In a recent video, financial expert and author Rachel Cruze lists ten mistakes people should avoid when buying a home. From anticipating costs to keeping a cool head in a competitive market, Cruze advises to make sure you stay on budget when making one of your biggest life purchases. Here are ten mistakes she says to avoid.
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Buying at the Top of Your Budget
It can be tempting to go to the top of your budget when buying a house, especially in a competitive market. But, Cruze explains, buying a house at the top of your budget leaves little room for other expenses. For example, she says homeowners often want to buy furniture, curtains, and more for their new homes. However, spending at the top of your budget can make it hard to afford extras.
Going All-in on a Bidding War You Can’t Afford
Buying a home is an emotional process. Many people get competitive when they see a house they believe is their dream home. Cruze says many houses are out there and advises that people not get carried away no matter how much they love the house. Instead, she advises only buying a house when you’re financially ready. Getting caught up in a bidding war might lead to spending more than you intended on a home.
Feeling Pressured by Increasing Interest Rates
There’s a lot of pressure to buy a home before interest rates increase even more. But, Cruze says to buy a home when you are financially ready, regardless of circumstances. Rushing to buy a home can create financial stress if you’re not prepared for homeownership. Interest rates fluctuate and can be unpredictable, so it’s best to be on your timeline rather than rushing to avoid an interest rate increase.
Not Having a Big Enough Down Payment
Cruze advises her listeners to save a 10%-20% downpayment for a house. Preferably, she says, put 20% down to avoid PMI. PMI stands for private mortgage insurance. It’s another bill you must pay on top of your mortgage and property taxes that protects your lender if you default on your loan.
Overlooking Details You Might Have to Fix Later
Cruze says to pay attention to the details when buying a house, especially regarding repairs. Take the time to understand your property’s condition. If you don’t, you might have unexpected repair expenses in the future. This includes paying for an inspection so you know the property’s condition fully.
Not Thinking About Selling the House Someday
Cruze says people typically stay in their homes for about ten years. So, think about the neighborhood, schools, and any future updates the neighborhood has planned. Positive updates to water lines and utility services can increase your home’s value. However, new highways or buildings that become eyesores can negatively affect your resale value down the road.