Have you finally decided that you are ready to buy a house?
No more renting, no more dealing with landlord raising the rates, and no more apartment hopping. But after talking to your friends and coworkers you’re starting to second guess yourself.
You were expecting high fives and support but instead, you got the doom and gloom speech.
That home buying ‘makes you immobile, ruins your financial life, the recession wouldn’t have happened if people rented, doesn’t make good money sense yadda yadda yeah’
And now you are scared and you don’t know what to think. So in this post, we go over the most common home-buying fears and determine if they are actually valid.
Here’s the first and most common one.
I’ll be stuck here
People like to make home-buying sound like you turn into a tree and are somehow doomed to be stuck in the same place F-O-R-E-V-E-R. But that’s no true if your plans change you still have a number of exit strategies at your disposal.
- You can sell your house.
- And if the market doesn’t allow for sell – like in the grips of the Great Recession – you can always rent it or
- do a rent with an option to buy.
- And if being a landlord isn’t your style, you can always hire a property manager to take care of your home while you move to another location.
Bottom line, you won’t be stuck.
But that being said, you shouldn’t buy with a plan to sell in less than 5 – 7 years unless you have built up amazing equity – by buying a fixer-upper and putting in sweat equity, or purchased the home at a below-market price where you can recoup the closing cost of buying the property, cover realtor fee, etc. associated with selling.
My home will be a money pit or maintenance costs will make bankrupt me
When you are renting all maintenance to the property is out of your hands, doesn’t cost a dime, and only a phone call away to fix. Nothing is really your job. But when you own a property, all of those expenses are yours to fix and pay for. And don’t be mistaken, replacing the mechanical systems in a home is not cheap.
But don’t let that discourage you. Anything you purchase will need maintenance, but you can offset these costs by:
1. looking for homes that have the expensive mechanics recently replaced i.e. the roof, electrical, furnace, A/C, water heater and sub-pump having most, or even a couple of the big items newly replace can give you the peace of mind to know those won’t need replacing for at least a few years.
2. You can also negotiate a home warranty into your purchase to cover the cost of any major repairs that can come up.
3. Or look for newer houses to avoid certain issues.
Older houses with original mechanical systems or ones where the appliance has already outlived the warranty are much more likely to eat into your maintenance fund faster than newer homes. So avoid the hassle as much as possible by hedging your bets.
I won’t be able to afford a mortgage
In some areas, buying is a no brainer. Buyers in big cities such as Detroit, Cleveland, Cincinnati, Milwaukee, Memphis, and Baltimore, for example, find that the average home mortgage payment is cheaper than the prevailing average rent.
That’s great news for renters thinking of taking the plunge!
And many agree.
Zillow Chief Economist Dr. Svenha Gudell stated in a press release that “Renters hesitant to enter the home buying market for fear of not being able to find an affordable home should be encouraged to discover they may have more options than they thought.” So don’t assume your mortgage will be more than your current rent.
You can estimate your mortgage payment by using any of the mortgage calculators found on the real estate websites such as Realtor.com, Redfin, or Zillow so you can know fairly quickly what your payment could look like.
In fact, nearly every site offers a mortgage estimator so you can know well in advance what you can and cannot afford. You can start preparing your budget for the new payments required so you will get used to it.
I’ll go into foreclosure and end up on the street
Many people see losing their job, ending up in foreclosure, and being kicked out on the street as the biggest fear they have regarding home buying. And while going into foreclosure is a legitimate worry, you can mitigate this risk by having a robust emergency fund set aside for emergencies.
And there is one ‘benefit’.
If the worst does happen, and you are unable to make a mortgage payment, unlike a landlord who can file evictions in 3 months (or weeks depending on your state), it usually takes several months if not years of non-payment before the bank forecloses on your home and comes to take it away. That gives you time to get back on your feet, work with the mortgage holder, or find another way to fix the problem.
My home won’t appreciate
It’s true, you can’t always bank on appreciation because you never really know which direction a neighborhood will take or what will happen over time.
A great neighborhood can deteriorate and go down, or the city and investors can pump money into new development and turn a sketchy neighborhood into an upgrade ‘IT’ place.
That’s why it is so important to choose the right property and purchase effectively i.e. a home with built-in equity, or the opportunity to add equity, in a low crime neighborhood, and with good schools.
You’ll be much more likely to end up on the right side of the coin.
You don’t have to be scared
The bottom line is, real estate has proven to be a great asset to building wealth and increasing your net worth. So the real question isn’t if buying a home is a good idea. The real question is what do you need to know how to buy the right home. Because buying the right house, in the right neighborhood, for the right price, is much more likely to be a successful purchase.
In that instance, you can’t lose when purchasing a property.