Many people who would like to own homes have fears that prevent them from buying. If you're one of these people, take heart - there are simple steps you can take to overcome your fears and become confident that you will make a sound purchase. Here are some of the top reasons you may be holding off on purchasing a home and how to overcome these hurdles. (For related reading, also check out 5 Mistakes Real Estate Investors Should Avoid.)

IN PICTURES: Financing For First-Time Home buyers

  1. A Loss in Property Value
    Homes can decline in value, even without a disaster. Neighborhoods can gradually decline, newly-built homes can make older neighborhoods less attractive, or an unpleasant development (prison, landfill, highway, etc.) could be built nearby. A poor or mediocre economy can also keep home values down.

    Even savvy home buyers can't always predict what will happen to home prices. But you can take precautions, like buying in a low-crime area where the homes are well-kept, primarily owner-occupied and with high-quality schools nearby. You can buy in an area where there are multiple sources of employment, so if one business shuts down or leaves, the entire town doesn't have to move to find work. And you can contact the city government to ask about future development plans in the area you want to buy.

  2. Overwhelming Maintenance Costs
    All homes have upkeep costs, and many homes have very large maintenance bills. If you become a homeowner, you won't be able to avoid these costs. However, there are numerous things you can do to mitigate and prepare for them:
    • Buy a home that has been well-maintained.

    • Buy a home that has recently had major components upgraded or replaced (e.g., new roof, new water heater, new plumbing, new electrical)

    • Buy a new home (though new homes sometimes have undiscovered defects).

    • Regularly maintain your home to prevent small problems from becoming major repairs.

    Go into the purchase with a generous emergency fund set aside for home maintenance and add to that fund every month.

    To avoid buying a money pit, you should also have a home inspection before you buy. (For more on home maintenance, take a look at Do You Need A Home Inspection?)

  3. Buyer's Remorse
    Are you concerned about buying the wrong house? Maybe it's because you don't know what you want. Fortunately, you can solve that problem.

    Make a wish list that includes features your home must have, as well as features that you'd like it to have but aren't necessary. Look at many houses to see what's available in your price range. If you find a home you think you want to buy, sleep on your decision before making an offer. And don't exceed your budget, as you will quickly regret buying any house that strains your finances. Also, don't be afraid to walk away from a house - new homes are always coming on the market.

IN PICTURES: Home Renovations That Don't Pay

  1. Being Unable To Afford Your Mortgage Payment
    Many people wonder how they will afford their mortgage if they lose their job. They also might see that the mortgage payment required to afford a home in their area exceeds what they currently pay in rent.

    To deal with potential job loss, make sure to have a large emergency fund set aside. You can use this money to continue paying the mortgage if you lose your job. Also, though you may experience unpleasant collection activities, your home isn't likely to be taken away from you the first time you miss a mortgage payment.

    Before you take on a mortgage, set up a budget so you know what your existing expenses are and how much money you take home every month. Also, think about new expenses that will come with home ownership, like water and trash bills. Pay little attention to what your lender thinks you can afford. You may think that your lender is the financial expert, but in actuality, you know more about your finances than anyone else. You can also try making fake mortgage payments for a few months and see how it affects your finances. If a mortgage would cost double what you currently pay in rent, make an extra "rent" payment every month into your savings account. Can you still live comfortably with this extra payment?

    Also, make sure you have health insurance before you buy. Unexpected medical bills are a common source of financial instability.

  2. Tricky Mortgages
    If you feel that you are not financially sophisticated enough to manage a mortgage, there are two simple remedies to this problem:
    • First, start educating yourself about how mortgages work, and don't buy a home until you understand what you're getting into. There are numerous books, articles and classes available on the subject. (For more information, take a look at Mortgages: Fixed-Rate Versus Adjustable-Rate.)

    • Second, if you're still uncertain, get a 15- or 30-year fixed-rate mortgage. These mortgages have withstood the test of time and are the most basic and most foolproof mortgages available.

The Bottom Line
Buying a home will likely be the largest purchase of your life, so you're justified to be hesitant. But millions of people, many of them less intelligent than you, have taken the plunge and are successful homeowners. Do your research, make the necessary preparations, and feel confident in purchasing your first home.

For the latest financial news, see Water Cooler Finance: Rising Markets And Buffett's Successor.

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