Facing My Financial Fears: Buying A Home

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This week, The Simple Dollar is doing a five part series on financial topics that scare me just a bit. Researching and then writing about them will (hopefully) alleviate some of that fear Other fears include buying a car, estate planning, investment risk, and Roth IRAs.

I saved my biggest fear for last. In the next twelve months, my wife and I will likely move forward with a home purchase, a move that fills me with a deep, deep trepidation. There are several reasons for this:

I am afraid of spending more than I can afford. My wife and I have looked at countless houses in the last few months. The one that we both fell in love with is on the bleeding upper edge of what we could afford (we looked at ones more expensive than that one, but they just didn’t *spark* with us like this one did). I sat down and prepared what I thought would be a monthly budget if we were to purchase that house and it made me get out the Maalox.

We don’t have a down payment. If things were entirely up to me, I would wait until we could have a full 20% down payment before buying, but my wife feels (quite strongly) that we are losing equity by waiting. Her philosophy is that we should buy and make double/triple/quadruple payments on the ARM we would have to get to get the down payment. This is fine, but it does increase our risk and give us less room to breathe within our budget. The presence of a full down payment (or even most of it) on a $225,000 home would relieve a lot of my fears very quickly.

I am afraid of “underbuying.” On the other hand, my wife and I both have a steady, solid income. I am concerned that by seeking a less-expensive house, I will reduce the quality of life for my wife and my son. I want them to have a nice home to live in. Most of the houses I’ve been really leaning toward are much less expensive than the house we fell in love with, but they’re also not as pleasant, either. I feel completely comfortable with the costs of those houses, but I wonder whether this comfort is worth it.

I am afraid of the maintenance costs. Since I’ve had no experience as a homeowner, I have little idea what to expect when it comes to maintenance costs for a home. (I am aware of the costs for insurance and for property taxes; I’m not referring to these.) What should I expect for a monthly cost for lawn maintenance? How much should I annually budget for minor home repairs? How much should I annually budget for larger but irregular purchases such as appliances, carpeting, and so forth? I have little idea what to do here, and various sources seem to give widely varying answers.

These fears all add up to a lot of sleepless nights. As spring approaches, we are going to meet with a close relative who is a real estate agent (but not in our area, so we won’t be working with her, thus eliminating potential conflicts of interest) who is going to give us detailed advice on what to do. I know her and trust her; meeting with her is the one thing I look forward to that will reduce my fears about a home purchase.

Outside of a “fairy godmother” appearing with a down payment for us, of course.

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4 thoughts on “Facing My Financial Fears: Buying A Home

  1. Equity Schmequity. Did you read what I wrote last week? Unless you guys live in a handful of midwestern communities, housing prices are falling. Make sure you have a substantial emergency fund (including mortgage payments) before proceeding AND enough to cover your whole closing costs shebang. It seems to me that people have been biting off more than they can chew in this market, and a lot of them are hurting.
    I’ve heard to save 1% of the home’s value for home maintenence, so $2250 for a $225K house.

  2. I earn my state minimum wage and I fear NOT ever being able to buy a home. I fear not being able to stabilize my housing costs the way homeowners can with a fixed-rate mortgage. I fear having to spend more than I can afford, specifically because I cannot lock in or even stabilize my housing costs. I fear gentrification and displacement, and eventual homelessness when rents soar beyond what I can afford.

  3. There are many areas where nice, decent size houses go for $40,000-60,000, both in the city and small towns. Mobile homes are much less than this. Save up as much as you can for a down payment and reduce your debts to improve your credit score. In this price range, your mortgage payment could be $300-$400.

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