A home purchase is the biggest investment most people ever make, so it’s particularly unfortunate when a homeowner runs into unanticipated problems and develops buyer’s remorse. Let’s maximize the chances you’ll be happy with your purchase by thinking ahead.
It seemed like a good idea at the time
Two elements typically fuel home buyer’s remorse. One is unforeseen costs. The second is unanticipated future events. The latter often result in increased expenses, so the two elements are intertwined.
Be clear about your total monthly house payment
You may have used an online mortgage calculator to figure the monthly total principal and interest payment on a loan. But your monthly house payment will also include property taxes and insurance. Both are paid once per year, but you set aside monthly payments for these costs either by paying into an escrow account with your mortgage company or by saving on your own. Failing to account for these taxes and property insurance costs may result in a rude awakening and buyer’s remorse when you begin making house payments.
Two other monthly costs can catch you off guard and prompt buyer’s remorse. If you make a down payment of less than 20 percent, your mortgage company will require you to pay a monthly premium for private mortgage insurance (PMI). This insurance protects the lender from loan default. Additionally, If you buy in a neighborhood with a homeowners association, you will pay mandatory monthly dues.
Make sure your housing budget has room for all these expenses. And keep in mind that taxes, property insurance and HOA dues will all rise in the future. It is easy to fall in love with a “dream house” that sweeps you off your feet but is more than you can truly afford. The thrill of closing and moving into that house will quickly turn into buyer’s remorse if you struggle financially to pay for it. Calculate a budget and make sure all the elements of your monthly house payment will fit within it.
Buy as much house as you need
Be careful to buy a house that will suit you in the future. If retirement is on the horizon, will the new place have space for the hobbies you hope to pursue? If you and your spouse or partner plan on children down the road, will there be room for them? If grandparents will eventually move in with your family, are there sufficient bedrooms and bathrooms? Conversely, buying more house than you’ll need can mean extra expense for utilities, maintenance and insurance and more time spent housekeeping.
And it’s not just size you need to think about. Is there some aspect of a home’s floor plan that will be unworkable in the future? Think carefully about your present and future needs before you sign on the dotted line to avoid buyer’s remorse.
Get to know the neighborhood
Make sure you’re familiar with the neighborhood before you get your heart set on a particular home. You may not really notice the train tracks you pass on your way to see a house, but you’ll definitely become aware of them if that freight train that passes at 1:30 a.m. leaves you tossing and turning each night. Research traffic and crime statistics for the area as well as such matters as the strength of the local public schools and the availability of nearby shopping.
And again, think about the future. Ask your agent, talk to local governmental authorities and research local media to see whether changes in zoning laws or planned developments may leave you with buyer’s remorse in a few years. The house you want may currently back up to a gorgeous greenbelt filled trees and open fields, but what if an apartment complex — or worse: a freeway! — will be built there in just a few years? Such occurrences will not only make your house less pleasant but could lower its resale value.
Can you afford maintenance and repairs?
It is crucial to have a home inspected for potential repairs while still under contract before closing. But even a good home inspection might not catch all issues. Many inspectors, for example, won’t climb onto a roof to spot problems. Whether it’s expected, like periodic exterior repainting, or comes out of the blue, like repairing tornado damage, paying for maintenance is a fact of life for homeowners. Experts advise setting aside one to three percent of a home’s purchase price annually for future repairs.
Consider your work commute
For many people, affording a house means buying farther out in the suburbs. Later, they find their daily commute to work is a real grind in terms of both distance and traffic and leads to buyer’s remorse. This is a hard problem to resolve. Give some careful thought to whether the areas where you can afford to live are practical. Perhaps your employer would consider work-from-home options.
Make sure you understand your mortgage
Analyze several mortgage options carefully so you can find the most competitive interest rate and terms. Be careful with adjustable rate mortgages (ARMs). ARMs can end up haunting buyers if the introductory rate is low and affordable but the reset rate rises to unaffordable levels. Don’t end up with an ARM that you can only handle at the introductory level.
Keep your appreciation expectations realistic
The conventional wisdom is that homes always appreciate in value, so you may expect you’ll make money on resale one day. But many factors, both local and national, affect home values. Appreciation is not always a slam dunk, so don’t set yourself up for buyer’s remorse.
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