What’s worse than biting into an apple and finding a worm?  Finding HALF of a worm!   The lesson here is not biting off more than you can chew.  We’ve been talking a bit about renting versus buying when it comes to North Conway real estate.  There are strong cases for both depending on your current situation.  For those thinking long-term, buying can be a better option and can help you develop strong community ties and an appreciating investment.  But how much can you chew?

In the spirit of disclosure, I write this today in anticipation of my closing this afternoon.  I’m actually writing this from a motel room since I moved my bed and, more importantly, my TV out of the house yesterday.  It is a bitter sweet day as I’m excited to have sold my home and excited to see what my next real estate adventure will bring.  It is a little bitter because I love the house I built and have enjoyed calling it “home” for the past two years.  Selling at this point was always the plan so I knew this day would come.  That said it is still the first home I have built and called my own.

One of the reasons for selling this home is the fact that I simply could not afford to keep living there.  The mortgage is not a problem, but the additional bills that pile up became a little too much.  A decent real estate agent will talk with you about the price of the home and might even discuss the actual monthly costs.  A really good agent will talk to you about the “real” price of the home and educate you on the potential unforeseen expenses that often take new homeowners by surprise.  In my particular case, I knew the majority of the costs associated, but a few still snuck up on me.

If you are building a new home, the bank is going to do a pretty good job of ensuring that you have the funds available to complete the project.  It is clearly in their best interest to have the money they are investing on your behalf produce a “sellable” home in the end.  I don’t think it is uncommon to use personal monies to complete construction projects, but using additional credit lines outside of the mortgage would not be a good recommendation.  (Ask me how I know.)  Once the home is built and you are settling in, those additional credit bills start to roll in and they are no less important than your mortgage.  It is here where you can start to feel overwhelmed if you had not appropriately planned.

The other expenses such as taxes and insurance are sometimes included in the mortgage payment amount.  Banks will often add money to your monthly payments and add those funds to a special account for the insurance and taxes.  This is a great way to manage your costs and is highly recommended.  Unless you are very good with your money and budgeting, the tax bill and insurance bill will inevitably surprise you.  Often these bills arrive at the most inopportune times.  If you are also trying to manage additional credit line payments, these extra expenses can become a little too much.

Education and planning are the keys to a successful journey into home ownership.  With a good understanding of your monthly expenses, buying a home can be a smooth transition from the world of rentals and open up whole new experiences for you as a homeowner.  You will not be surprised by the monthly expenses and will have reserves in place for those unexpected costs.  I never was annoyed when the oil truck drove down my driveway as I had been putting money aside for heating.  The electric bill never really strayed too far from what it was when I was renting and other tertiary bills like cable and phone have no real bearing on where you are living.   A successful transition from renting to owning is within your reach if you plan ahead.

There is no shortage of articles about short sales and foreclosures in today’s media.  We were certainly more fortunate than many parts of the country in that we saw very few of these by comparison.  I think the main reason for a majority of these is simply lack of planning.  Of course there were a few unscrupulous lenders that pushed buyers into more home than they could truly afford, but for the most part the buyer has to shoulder a good percentage of that responsibility.

Variable rate, interest only and balloon payment mortgages each serve a valid purpose in the world of real estate, but they are not for everyone and every situation.  I purchased the land on which I built my home using a variable rate mortgage with a balloon payment due in three years.  This would have been crazy to purchase my house with, but knowing the land would be subdivided and I would be building a home on one piece of it made it a very attractive option.  A good friend of mine just bought a condo with a variable rate mortgage.  This works well for her since the rates are so amazingly low right now and she plans to sell the condo in 5 or 6 years.  The worst that could happen is her rate will jump 2 points in that timeframe.  Still a very attractive rate and that is still only a possibility, not a confirmed rate hike.  Again, for the specific situation, it makes the most sense.

I’m a believer in home ownership.  The feeling of pride and the comfort of coming home to a place I built and customized is second to none.  I was fortunate to find a buyer that loves the mountains as much as I do and they will make this house their home now.  Because this is such a great time to buy, I am already on the lookout for a new home and will be sure to plan and budget a little more conservatively this time around.  Perhaps this time I will avoid the worm.