The 3 Things That Scare You Most About Buying a Home

Buying a home must be up there with public speaking and the remake of The Exorcist for frightful experiences, but many of us will buy a home, speak publicly and watch that movie again and again in our lifetimes.

By giving you a few of the “behind-the-scenes” secrets, we hope to help you deal with the 3 things that scare you most about buying a home.


1. The Cost
The greatest fear that people have about buying a home is being able to afford it. This is what keeps us awake at night – calculating and recalculating how many lunches we have to pack instead of going out with the gang, to be able to make the mortgage payment.

The behind-the -scenes secret to dealing with this fear is working with a great lender, getting pre-approved BEFORE you start looking at homes, and being realistic about what you are willing and able to spend. The lender will give you are range of loan options available, and if asked, will give you a realistic projection of what you can REALLY afford considering your budget and lifestyle.

2. The Commitment
Women like to stereotype men as having a fear of commitment – but when it comes to buying a
home, we’re all susceptible. Buying a home usually means committing money and time (at least a year – usually more like 5 years) to being in one spot. If you’re just finishing a degree or training, or you’re not sure that you’ll be in the same position for a while, you may consider waiting until your life is a little more stable.

The behind-the -scenes secret to dealing with the fear of commitment is in buying a home that will re-sell easily – that has features that other people will want. In addition, you can get a two-step mortgage, that allows you to pay a fixed rate for a certain period of time, and a flexible rate later on – so that you can get out of the loan easily after the first step.


3. The People
Who can you trust in this home buying process? This is a big investment we’re talking about. And it seems that everyone is out to make as much money as possible OFF of you!
There are sellers, real estate consultants, mortgage brokers, builders, movers, and attorneys, all of whom may be strangers, and have a vested interest when you buy a home. It’s easy to be afraid that they will take you to the cleaners.

The behind-the -scenes secret is to check their references. Really. Many brokers and real estate consultants operate on a “by referral only” basis – in which they ask clients to refer them to others they know are buying a home. Those who offer “lifetime relationships” and other services (like Free Reports and seminars on buying or selling homes) are already striving to meet your needs.

In reality, they are NOT all out to get you – because in the long run, the BEST business strategy is to make sure that you get what you need and want in a home.

Here’s A Quick Way To Figure Out How Much House You Can Afford…

Here’s the simplified version of what a mortgage broker would do with you.


Step One: (Annual salary ÷ 12)
What is your gross monthly income from all sources? If your annual salary is $75,000, divide this by 12 and you’ll see that your monthly income is $6,250.

Step Two: (Monthly salary x percent you want to spend)
Brokers and financial planners will recommend that you spend anywhere between 25% and 36% of your monthly income on household expenses. We’re going to use 36%. $6,250 x
.36 = $2,250.

Step Three: (Calculate your debt)
Add up your current monthly debt. This includes things like a car loan, insurance, school loans, credit cards, and any other personal debt you may have. All of this added together gives you your total debt. Just a guess, but let’s say that these add up to $750 a month.

Step Four: (Amount you want to spend minus total debt)
Now, take that total debt and subtract it from the amount that you were willing to spend per month to get your maximum monthly payment for your mortgage.
$2,250 - $750 = $1,500

Step Five: (Monthly payment x 12)
Multiply that house payment by 12 months, and you have
$18,000 to spend each year.

Step Six: (Annual payment ÷ interest rate)
Divide this annual amount by the current interest rate (I’m using 6%, because it’s a nice round number, and a good average). So, $18,000 ÷ .06 leaves you with $300,000 available for a mortgage!

Step 7: (Mortgage + Down payment)
Now, take the amount that you have calculated that you can afford to pay for a mortgage, add the amount of cash that you have on hand to make a down payment, and you get your purchase price! Many lenders in today’s marketplace will lend with as little as 5% downpayment if you have good credit and a steady job.

So, using the current example: The mortgage was
$300,000 plus you have $20,000 on hand for a down payment, then you can afford to purchase a home for $320,000.


Now, did that REALLY seem like algebra to you?
Although this is a quick and easy estimate, you should work with a mortgage broker so that you know EXACTLY how much you can afford. There are also many maximum mortgage calculators found through out the web. Check out the calculator on Tridac Mortgages website.