Smart Moves by Ellen James Martin

Conquering the First-Timer Fears

As a potential first-time homebuyer, Daryl Fairweather had every reason to feel confident. She had a solid job, a Ph.D. in economics from the prestigious University of Chicago, and a mother with a background in real estate to help her navigate through the buying process.

But when it came time to close on her purchase of the small Spanish-style house she’d selected in San Diego, she felt the gravity of her decision.

“Taking out a 30-year mortgage felt like a huge step toward adulthood and a very big decision, like getting married,” says Fairweather, who now serves as chief economist for Redfin (redfin.com), a national real estate company.

Fairweather ultimately made the leap. But her hesitations are shared by many of her generational cohort.

Art Godi, the broker-owner of a realty firm in California, says that unlike Fairweather, a surprising number of longtime renters who are motivated to buy a home remain stuck in their rental units because of fears about moving forward. Here are a few common homebuying fears and how to address them:

-- Fear of embarrassment about your credit history.

“Going to the lender’s office for preapproval can be a big breakthrough. People are often pleasantly surprised by what the lender tells them,” says Godi, a former president of the National Association of Realtors (realtor.org).

Of course, many prospective homeowners have flaws on their credit reports that must be fixed before mortgage approval is possible. Still, as Godi says, mortgage brokers and lenders often prove much more supportive than loan applicants anticipate.

“Call it jaded, but mortgage lenders have seen it all when it comes to credit reports. They aren’t going to be shocked or surprised no matter what your credit history reveals,” he says.

Some would-be mortgage applicants, especially those with modest incomes, worry they’ll feel shame when lenders look at their pay stubs or federal tax returns.

But most mortgage lenders rely on commissions and don’t get paid unless their clients get approved. This gives them a strong incentive to take the time and effort required to help rectify their clients’ problems.

-- Fear of selecting a property without the support of your family.

Many would-be first-time buyers are in their 20s or 30s. On financial matters, they still look to their elders for direction and, not infrequently, for cash subsidies as well.

“I can’t tell you how many times buyers crave the support of wise family members when it comes to buying their first home. It’s a new experience that can feel exciting yet incredibly scary,” says Merrill Ottwein, an Illinois-based real estate broker and past president of the National Association of Exclusive Buyer Agents (naeba.org).

There’s nothing inherently wrong with seeking help from relatives. But Ottwein says you should request their involvement early on, not when you’re about to sign the papers to buy a place.

“Your family could be caught off-guard by a late-stage request for guidance. They might be needlessly negative and counsel you against a particular purchase in an attempt to shield you from an error,” Ottwein says.

If you’re afraid to go forward without your relatives’ guidance, but don’t want them to mess up your plans, he suggests you bring them along on all your house-hunting trips. That way they can compare various alternatives and are likely to give you more objective advice.

-- Fear you will suffer from “buyer’s remorse.”

Given the stakes, many prospective first-time buyers become highly risk-averse, worrying they’ll select the wrong home.

“For beginners, there’s a strong tendency to over-research the market; to gather more and more facts before making a commitment,” Godi says. “Psychologically, it’s an easier, safer course to keep searching for additional information than to make a decision.”

But waiting for absolute certainty can have its penalties. Even in a market where buyers have the upper hand, purchasers can forfeit the chance to buy the home of their dreams simply because they obsess too long over the details.

“Through the years, I’ve seen many offers by first-time buyers turned down by sellers because they procrastinated on a decision,” Godi says.

Second- and third-time homebuyers don’t agonize as much over the fine points, he says. “You soon realize there’s no such thing as a perfect house, even if you have it custom-built.”

-- Fear of coming up short on the funds to close a home deal.

Granted, it can be costly to make a housing change at any stage of your life. But many first-time buyers overestimate their need for cash to go through the transition. They fail to take into account the reality that there are a multitude of low- to no-down-payment mortgage programs available to them.

Ottwein says first-time buyers are well advised to explore these options as soon as they decide to make a purchase, rather than waiting until their savings accounts are brimming with funds.

“Before you head into a huge savings campaign, call an experienced mortgage lender. It’s possible that you may not need as large a down payment as you imagine,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)