San Francisco may be witnessing one of the highest rates of home value appreciation in the country – in excess of 25%, in the second quarter of 2013, yet a variety of home buying fears still remain among prospective home buyers. Are these first time home buyer fears justified? And if not, how do we conquer them? Read on as we explore these nuances in greater detail.
Timing remains one of the biggest fears among prospective buyers. Essentially they are unsure whether the time in question would be opportune to make a property purchase. After all, given the way property prices have seesawed in recent history, more downwards than upwards, many home buyers feel that it may be better to stall the purchase they have been contemplating so that they can take advantage of even lower prices.
This is honestly, not the best of strategies – nor is the fear factor in this scenario justified in anyway. After all, as we mentioned right up front, in many parts of the country home value appreciation rates are on an absolute roll, so the “strategy” of stalling an impending purchase may only backfire since prices would in fact have gone up considerably rather than down.
Ideally, you should only look at your own preparedness (largely financial preparedness) as the primary driving force behind your home buying impetus; if you are adequately prepared financially, NOW can very well be as good a time as any to buy the property you have been eyeing – and dreaming about!
Depreciation in property values is a genuine fear for a prospective first time home buyer, often with very good reason. After all, across the country, including here in San Francisco city and the entire Bay Area, we saw a major downward spiral in property prices at the peak of the United States housing bubble. No doubt, things have picked up substantially from those days and there is heightened optimism currently – not only as a matter of perception but very much in reality, with San Francisco and other California metros likely to witness the strongest levels of property appreciation in 2014, fear remains concurrent among home buying prospects.
What if there is another correction?
What if this current phase of appreciation only turns out to be another bubble in the making?
What if the property I buy only turns out to be a sitting duck, waiting to crash in its value?
These are many of the fears going through buyer’s minds.
In this regard, we have to say that it is really difficult to predict the way the market behaves. All that we can do at our end is to ensure that we buy a property which is “risk averse”, implying in a “good” neighborhood, which is free from crime. Such neighborhoods usually do not see major corrections in property prices. Also, buying homes with multiple employment avenues in the vicinity helps since people do not move out en masse (in case of a downturn), which would otherwise have driven prices down rather drastically.
Not being able to afford a property that is currently affordable remains a major fear among a lot of prospective home buyers. After all, what if jobs are lost? Or there is another negative setback which takes place, say an accident or a debilitating illness which renders viable employment implausible?
There is little that we can do in case of such situations other than to hope for the best. At the same time, we must look at augmenting our current income until we are healthy as well as in a very good employment situation. In turn, the effort should be to maximize savings so that mortgage payments can happen even if something goes awry. Further, the faster mortgage payments are made, sooner the property in question will be yours for the taking without any pending liabilities. So if you happen to come across a lump sum amount, you could very well use it towards prepayment of your home mortgage, instead of splurging elsewhere.
Buying the Wrong Property
A major fear for a prospective first time home buyer is the possibility of ending up with the “wrong” property – one which needs extensive repair and renovation, to really make it livable in the truest sense. Or maybe it simply does not have what you want or expect from your home.
This is one aspect which can be easily controlled. For instance, you can prepare a thorough listing of your property expectations…you want a certain view, check; you want a certain location, check; you want a certain layout, check. This way you can avoid ending up with a potential lemon which is diametrically opposite to your expectations.
Also, please remember to double check fixtures and fittings, drainage, insulation and a host of other related elements thoroughly, prior to signing on the dotted line, confirming your purchase. And bear in mind, issues along these lines crop up not only in the case of old properties but among newer ones as well. So do not take things for granted either way.
This may seem a relatively minor aspect but truth is that when it comes to finalizing a property purchase, there are many ancillary expenses which crop up under the aegis of “closing costs”. Closing costs can include things like appraisal fees, credit report charges, loan origination fees, and so on.
The best way to manage these closing costs is to try and have them incorporated into the mortgage sum, which is reasonably easy in case of FHA loans.
Also, you can negotiate in such a way that brokers can pay a major chunk of these closing costs, out of their brokerage fee; in any case, they will still make money so they have relatively little to lose.
Typically, these are the top five home buying fears most commonly seen among prospective home buyers. Reading through this article should have given you a very good idea of how to conquer these fears with reasonable ease.