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Manage your home buying fears: Three things every home buyer should know.

People fear responsibilities of all types.  Getting married and having a baby are classic examples.  What about buying a house?  It is a large, life changing responsibility too.  And, people can be afraid of taking this step.

Home Buyers biggest fear is being unable to afford their mortgage payment.

Unlike changes like having a child or getting married, people are afraid of the financial implications of home ownership, rather than the commitment.  According to a study by the Home Buying Institute, which surveyed 7,000 readers, the biggest fear related to home ownership is having a mortgage payment too big for their budget.  Over one third of potential home buyers reported this as their biggest fear.

Other fears include:  paying more than what the home is worth, foreclosure in the future, and structural problems in the home.

Unfortunatley this is not an irrational fear: every day families are forced out of their homes because they can no longer afford their mortgage.  But, it doesn’t have to end that way.

Here are three ways to avoid being unable to avoid your mortgage:

1. You (not your lender) are responsible for developing your budget.

The loan underwriting process is becoming stricter.  The bank does not want you to default on your loan, from a business perspective.  But, from a business perspective, the more money they loan you, the more money they can make.   In many cases, it is possible to be approved for a loan larger than what fits comfortably in your budget.  It is easy to be tempted.

Instead of buying a house based on the budget your bank approves, establish your own budget first.  If your fear is being unable to afford your mortgage, make sure that you leave cushion in your budget for unexpected repairs, and other things that life throws your way.

The responsibility of budgeting and sticking to your budget are your responsibility.

2. Plan for the unthinkable.

Think of the Titanic: the unsinkable ship did not have enough life boats for all of the passengers on board because everyone thought it was “impossible” to sink this ship.  We all know how that ended.

No matter how secure your job is, it is probably not “unsinkable.”  When things are looking good, it is hard to imagine that luck could change.   When the ship is going down, so to speak, it is not a good time to first take a look at this question: what happens if you lose your job?  Do you have a backup plan?  Can you afford the home on one income?  Do you have savings to cover the mortgage and other bills if you should lose your job?

While hopefully you will never have to use your contingency plan, you need to have one.

3. Live within your means.

Once you have established your budget, stick to it.  Reason and budgets can easily fall to the wayside in the emotion of a more glamorous home, in a slightly better neighborhood, with slightly “newer” upgrades.  It is a dangerous path that can have uncomfortable outcomes.

If you live within your means, budget responsibly and have a solid backup plan in case of the unthinkable, you are effectively managing the risk of being unable to afford your mortgage payment.

An exclusive buyers agent can help you develop your budget so that it is comfortable for your lifestyle.  They can also help you to look at homes within your budget, and steer clear of homes that will be pushing the limits.