Buying a home can be an overwhelming process. There are so many decisions to make and any of them can have serious financial impact. A home, after all, is hardly a liquid asset. Nor is it a growth investment, according to Wall Street definitions. It’s your greatest financial debt, even while it puts a roof over your head. As it appreciates, it also needs repairs and maintenance. With all that weighing on you, no wonder you’ve got commitment phobia. Yet, you really want to buy a home. You know that few purchases will provide you the quality of life that a home of your own does. There are plenty of advantages, as well – tax breaks, rising real estate values, a stable environment for the family, to name only a few. So you stifle your worries and keep looking for homes. You just can’t find the one that’s just right for you. It might be time to back this train up and examine what is causing the conflict between wanting to buy and being unable to make a decision. There is a cause, and its name is money. The question is which aspect of money is stopping you from moving forward?
Lenders will loan you money at the top of your ability to borrow. Stretching to buy the most home you can possibly afford is a good strategy, but only under certain conditions – having confidence that your salary will rise, that your income is stable and that you can handle large surprise expenses. If you’ve been pre-qualified, you are already looking at bigger, better, more beautiful homes at the top of your range. But something isn’t quite right. Even though you may feel that your income is stable, a feeling is telling you that if you buy in this range, you won’t have enough in reserves should something happen. Those are your instincts talking, and you should listen, because your desires have been doing the talking up to now. Your instincts are telling your desires to scale back a little. Talk to your Realtor and ask him or her to show you less expensive homes. You can’t go wrong buying slightly under your ability. In fact, many financial advisors tell their clients to budget about 25 percent of their income for housing in order to position them to build reserves for savings, investments, home improvements, emergencies and dozens of other reasons. That’s almost 6 percent less than lenders will allow you to borrow. Just think what else you can do with 6 percent of your income. You’ll still have your house; you’ll just have more to spend on other things.
Fear takes the fun out of a lot of things, but there is reasonable fear and unreasonable fear. Unreasonable fears have no basis in reality, so there is little you can do beyond trying to get them under control. Reasonable fears you can handle on your own with a little common sense. Fear can be tamed by looking at the worst case scenarios compared to the best case scenarios. So examine the questions that are really bothering you. What if we can’t make our payments? This question can be balanced by a best case. What if we manage our money so well that we can make double payments? So the fear here is manageable – it comes down to how confident you are about managing your money. If you aren’t sure of yourself, get help. Ask someone whose money management style you admire for advice on how to manage your money better. Then stick with it. What if the value of our home goes down? Would you feel as fearful if you asked yourself whether your property will go up in value? Property can go up or down, but all property requires maintenance or it surely will deteriorate in value. This can be easily prevented by having enough budgeted or in your reserves to perform scheduled and unscheduled maintenance. Look at the properties surrounding the home you are considering. Are they maintained with pride? Are they being updated? Then your chances are good that the neighborhood and your home will retain its value. Rest assured that there will always be a buyer for an attractive, well-maintained property.
Because it is not a liquid asset, real estate is not as volatile as you think. It goes down slowly and rises comparatively slowly. And home values even when depressed may get resuscitation after a few years. Your best hedge against the future is to keep your property in desirable condition.
You can’t predict the future. The only thing you can do is prepare yourself to handle what may happen.
Submitted by the NMAR PR Committee
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