6 Real Estate Fears That Are Holding You Back (Debunked)
Many people who would like to own homes have fears that prevent them from buying. And rightfully so, as buying a home is usually the largest purchase a person ever makes. If you’re one of these people who is hesitant, take heart – there are simple steps you can take to overcome your fears and become confident that you will make a sound purchase. Here are the top 6 reasons you may be holding off on purchasing a home and how to overcome these hurdles.
1 – Loss in Property Value
The Millennial Generation has been very cautious to take the leap into homeownership after witnessing their parents suffer through the 2008 real estate market crash. Many of these homeowners became underwater (owed more on their loan than the market value) and were forced into foreclosure or short sales.
It is also true that homes can lose their value without a major disaster, such as: the property being in an older neglected neighborhoods and poor city planning by constructing a jail, landfill, or highway nearby.
Although you cannot always predict the housing market there are securities in place and precautions you can take. Lending standards are much higher today than they were in 2008 and sub-prime lending is a thing of the past. This means that banks are only approving mortgages to families that can afford them and for prices that are not overly inflated. Precautions you can take are buying in a low-crime area where the homes are well-kept, primarily owner-occupied and with high-quality schools nearby. You can contact the city government to ask about future development plans in the area you want to buy.
2 – Maintenance Worries
Yes, there is maintenance. If your landlord is completing maintenance (important point: IF), then you will also be paying for that maintenance in increasing rent over the years.
To avoid buying a money pit you should always have a home inspection completed prior to purchasing a home. The home inspection will detail any current or possible future maintenance issues.
Other ways to curb possible maintenance issues are: purchase a home that has been well-maintained, purchase a home that has recently had major components upgraded or replaced (e.g., new roof, new water heater, new plumbing, new electrical), purchase a new home (though new homes sometimes have undiscovered defects, regularly maintain your home to prevent small problems from becoming major repairs.
It is prudent that you consider having an emergency fund set aside for maintenance issues and continue to add to it on a monthly basis.
A final option to consider is purchasing a property, like a condominium, that is within a HOA. Generally, the HOA will take care of the majority of common area maintenance such as: landscaping, roof repair, exterior maintenance, etc…
3 – Mortgage Affordability
Before you take on a mortgage, set up a budget so you know what your existing expenses are and how much money you take home every month. Also, think about new expenses that will come with home ownership, like property taxes, landscaping, water/trash, etc…
Many people wonder how they will afford their mortgage if they lose their job. They also might see that the mortgage payment required to afford a home in their area exceeds what they currently pay in rent. To deal with potential job loss, make sure to have a large emergency fund set aside. You can use this money to continue paying the mortgage if you lose your job.
Something that doesn’t always come to mind when preparing to take on a mortgage is having health insurance in place. Unexpected medical bills are a common source of financial instability. This is something you should consider prior to looking at owning a home.
4 – Finding the Right Mortgage (that you understand)
If you feel that you are not financially sophisticated enough to manage a mortgage, there are two simple remedies to this problem:
First, start educating yourself about how mortgages work, and don’t buy a home until you understand what you’re getting into. There are numerous books, articles and classes available on the subject.
Mortgage Confidential: What You Need to Know that Your Lender won’t tell you by David Reed.
Like finding a deal in real estate, you must find a professional that you can trust. The loan products available are available to almost anyone completing loans. Whether you work with a broker or a direct lender (advantages and disadvantages to both – read the book), find someone that can review your specific situation, your short and long term financial goals, and offer the best options for you.
Second, if you’re still uncertain, get a 15- or 30-year fixed-rate mortgage. These mortgages have withstood the test of time and are the most basic and most foolproof mortgages available.
5 – Not Understanding the Real Estate Process
There are a lot of steps and extra costs that could come as a surprise to first time home buyers. Making the decision to purchase a home and how to plan accordingly can only be successful if you know all the details. Here is a brief overview of the process:
1 – Find a Realtor
2 – Find a Lender / Get Pre-Approved
3 – Understand All the Costs of Purchasing (Down Payment / Earnest Money Deposit / Home Inspections / Lender Fees / Closing Costs / Home Warranty / Homeowners Insurance)
5 – Making an Offer
6 – Escrow
7 – Insurance
8 – Move In Preparations (Utilities / Change of Address/ Moving Day)
9 – Closing
The right Realtor® will be able to detail this process out to you and also help you navigate along the way.
6 – Not Trusting Real Estate Agents
Yes, the industry has its issues. There are some really, really bad agents out there. However, there are those of us who went into the profession to make it better, to really help home owners and home buyers, and we really, really know our stuff. We are professional, we return calls, we do our homework, we know the neighborhoods like the back of our hands, we see anywhere from 12-50 houses a week (a staggering 3000 homes a year), we drool over MLS (multiple listing data) until wee hours in the morning, and maybe most importantly we believe in the concept of home ownership. If you don’t have an agent you feel you can trust, if you don’t believe they have your back; fire them. Find an agent that supports your goals, places your best interest first, will answer every question with a smile, and addresses every concern before, during, and after the sale.
In summary, caution in any market is prudent and necessary. If you are considering buying a home there must be a reason, an understanding of the reason and a desire to support the goal with true professionals and knowledge. Knowledge is simply smart living. If you have questions or concerns about buying a home contact us.
