The Most Common Homeowner Regrets and How to Avoid Them

It has been said that as many as 44% of home buyers have buyer’s remorse, and this figure climbs as high as 63% for Millennials. Understanding these issues before you purchase your new home can help you to avoid making the same mistakes and suffering the same regrets. 

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This is essential for all first-time home buyers, as it can feel like you’re entering the great unknown, taking your first steps towards the biggest commitment you will ever make and feeling the consequences of any mistakes you make for years to come.

Home Buyer’s Remorse and How to Avoid It

The home buying process is long, complicated, and expensive. There are many elements of buying a new house, from the interest rates and lender choice to the house itself, the moving process, and whether you spent more than you should have done or less than you could have done.

It’s not surprising that lenders have regrets. It would be surprising if they didn’t. However, it’s still important that you avoid these by making the right decision in all of the following areas.

The Down Payment Was Too Small

Borrowers are keen to get the house they want as quickly as they can, which often means saving the minimal amount needed for a down payment. Upon realizing they can only afford 3%, for instance, the average home buyer is more inclined to look for a 3% down payment mortgage than to spend several years dealing with savings accounts and accumulating as many additional funds as they can.

But as soon as they settle into the house, they realize their mistake. They technically own just 3% of the home at that point, which means their options for home equity loans are non-existent and they are forced to pay private mortgage insurance, which can greatly increase their monthly mortgage payment.

What’s more, a smaller down payment means a higher mortgage balance, which in turn means more interest will accumulate and both the minimum payment and the total term balance will be higher.

Of course, saving for a 20% down payment, which is the amount needed to avoid private mortgage insurance, isn’t easy. In fact, it will take the average Millennial 14 years to save this amount. But the good news is that you don’t necessarily need the full 20% and any extra that you put towards the down payment, even if it’s just a few grand, will help your situation.

Do all you can to increase the down payment, even if it means delaying your purchase by a few years. You may spend more money on rent over those years, but the amount you save by reducing the mortgage balance will put more money in your pocket at the end of the month.

The Location isn’t Right

As any real estate agent will tell you, location is key, and could even be the most important feature. It’s no wonder, then, that so many first-time buyers regret buying their house because of its location. 

The issues usually revolve around one of the following:

Difficult Commute 

Homebuyers are often happy to make sacrifices with regards to their commute, choosing a house that is out of the way just because it’s bigger and cheaper than what they might get closer to their workplace. This seems like a sensible decision at the time, but that disappears once they actually move in and start traveling to work every day.

Do your future self a favor by actually taking that commute once or twice. It may simply be a case of traveling a few extra miles in the car or taking a different train, which likely isn’t going to cause any problems, but you may also find that the traffic is heavier, the trains are slower/costlier, and your options are fewer than you thought.

Waking up a few minutes early isn’t going to have much of an impact on your day, but what if you have to make an extra stop on the bus or train, what if you have to navigate through rush hour traffic, what if all of this means waking up an hour or two earlier and arriving home much later than usual?

Bad Neighborhood

If you don’t know the area intimately, it’s hard to know whether you’re buying in a good area or a bad one. The real estate agent certainly isn’t going to tell you and you can’t expect much help from the sellers, either. So, what can you do?

There are actually a few things that can help you here. Firstly, you should check local crime reports to see if there is a disproportionate amount of crime in the neighborhood or surrounding areas. Don’t be scared away by the existence of any crime, as this is common, just focus on lots of serious crime.

Secondly, look for families or older couples in the area and ask them outright if it’s a nice neighborhood. They are the most likely to have issues with rowdy neighbors and the most likely to complain, so if there are ongoing disputes and complaints, they’ll tell you and warn you away.

Finally, drive by the neighborhood at different times of the day, including on the weekend and at night. Many viewings take place during the day when everything is peaceful and friendly, but until you see the neighborhood at night you can’t really know what it’s like.

Difficult for School

If you have young children now or plan to have them in the future, you need a house that is located near to a school and within a good school district. Do your research beforehand to find one that fits the bill. 

Not only will this ensure your kids get the best education and don’t have to travel far for it, but it will also increase your chances of living near other families with children of a similar age.

Your first home is also their first home, so think about your little ones and how it will impact them growing up.

Too Far from Family and Friends

A home that is a little out of the way may also be further from friends and family. Again, this is something that seems okay at the point of purchase, and it’s certainly worth sacrificing this benefit to get a better and cheaper house. But once you’re settled in and you realize that you’re now disconnected, missing out on social gatherings, and traveling further to visit loved ones, it may lose its appeal.

Not Paying Off Debt

A home loan gives you a valuable asset, but it also gives you a massive debt. It’s not as damaging as a heap of maxed-out credit cards, but it’s still a debt and a responsibility and this is something that many buyers overlook.

They assume that the mortgage payments will be a direct swap for rent, and they’ll be able to afford them without issue because they made rent payments for so many years. But not only are mortgage payments often higher, they also come with additional expenses, including:

  • Home repairs
  • Mortgage insurance
  • Taxes and property insurance
  • Utility bills

Your monthly payments can be greatly inflated by all these extras and if you still have lots of credit card or student loan debt when you apply, those obligations can leave you with a massive responsibility.

Of course, many homeowners easily manage their debts and the majority of these have some form of credit card and student loan debt hanging over them. However, the debt itself is not the issue, what matters is how much money this debt takes from your gross income.

A mortgage lender will look at these existing debts to calculate your debt to income ratio and make sure you can afford the monthly payment, but they don’t consider the money you need to enjoy life, build a savings account, establish an emergency fund, and do all the other things that homeowners need to do. 

As a result, you may find that all your income goes on debts and essentials and leaves you with very little to enjoy life.

It’s important to consider these additional debts before you apply. Calculate how much of your income they are taking every month and see if you can afford to manage them when you have a mortgage. 

If not, it may be better to use some of the money set aside for your down payment to clear these debts and then start saving again. It will add a year or two to the process, but without those debts saving money will be easier and it will all be worth it in the long run.

Didn’t Calculate Extra Costs

One of the immediate regrets that homeowners have is not calculating just how expensive it would be to move home. As discussed in our guide to the real cost of moving home, it’s not all about the down payment. You have to consider insurance, taxes, closing costs, legal fees, moving costs, and more, and that’s before you think about furnishing your new home.

Lenders will charge you for everything during this process, from home appraisals to pulling your credit report and checking your credit score. There are lots of hidden costs and if you’re not prepared then your bank account will take an unexpected hit.

The House is Too Small or Big

Homeownership is a long-term thing, which is why it’s so difficult to get everything right. You need to think about what you want now, as well as what you might want in the future.

Single couples buy compact, cheap houses, only to start a family and realize they need more space; older couples buy large houses for all their kids, only for those kids to move out and leave them with lots of empty space.

These things need to be calculated in advance. Of course, you shouldn’t buy a large 6-bedroom house just because you plan on having 5 kids in the future. That would be a waste. But choosing a house that will accommodate some or all of your plans in the next 5 or 10 years is essential.

It is a Bad Investment

If you’re buying to make money, you run a big risk of making a costly mistake, but the same applies to anyone who pays above the home’s purchase price just because they don’t want to lose it to someone else. A house is a home, but it is also a real estate investment.

If your first house is a hollow shell, a fixer-upper that needs lots of investment, make sure you have the money to invest and/or the skills to do the work yourself. If you’re buying a home for the next couple of decades, make sure you pay for a detailed home inspection and pay attention to what the inspector recommends.

And in all cases, keep your eye on the housing market. The real estate market is constantly shifting and a big boom or bust is always around the corner. If you buy at its highest and then it drops, you may struggle to recoup any of your investment for the next couple of decades; if you buy at its lowest, you’ll see your investment grow with each passing year.

Conclusion: Keep Calm During the Chaos

A home purchase is one of the most exciting and stressful things that you can do. It’s easy to let your emotions get the better of you during this time, and to let your heart rule your head. But by taking a step back, slowing everything down and looking at things objectively and logically, you can afford any costly mistakes while still getting the house of your dreams and going from renters to owners; from a waste of money to a valuable investment!