I've always been a plain vanilla kind of girl when it comes to mortgages. We own two houses and both of them have standard, fixed-rate mortgages. I spent some time in mortgage banking and saw too many creative (aka crazy) mortgages turn into a nightmare for a homeowner. I have always held the belief that if you need to get a creative mortgage, you probably can't afford the house anyway.
We've just moved overseas and expect to be here for three years. When we go back to the States, it seems likely that we'll end up outside of DC again, and we have identified a few neighborhoods that interest us. The real estate market has been teasing me lately with well-priced offerings in the neighborhoods we like. A great house at a great price hits the market every few weeks and it is driving me crazy that we are so far away and so unlikely to move back any time soon.
Last night, I noticed a significant price drop on this house that seems as if it would be very good for our family. I did some research and then, because I'm crazy like that, I did the math to figure out whether we could afford the house. And the answer is: maybe. Yes, I know we have enough money (I would never do it if I were unsure). The questions come in the mortgage: can we get a mortgage? We'd have to rent it out until we got back...would the bank count rental income on a place we didn't even own yet? How close would the bank let us cut our budget? How would they factor in our overseas allowances? They are all good questions, but here is the main thing: I'm basing all my calculations on a very conservative loan from a lender such as Navy Federal. I know for sure that I could go with a more liberal lender and buy this house without much problem.
It is amazing how a person can rationalize something when they want it enough. The more I think about this house, the more I think I should look around and "just see" what another lender could do for us. It is completely contrary to my long-held beliefs about home financing, and that probably means that it is a bad idea. (Never mind that my husband will smartly put the kibosh on this whole scheme when he reads this.)
This incredibly long introduction brings me to the main point of my article: how do you know when to follow your head, and how do you know when to follow your heart? I don't think it is good to choose either way all of the time. If you always follow your head, you might miss out on something lovely that would make your heart happy. If you always follow you heart, well, that rarely works out well when it comes to money. Better to have some sort of balance between the two, with your head making most of the decisions and leaving some (hopefully smaller) choices to your heart.
How do you decide when your heart and your head conflict?