Besides, I finally have the money. At least I thought I did, until I figured out what buying a home would do to my budget.

Dancing with your demons
Whenever you're faced with making a big commitment in either love or money, all your worst fears and biggest neuroses rise up and overpower your common sense. So when faced with the prospect of making a huge financial commitment like owning a house, I resorted to old familiar habits like ... total denial! (Hey, it's worked in the past.)

I conveniently "forgot" that owning a house, especially an older house in upstate New York where the climate can be quite unforgiving, means not just paying for the house, but paying for all the repairs. Forever.

I conveniently "forgot" that buying a house would require also buying a CAR. Which would require car insurance.

Moreover, most people would give up their rental apartment to go live in the house, which is the principal motivation to buy in the first place, right? But not me. Oh, no. Nothing so practical. I'm going to keep both places.

Don’t hate me because I’m stupid
Look. My editor made me do the math, as he so often does. If I were to take the money that I would invest in the house over 10 years (minus repairs, plus appreciation, etc.), and compare that yield to what the same amount invested in the stock market would get me -- the stock market would be a better investment.

But a house is also a form of enforced savings. Would I, on my own, be motivated (or frugal) enough to set aside the equivalent of my $750 mortgage payment and invest it in mutual funds every single month? No way. But I'd have a helluva wardrobe.

So as crazy as this sounds, it actually makes more sense for ME to buy a house than pretend to save my money -- since I would probably just spend it all. (Editor's note: Astute readers will detect a world-class rationalization in the preceding sentence.) Sad, but true. Know thyself, Socrates wrote. And I'm trying.

And now for some budget magic
This may sound a little kooky. But if you're thinking of buying a house, let my example inspire you.

To my surprise, buying a house takes more determination than money. I'd almost advise that you start to look, even if you don't feel quite ready or financially prepared. It's like having a kid. I don't think you ever feel financially prepared, so sometimes you just have to rock on.

The house I fell in love with is $95,000, and I'm putting down a measly $5,000. I didn't even HAVE that $5K when I went house hunting the first time, but I was close. (I hope my real-estate agent isn’t reading this.) Anyway, houses take a long time to buy, and I've been saving like a madwoman ever since then. It's incredible how many sacrifices you can make when the thing you want most is within reach.

But all that bravado has its downside in my tendency toward denial, as I mentioned. So to convince myself that I could afford to both buy the house and keep renting, I had to do what so many corporate executives have done in recent years: invent a whole new system of accounting!

I've recently gotten an additional free-lance contract, which promised a steady new revenue stream -- thousands of extra dollars per year. I'm rich! With the resulting growth in EBIDTA, I can reclassify prior-period earnings and justify expansion of the physical plant!

Then I took my monthly income and subtracted all my expenses:

 

• rent for my apartment
• mortgage on the house
• taxes
• utilities
• phones
• credit card payments
• living expenses

and decided I could live on the remaining $1,400 a month, no problem. Unfortunately, that's what everybody does when they are creating a budget that will never work.

Back to reality
The reason budgets created by subtraction never work is that they aren't based on reality. People tend to count only their regular expenditures and forget about those big ugly expenses that crop up infrequently but with catastrophic regularity.

After resisting it for weeks, I finally sat down with to work the numbers according to the method outlined in a column on "the 60% solution," which is designed to take care of present expenses AND provide cash for the unexpected. I recalculated my budget to see if I could fit all of my regular living expenses and all my taxes into 60% of my gross income, and then divide the remaining 40% up equally for fun, retirement savings, irregular expenses and for major, long-term expenses (like buying a car and repairing the roof).

And I couldn't make the numbers work.

That meant either:
 

• give up the house,
• buy the house but live on the edge of financial insanity (in which case my editor would fire me, because then why am I here?),
• ask Martha Stewart if I can borrow some money,
• or bring in more cash.

I need the house
A certain amount of insanity comes into play when you’re buying a house. I mentioned that my parents never bought one. And that it has been 31 years since I first knew that I had to own one myself or die. That conviction has only grown as I've watched my parents pay ungodly amounts of rent -- with nothing to show for it.

I know that there are a dozen other more sensible ways to buy my first house. I could bide my time, save my money and eventually find another one. I could buy a house that I would live in, instead of trying to own and rent at the same time. I think, honestly, I’m afraid that if I wait any longer, another 30 years will pass and I still won’t have a house.

So as hard as this decision is, financially, I'm willing to take on a few additional writing assignments beyond what I'll be earning with my new gig. These should bring in an extra $10,000 a year, which is basically what the house is going to cost me in mortgage payments, taxes, insurance, etc.

I was a little depressed upon facing up to this necessity. I thought my little raise would take care of the new expenses, and it would, but with nothing left in the bank: no savings, no emergency money, no cushion. Of course, this is how I was raised, so it seems totally doable!

And maybe it is, but it's also a recipe for ceaseless anxiety -- and it's a chance I don't want to take. So, yes, taking on the equivalent of some part-time work seems reasonable. And while it will be hard to give up my shoe-shopping fetish, I’m sure I can channel those impulses into more productive ends.

Home Depot, here I come!