Buying a home is a big decision. It’s exciting yet a bit terrifying at the same time. Naturally, you want the best deal on a house that you’ll be happy to live in, but sometimes emotions can cloud the decision-making process.
As USA Today recently reported, the competition for homes in the real estate market today often means buyers are rushing, which can easily lead to buyer’s remorse. Around a third of baby boomers have faced home-buying regrets compared to a whopping 64 percent of millennials.
It’s vital to understand all the steps to buy a house and the potential traps to avoid in the process to reduce the chance of regretting such a big purchase.
Spending Too Much
The general advice is that your housing costs shouldn’t exceed 28 percent of your take-home pay. That includes not only the monthly mortgage payment but homeowners insurance and property taxes. You’ll also want to consider the cost of maintenance and repairs associated with homeownership.
When you start shopping for homes, know what you can truly afford. In today’s current market, sellers are unlikely to accept an offer that’s lower than the listed price, with so many getting offers well above.
It’s best to avoid even touring homes above your budget to eliminate the possibility of exceeding that 28 percent threshold which puts you at risk of falling behind on your mortgage or other bills.
Not Knowing the Difference Between Needs and Wants
It’s essential to know the difference between what you absolutely need and what you’d like to have. If you don’t know what you need, you could fall in love with a house with several of your “wants” yet few of your needs.
Take the time to think about your needs and wants before shopping. Needs include things like having enough bedrooms for everyone in your family, a sufficient number of bathrooms, and adequate square footage for comfortable living. Wants might include bay windows, hardwood floors, a view, or a pool.
Applying For a Mortgage Without Getting Your Credit In Shape
While it may be possible to get a home loan with a credit score of 620 or less, that doesn’t mean you should because your interest rate will be much higher than someone with a score of 740 or above.
Imagine you borrow $300,000 for a home, and you have strong credit that gets you a 3.14 percent interest rate on a 30-year fixed mortgage. That translates to a monthly payment of about $1288 (not including PMI, property taxes, HOA fees, etc.). But if your credit score isn’t that great and you’re approved for a mortgage with an interest rate of 5.25 percent, instead, that payment will be around $1657. Over the short- and the long-term, that’s a significant difference – over 30 years, you’d be paying nearly $133,000 more.
Before applying for a mortgage, be sure to check your credit report and your credit score. If your score is below 700, try to hold off until you can raise it. Resolve any errors that might be lowering it, pay down some of your existing debt, and always pay your bills on time.
More To Know About It
- Falling in Love with a Home Without Doing Your Research It’s easy to get caught up in the excitement of finding the perfect home, but it’s important to do your due diligence before making an offer. Research the neighborhood, school district, and any potential issues with the home, such as past flooding or structural damage.
- Overlooking Hidden Costs When shopping for a home, it’s important to consider not just the purchase price but also the additional costs such as property taxes, homeowner’s insurance, and maintenance expenses. Failure to factor in these costs can lead to financial strain in the long run.
- Failing to Get Pre-Approved for a Mortgage Getting pre-approved for a mortgage can give you a better understanding of your budget and allow you to shop for homes that are within your price range. Failing to do so can lead to disappointment and wasted time.
- Ignoring Inspection Reports An inspection report can reveal potential issues with the home that may not be visible to the untrained eye. Ignoring these reports can lead to costly repairs down the line.
- Forgetting to Consider Resale Value While it’s important to find a home that meets your current needs, it’s also important to consider its potential resale value. Factors such as location, school district, and neighborhood can all impact a home’s resale value.
- Overlooking Homeowner Association (HOA) Fees If the home you’re considering is part of an HOA, make sure to factor in the associated fees. These fees can vary widely and can add significantly to the cost of homeownership.
- Making an Emotional Decision Buying a home is a major financial decision, and it’s important to approach it with a clear head. Making an emotional decision based on the appearance of the home or the excitement of the moment can lead to regret down the line.
- Failing to Negotiate Don’t be afraid to negotiate on the purchase price or other terms of the sale. Doing so can save you money and help you get a better deal on the home.
- Ignoring the Home’s Condition When shopping for a home, it’s important to consider its overall condition. A home that needs significant repairs or upgrades may cost you more than you anticipated.
