All about the things that creep you out – when it comes to real estate….and – all the reasons there’s really nothing to be afraid of!
We’re going to wrap up today’s show with one of the biggest and most fundamental fears out there. That terrifying moment, when you consider leaving the rental apartment behind, and buying a home of your own.
Now THAT – can be pretty frightening!
Some people who are renting – tell us one thing in particular is especially scary: and that is, not knowing all the expenses involved in buying a home. Are there hidden costs out there? Will they be writing check after check – and end up regretting their decision to buy?
It’s a valid point – considering that as a renter, they write one check a month to the landlord, maybe some for utilities and insurance – and they’re done. Renters understand that. But a whole house? Hmmmmm. Will they be able to afford it? Or will it be – a bottomless pit – they throw money into every month?
Let’s take a look at that. Beginning with the fact that worrying about money? Is pretty normal. The National Foundation for Credit Counseling did a survey a few years back, and found that FOUR out of FIVE people who responded said personal finances keep them awake at night. At least sometimes.
So sure. Spending all that money on a house can be frightening. And so is the idea of paying all the bills. But like many of the scary things we’ve talked about on today’s show, when you fully understand all the facts, it’s really not so scary after all.
So let’s address those fears – step by step. OK? step number one: when you first sit down with your REALTOR®, ask them about the expenses you may be facing – as a home owner.
Your REALTOR® will be glad to help. They have the experience, and the local market knowledge to help you understand exactly what to expect.
They will help you separate “fear’ from ‘fact.’
Starting – with the down payment.
The fear is – you won’t be able to come up with the down payment. Many people think you need 20% of the purchase price, to buy a home. Well, that’s the fear – but here’s the fact: People can get a mortgage with a down payment as low as 3 percent. So it’s not as scary as it seems.
OK? Now, once you’ve BOUGHT the place, you have to be able to afford to LIVE in it.
The fear? You’ll be house poor. But the fact is? These days lenders look VERY carefully at the financial picture of everyone who gets a mortgage. In today’s market lenders won’t let you become house poor, because that would be risky. And after the crash 10 years ago lenders don’t do risky anymore.
And most lenders will require your total monthly debt, including your mortgage, credit cards, car loans and student loans – is no more than up to 45 % of your total monthly income. You see? 45%. So, you will have 55% left – for utilities, groceries, gas, and even vacations. That’s a long way – from being house poor!
Another fear: the place will fall apart. But the fact is, when you buy a house you’ll get an inspection – so you will know its condition before you commit!
The home inspector’s job is to make sure the property is safe, and in good condition. They will identify any problems that could represent big bills in the future. Like a roof that only has a few years lifespan left. So before you decide to buy the place, you’ll have a pretty good idea about what kind of shape it’s in, and whether you’ll be facing any big bills in the future. They’ll help you go into the transaction with all the facts you need to make a solid decision.
So yes, making the jump from renting to owning a home of your own is a lot to think about. But scary? Not so much. Because if you know what your household expenses will be, and you make a budget, and you stick to it? You’ll always be ready, and you’ll never be surprised – or frightened – by the costs involved in owning your own home.
And by the way if you get a 30-year fixed mortgage, you’ll know exactly what your mortgage payment will be every single year. It will never go up.
Compare that to seeing your rent increase again and again. You never really know when you’re renting how much more you’ll be paying in the years ahead. Whether you’ll be able to afford the place. Or whether you have to move out and find something else if it gets too expensive. Now that, is truly a really scary thing.