Ask Andrew – As featured on Bethesda Now
Question: Buying a home is scary, plain and simple. A buyer questions every aspect of the process and rightfully so, as it is most likely the largest investment a buyer will ever make. So what are the most common fears and how do you eliminate them?
A : Here are the four most common fears that I hear from buyers:
Buying a home at the height of the market and then the market crashes: Agents are asked on a regular basis what they believe a home will be worth in the next five years.
The truth is that agents can’t tell the future so there is just no way to be 100 percent accurate. If I could tell you exactly what a home would be worth in the next five years, I would be a billionaire.
Agents can give an estimate based on past trends and economic projections, but I wouldn’t purchase a home solely based on those predictions. My recommendation would be to purchase a home with a plan in mind that incorporates your worst-case scenario so you don’t get any surprises. Be sure to speak with a Realtor to determine the best plan to meets your goals.
Please be sure to read the last paragraph of this column about short-term and long-term real estate investments.
Buying a home that turns into a money pit rather than a good investment: When buying a home, you’re banking on the seller disclosing everything that is wrong with the home.
However, you may be putting your trust in a seller who doesn’t know much about homes or who has no idea of how to maintain it. The best way to eliminate this fear is to have inspections on anything and everything that scares you.
A home inspector obviously won’t be able to look inside the walls, but will help eliminate most fears with a home’s condition. Please remember that a home inspection may not inspect everything of concern.
Be sure to get a specialist to inspect everything outside of a normal home inspection, such as a chimney contractor, pool company or roofing company. You could always purchase a home warranty to give you some additional protection after you own the home. A home warranty typically runs about $495 a year.
Buying a home that you can’t afford: This deals with buying a home above and beyond your budget. A lender typically qualifies a buyer based on debt-to-income ratios. The bank typically wants to see a 41 percent-43 percent debt-to-income ratio.
This means all of your debt (monthly obligations) plus the new mortgage you’re trying to obtain equates to 41 percent-43 percent of your monthly income.
The banks try to prevent buyers from overbuying and buying more than they can afford, but it ultimately comes down to the buyer knowing his or her finances and sticking to their comfort zone.
Falling in love with a home to later find out you don’t qualify: This falls more into financing more than concerns with the home itself.
I always recommend my clients speak with a lender before looking at homes. Everyone would love a mansion for $1. But we all need to be realistic about what we can afford and what homes fall within that budget.
When speaking to a lender, be 100 percent honest and supply the lender with all necessary paperwork ahead of time to eliminate this fear as much as possible.
Real estate is a good investment for many reasons. However, if you’re worried about the fears listed above, remember that real estate can be a short-term investment or a long-term investment.
If you don’t receive the return you were looking for in the short term, turn the home into a rental property and make it a long-term investment so you can capitalize. Every property is different, but take all strategies into account before purchasing or selling a property. Consult a Realtor to come up with the best approach for you.