You've
looked at dozens of homes. Your REALTOR®, Lisa Bear, is about to tear her hair out
with frustration. You are paralyzed, letting one great home after
another pass you by. Why can't you make a decision?
Buying
a home can be an overwhelming process. There are so many decisions to
make and any of them can mean serious financial consequences. 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 commitmentphobia.
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 it's name is
money. The question is, which aspect of money is stopping you from
moving forward?
Fear of spending too much
Lenders will loan you money at the top of your ability to borrow. Realtors will suggest that you will be happier in a "bigger, better" home, eliminating the need to "trade up" in a few years. Stretching to buy the most home you can possibly afford is a good strategy, but only under certain conditions - that you have 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.
That means backtracking. Talk
to your Realtor and ask 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% 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 six percent less than lenders will allow you to borrow.
Just think what else you can do with six percent of your income. You'll
still have your house, you'll just have more to do other things with.
A conflict in goals
Many couples purchase homes with the idea that they will have a child,
so stretching buying power to have the extra space makes sense. But if
you are trying to accomplish two big financial goals at the same time -
buying a home and adding to your family, then something has to give.
You can't have it all - peace
of mind, a large mortgage, and burgeoning expenses all at the same time.
Something has to give and the way to do that is simply to prioritize
your goals. In what order of importance do you want things to happen?
What is most important to you? Whether you are planning a family,
returning to graduate school, paying off a student loan, or buying a new
car, you surely realize that your financial pie can only be sliced so
many ways. Your mortgage is the largest, and the larger it is the
smaller the other pieces.
Problems in the marriage
This is one of the toughest issues to address, and one your Realtor
can't help you with. But just as you are listening to your instincts
about the amount of money you should spend on your new home, you should
be paying even more attention to your feelings about your marriage. And
only you can answer the question - will we still be together in five
years? You should at least be able to predict being together long enough
to pay off the interest on your loan! Or you'll be selling your home
without the benefit of building any equity and equity only comes with
appreciation and mortgage reduction.
Buying a home will not fix a
poor relationship. It will only make things worse. So you have a
decision to make and it isn't which house to buy. It is whether or not
you want this relationship to survive.
If you decide you want the
marriage, then you must pour your efforts into fixing its problems,
including your share of the blame. Be willing to change some things,
compromise on others, or accept many things as they are. If you can't do
all of those, then to dissolve the partnership is your only other
choice. After you have solved the problems in your relationship, you
will find your home more easily.
Fear of the future
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 getting professional help for your
anxiety. 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 in value?
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 a 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.
So money isn't the root of all
evil, but it is the root of indecision - at least when you are
paralyzed about buying a home. Thinking through the money issues can
help you get moving one direction or the other. For some of you, just
reading this article will put your jitters to rest. For others, you may
realize that a home isn't in the cards for you right now, and that's OK.
Wait a few days or weeks if you need to. Use the time to regroup. It is
far better for you to work through a few obstacles than to jump into
the largest investment of your life without confidence. If you can work
through your fears, get your finances in tip top shape and proceed,
you'll find buying a home doesn't have to be a paralyzing decision. In
fact, it can be one of the most exhilarating things you'll ever do.
If you are worried about cash
flow, then making disproportionately large house payments will tarnish
the joy of home ownership, unless you can find ways to cut down the
other pie pieces. Work to improve your cash flow. Accelerate your credit
card pay -offs Don't incur new debt. Rebudget your expenses and
eliminate unnecessary expenditures. Make compromises - vow to cut down
if you can't cut something out. Be willing to move timelines for meeting
your goals. Don't be influenced by others to live beyond your means.
Set your sights on an affordable home, and you may find your dream home
will appear right before your very eyes.
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