It is not uncommon for buyers to rush into a deal that doesn’t necessarily
fit their budget or suit their needs, especially in a competitive market. As a
result, numerous buyers have regrets after purchasing a home. Below is a list
of the most common buyers' regrets and how to cope with them.
1. Regrets about the costs of homeownership
By far the biggest regret among recent homebuyers was not being
prepared for the maintenance and other costs associated with homeownership. Therefore, it is important for new homebuyers to start a housing
emergency fund as soon as they become homeowners to be able to finance upkeep
and upgrades such as but not limited to: a roof repair, the need to fix or
replace heating, cooling, or appliances, HVAC, etc. Putting aside money every
month specifically for housing expenses can provide you with a cushion for the
unexpected. Saving 1% of the property’s value is a good starting point for
maintenance expenses per year.
2. Worries about getting the best mortgage
It remains important to shop around for the best loan offer once you
decided to buy a home. Consequently, when meeting with loan officers, ask them to prepare several financing scenarios for
you including different loan types, duration, buying or not basis points. For
instance, even a few basis points difference in interest can mean a savings (or
extra cost) of thousands of dollars over the life of your loan.
According to a study Freddie Mac conducted in 2018, a borrower who got
one extra rate quote saved an average of $1,435 over the life of a typical
$250,000 mortgage. Moreover, 80% of those borrowers saved between $966
and $2,086 by shopping around with one additional lender. The more you shop around,
the more savings you rack up. Borrowers who got five rate quotes saved $2,914 —
on average — with 80% of those shoppers who got five quotes saving
between $2,089 and $3,904.
3. Remorse over the home itself
While financial frustrations topped the list of regrets for new
homebuyers, many survey respondents said they also came to realize their new
place was literally not the right fit.
To solve this issue, work with a pro-active real estate agent who can
guide you through the buying process even in a highly competitive market and
who his willing to dedicate enough of his/her time to help you get a home that
fits your means and needs instead of pushing to make snap decisions and pocket
their commission as soon as possible.
Before you start looking for a property, do a list of the features
your home must have and one with the features that it would be nice to have. If
you need to make a quick decision on a given property, go back to your list and
see if the home in question is matching your desires. In other words, be ready to
make some concessions, but stick to your guns on must-haves.
4. Budget before you buy
Before shopping for a home, it’s important to figure out how much house you can comfortably afford, which may be a different number from the maximum mortgage you can get approved for. One rule of thumb is that you shouldn’t spend more than 28% of your gross monthly income on housing-related costs and 36% on total debts, including your mortgage, credit cards, and other loans. That said, everyone’s situation is different and the above-mentioned rule doesn’t take into account the need to leave room in your budget for things like furniture, as well as maintenance and repairs.
5. Becoming house poor
While buying a home can be a sound investment, it can also become a
financial burden. Here’s how to think about your housing budget so that doesn’t
happen to you.
Someone is house poor when he/she spends so much of their income on
homeownership — such as monthly mortgage payments, property taxes, insurance,
and maintenance — that there’s very little left in the budget for other
important expenses. Being house poor can limit your ability to build up
retirement or other savings, pay off debt, travel, or enjoy life. Below are a
few tips to avoid this situation.
6. Tips to avoid being house poor when adversity shows up
Even if you plan properly for a home, it’s possible to become house
poor if a job loss or medical emergency leaves you unable to pay your bills.
Here are 2 steps you can take before and after buying a home to avoid spending
too much of your income on homeownership:
If you can, make a larger down payment. If you put down more money, it
will lower your monthly mortgage bill. While you can eliminate private mortgage
insurance with a 20% down payment, make sure the down payment you choose
doesn’t leave you with no savings or unable to manage your monthly bills.
Buy a starter home. Your first home doesn’t have to be the house you
live in forever. A starter home is a single-family home, condominium, or
townhouse that is smaller and typically more affordable for first-time
homebuyers. When I work with first-time homebuyers, I usually encourage them to
buy a starter home they can offer with the objective of buying a bigger home
within the next 5 years and keep the starter home as a rental.
To conclude, buying a home can be overwhelming, and for most people,
it is the single largest purchase they’ll ever make. Especially in a fevered
real estate market, it can be easy to make snap decisions because you want to
edge out the competition without fully thinking things through. Planning ahead
and working with a knowledgeable agent and not letting your emotions overcome
your needs and limitations are all keys to being a satisfied homeowner after
the excitement wears off and reality sets in.