Spring is here, which means some people are gearing up to make what could be the largest purchase of their lifetime: a home.
In many parts of the country, would-be buyers are finding that there aren’t enough homes on the market. That could lead them to move more quickly than they would like to increase their chances of getting the home they like, says Tim Manni, a mortgage expert for NerdWallet, a personal-finance site. The home-buying process can have many moving parts, and even people who aren’t rushing the process can make mistakes.
In fact, nearly half of homeowners said they wish they had done something differently, according to a survey of more than 1,400 homeowners released by NerdWallet this year.
So before you take the jump, here are some things that others have said they regretted after making their purchase, based on surveys and discussions with industry experts. Keep these in mind as you look for your new home.
- Not knowing enough about the house and its location. One of the regrets expressed by 22 percent of homeowners in a 2013 survey by the real estate website Trulia is that they wished they had had more information about their homes.
Some people buying homes in tight markets may try to beat competing offers by not requiring a home inspection, says Daisy Kong, a spokeswoman for Trulia. But that means they may not discover problems with the home until after the sale is complete, she says. Home buyers who overlook these issues before signing on the dotted line could get stuck making expensive repairs and renovations they weren’t prepared for.Other times, home buyers may forget to research factors that are important to them, such as the quality of the schools in the neighborhood, Kong says.
- Not buying a bigger house. This was the No. 1 regret listed in studies from NerdWallet and Trulia. Some buyers become so focused on specific neighborhoods that they miss good deals elsewhere, says Sarah Staley, a housing expert for Realtor.com. Branching out in terms of location can increase your chances of finding a home with the space and features you need, such as a back yard, or the right amount of bedrooms and bathrooms, Staley says. “Don’t pigeonhole yourself into one area,” she says.
- Not understanding the financial ins and outs. About 41 percent of homeowners said they were not aware of all of their loan options, according to the NerdWallet survey. Among millennials, 19 percent of homeowners were surprised by how long it took to buy a house, according to the survey. About 15 percent said they were surprised by hidden fees.
The findings suggest that some people are not doing enough research about mortgages, fees and other costs they may face when buying a home, Manni says. Some people may underestimate how much they should save to cover closing costs and other expenses, he says. Buyers who don’t research their credit histories may miss a “black mark” on their credit reports that can lead to a higher mortgage rate, he says. Other people may forget to compare mortgage lenders, which could cause them to miss out on a better rate.
- Not giving a bigger down payment. About 18 percent of home buyers wish they had made a bigger down payment, according to the 2013 survey from Trulia, its most recent survey on the topic. Although a smaller down payment can get home buyers into a house sooner, it may lead to higher costs in the long run. For example, some people can buy homes with as little as 3.5 percent of the purchase price down if they use a mortgage insured by the Federal Housing Administration. But because they are required to pay for mortgage insurance, they may end up paying more for the house overall, Kong says.
Having a down payment of at least 20 percent can give you a better chance of snatching a home in a hot housing market, Staley says. The size of the down payment can also affect your interest rate and your monthly payment, Manni says. (Generally speaking, the larger the down payment, the lower the interest rate and monthly payment.)
- Not saving enough — in general. This extends beyond the down payment. Nine percent of homeowners said they did not feel as financially secure as they did before they made the purchase, according to NerdWallet. Some people may be surprised by expenses they faced during the process, such as closing costs, Manni says. Others may feel squeezed by other financial obligations, such as student loan bills, Kong says.
Potential buyers should use online calculators to estimate what their monthly payments may be, depending on the size of their down payment and other factors, Staley says. Families should also remember to consider other expenses they may face soon, she says. For example, young couples who want to have children should budget for some of the expenses that may come up later, such as child-care costs, Staley says.