lobster.
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Buying
a house is like boiling a lobster. If
you happen to be a lobster. First
you figure out your price range. You do
this with a simple formula based on your debt and monthly income. The friendly people at Money Magazine will be
glad to help you with this step. Then
you get pre-approved for a mortgage. To
be safe, you get pre-approved for a bit more than you think you will
need. That way you will have some wiggle
room. Next
you start looking at houses and you immediately go to the maximum end
of your
price range because everything else in your price range looks like
crap. (I am
assuming that you live in the Northeast or Next
you start to bump up your maximum price.
After all, sellers almost always negotiate, so it’s okay
if their asking
price is still 10 or 15% more than what you can afford.
Call it 20%.
You can talk them down. Then
you find THE house. It is not perfect,
but it is still better than anything else in your price range, and
meets most
of your requirements. So you make an
offer. Which is at the upper end of your
new, upwardly revised price range. You
negotiate. Someone else has put in an
offer on the same day, so you offer as much as you think you can manage. The
owners counter. You’re all-in at this
point, and you don’t want to blow the deal over a few thousand measly
dollars. Call it five.
Or seven.
In the grand scheme of things, it’s small dollars. A couple hundred more a month in P&I. Mostly Hooray,
you get the house. Now you go to
finalize the mortgage and damn! Rates
have gone up 3/8ths of a point since you were pre-approved. And, because your down payment is a smaller
fraction of the price you finally agreed to, the PMI (yes, the damn
PMI) is
higher than you were expecting. But at
this point you’ve put down a non-refundable good faith deposit and you
don’t
want to blow the deal over another couple hundred bucks a month. Call it three. So
you sign on the dotted line And
there you go…cooked like the proverbial goose.
Or lobster. But with very
tasteful window dressings. |