- Not Saving Enough for a Down Payment
A misconception exists that potential homeowners must put down at least 20 percent on a home before a mortgage lender will consider financing the remaining amount. A likely reason for this myth is that borrowers typically need to put down at least 20 percent to avoid paying private mortgage insurance (PMI). However, the amount of the down payment, or needing to obtain private mortgage insurance, has little bearing on qualifying for a mortgage and more to do with the amount of home you can afford. Plus, most lenders offer loan products which allow for lower down payment amounts and programs which may assist you with your down payment.
- Concerns About the Home’s Condition
Perhaps you and your partner have found a house you both love but feel anxious that it will fall apart the day you move in. There are two reasons why this occurrence is rare. One is that most home owner’s preparing to sell their homes spend considerable time and resources getting their house in sellable condition. The other is that lenders strongly encourage a professional home inspection by a neutral party, who has no stake in the sale of the home, to help uncover potential defects. By getting a home inspection, you can put yourself at ease and gain confidence regarding your investment.
- Past Credit Mistakes
If you plan to buy a house in the next year, it’s a good idea to obtain a free copy of your credit report and request your credit score. This gives you the chance to challenge inaccuracies in your credit report as well as improve your payment history if you have had issues in the past. Mortgage lenders typically reserve the best interest rates for applicants with a credit score between 760 and 850. That doesn’t automatically mean disqualification for a lower score, but you could expect to pay a higher interest rate. You can learn more about obtaining a free copy of your credit report here.
- Loss of Property Value
Home values can be unpredictable. A natural disaster, a failure in neighbors taking good care of their homes, or developers building something considered undesirable nearby are some of the most common causes of declining property values. A halfway house is a good example of the latter. While there is no way to anticipate every occurrence which could affect your home’s value down the road, you can take a proactive approach by purchasing in a low-crime neighborhood with mostly owner-occupied homes which appear well-maintained. It might also be a good idea to contact your local government’s planning and development representative to inquire about future building plans.
- Unaffordable Maintenance Costs
It’s true you're typically on your own when it comes to paying for repairs for broken appliances, damage to your siding, and other common upkeep costs. To assist in calming your fears, consider putting some money aside in an emergency fund. In addition, make sure the home has been well-maintained before moving in and ask for a written record for repair or installation of major fixtures such as the roof, plumbing system, and water heater. Regular maintenance of appliances and other major fixtures may reduce these costs and help eliminate this fear. If you’re still concerned about unanticipated maintenance costs, do some research and consider buying a condo or townhome with a well-run homeowners association (HOA). While you’ll be required to pay HOA dues monthly or annually, if a costly repair needs to be completed to the outside of your home, this will typically be covered by your dues.
- Unaffordable Mortgage Payment
The foreclosure crisis, which began over a decade ago, has caused a good amount of fear for home shoppers concerned about getting in over their head with a pricey mortgage payment. What would your financial situation look like if you lost your job or your spouse endured a long illness? The best way to prepare for these unexpected occurrences, and similar scenarios, is to create an emergency fund which can cover your living expenses for six months. This should include the anticipated amount of your new mortgage payment, as well as any other obligations you’d expect to pay. While saving this amount of money may seem like a tough task, you’ll rest easier knowing if an unanticipated emergency occurs, you’ll be prepared. Additionally, speaking to a mortgage professional regarding how much home you’ll be able to comfortably afford will assist in diminishing your concerns. A good place to start is by utilizing an online affordability calculator to get an idea of what you can afford and what your payments may look like.
- Experiencing Buyer’s Remorse
It’s common to wonder if you made the right decisions when finalizing a large financial investment. You’re unlikely to find a house which meets all of your requirements to a t, but creating a list of must-haves before you begin your home search will help in reducing your feelings of anxiety once you’ve made an offer. Be sure to view several houses with your “must-have” list in hand. If you are working with a real estate agent, be sure to firmly explain that you’d like to avoid viewing homes which exceed your budget. Overall, to help avoid buyer’s remorse, trust your gut. Don’t rush to purchase a property until you feel strongly about your decision.
Penrith Home Loans is dedicated to guiding you through the home loan process and is happy to address any lingering concerns you may have. We understand the potential anxiety which comes along with the purchase of a home, and we’re here to provide education and reassurance.