Buying a house ranks right up there as a life-changing event along with getting married, having kids, or moving across country for a big new job. Various professionals will offer to help you with the business side of buying a house. You may talk to mortgage lenders, real estate agents, home inspectors, title insurance professionals, appraisers, and so on. But it’s probably safe to say that most will not offer to help you in preparing for the emotional side of buying a home. Well, it can seem a bit daunting at first, and you may not know how to begin. So let me help with a few tips to start coping with your emotional reaction to buying a house.
- Repeat this mantra: “I can do this”. If you are a first-time home buyer, the most important thing to remember is that people buy and sell houses everyday and they are no different from you. Except maybe they’ve done it more than once. Even if you know someone doing it for the third or fourth time, just take that as a testament to the fact that the process is not all that horrible. You will do just fine.
- Trust your instincts. We all have them, the little voices in our heads that say this is the right thing or wrong thing to do. Don’t let the paperwork and financial inquiries get you down. Something inside of you told you this was a good idea. Trust in yourself.
- Have the facts about whether renting or buying is best for you. If you have happy memories of growing up in a house brimming with love, you may feel tempted to replay that happy childhood for your kids. Don’t rest your decision on emotional ties to your past. Take a realistic look at your finances and your career plans for the next five years or more. Research the advantages and disadvantages that come with buying a house. Write them down to keep them at your fingertips. You will feel better about your decision when you can point to your list. Remember that buying a house is a long-term commitment — unlike rentals that you can walk away from easily.
- Your credit rating should not surprise you. Know — before you ever talk to a banker or real estate agent — what your finances look like. Unexpected expenses happen to homeowners. If you do not have a cash surplus to cover these unexpected happenings, you will find your happy home becoming something else altogether. “Prepare yourself” is your motto when home buying.
- Don’t fall in love with your house. You may find a spectacular house but remember you are buying a place to live, not your dream-come-true-I-will-die-if-I-cannot-have-it house. If the price seems too high and the owner won’t negotiate, then walk away with your head held high (and hope they will come crawling back with a lowered asking price). If you fall in love with the house, the seller will see that in your eyes and you’ve lost the battle for control. Steel yourself. Brush aside emotional decisions that go against your better judgment.
- You are not alone in the process. Work with real estate industry professionals. They know the local area, the sale history of the house, the current market in your area. They can guide you and function as your impartial judge. Use them as your resource to get answers to your questions about the property or the process. Realtors get to see all the inventory on the market, so they know what else is out there. Best of all, a good Realtor has a team in place to not only guide you well but also take a lot of stress out of the process.
- Before you even look at your first house, know what you want in a home. Know what amenities are important to you. Keep notes on each house you visit because it is easy to get confused keeping track of the features of each home. If certain features are very important to you, then don’t get distracted by glittery baubles or swap your favorite features in favor of something else. Go home to think about everything carefully. Do a pro-con analysis to see what features really mean the most to you. And realize that every home purchase involves some sort of compromise.
- Beating the down payment blues. It’s true that most conventional financial institutions want 20% of the sale price as a down payment. Like many buyers you might not have that kind of cash laying around but that doesn’t mean you have to forego buying a house. You can beat the down payment blues through several avenues: (a) Private Mortgage Insurance (PMI) allows you to buy a home with less than 20% down with a small amount up front and an added fee to your mortgage, (b) piggyback loans are second mortgages on your property for the amount of the down payment (typically, they carry higher interest rates for ten years), (c) HUD and CHFA offer down payment assistance which looks like a piggyback loan with lower interest rates, (d) FHA loans allow for lower credit scores and low money down if the property satisfies FHA requirements, and (e) no down payment loans through VA approved lenders for military veterans. Be careful when you choose these financing arrangements that you are not biting off more than you can chew. This loan information is only meant to be introductory, it is important that you talk to a great mortgage lender to discuss your specific situation… and fortunately I know a few that have done a great job for our past clients, just ask me to be introduced.
- Foreclosures and “fixer-upper” specials: First-time home buyers beware! Some buyers fall in love with McMansions and others fall in love with the idea of bringing an old home back to life with a little TLC. Here again, keep those emotions in check. These “deals” promise inexpensive buys into home ownership but it’s the fixer-upper part that raises serious issues. If you consider foreclosures and fixer-uppers as an option, ask to have the property inspected so you can determine what kind of expenses “fixing” the property will involve. (Having to replace an entire septic system or the entire electrical system because it’s not up to code may break the budget.) One other caveat: In foreclosures, the price of the house may not reflect the outstanding liens against the home that a buyer must repay. You should use a real estate agent experienced in foreclosures who can answer your questions honestly. Stick to your guns. If the deal looks too good…it just might be.
- What is a closing anyway? The closing, or settlement date, on your new house is a meeting with the buyer (you) and the seller, both real estate agents, the lender, and the title insurance officer. The seller has accepted your offer, you arranged your financing, so what remains is basically a matter of signing a lot of paperwork and the final transfer of money. You may see paper with HUD’s logo on it as HUD’s financial arm, FHA, is the largest mortgage insurer in the world. HUD and the Consumer Finance Protection Bureau have a lot to say about the disclosures you will receive at the closing. For example, there are disclosures about lead paint for houses built before a certain date. There is a loan disclosure form to ensure you as the consumer have the financial information of the transaction clearly detailed for your review. The process can seem pretty intimidating but if you remember to keep all the professionals focused on doing their jobs well, you will have a happy closure of your grand adventure into home ownership.
To talk more about this, or anything else, please contact me. Think of me as your resource for all your Denver real estate questions.