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After the excitement of buying a house wears off and reality sets in, you may realize the home doesn't quite measure up to your expectations. It's unfortunately common for homebuyers to experience some form of regret after buying a home. This regret may be due to the home's size, location, cost or other factors. Here's what you can do to avoid it.
What Is Buyer's Remorse for Homeowners?
Homebuyer's remorse is the feeling of disappointment or regret after purchasing a home, and it's not rare. According to Clever Real Estate's 2023 American Home Buyer and Seller Report, about 93% of recent homebuyers have regrets about their experience.
Homebuyer's remorse can happen for a number of reasons. In Clever's survey, one-third of homebuyers surveyed said their biggest regret was high maintenance costs. Many buyers felt sellers weren't transparent about maintenance costs. Others chose to forgo inspections—a common concession during the pandemic's buying frenzy—and missed the chance to discover critical issues.
Other common reasons include buying too quickly (30%), spending too much (28%), accepting a high interest rate (28%) and buying a fixer-upper (26%).
How to Buy a Home Strategically to Avoid Buyer's Remorse
Understanding the commitments you're making and assessing whether you're ready can help stave off remorse after buying a home. Taking a measured approach can help you do the proper due diligence and make a sound decision.
Determine Your Priorities
Being clear on your wants and needs can help you avoid buyer's remorse after closing on your home. Consider the home features that are important to you and necessary for your household size and lifestyle. Beyond just the price, be sure to also consider what you need in terms of condition, location, size, layout and amenities.
Familiarize yourself with both the home and neighborhood before making an offer. Visit the property at different times of the day and different days of the week to better understand what it would be like to live in the home. Be on the lookout for other potential annoyances, such as limited guest parking, loud or messy neighbors or disruptive nearby traffic.
Make sure the house is in good condition and uncover potential repairs by completing a thorough and comprehensive home inspection.
Get Financially Prepared
Being financially ready is one of the best ways to avoid homebuyer's regret. Determine a realistic budget based on your income and expenses. Save up a down payment for a more affordable mortgage. Don't forget to factor in property taxes, maintenance, HOA fees, homeowners insurance and private mortgage insurance if you're paying less than 20% down. Make sure your emergency fund has enough to cover three to six months of living expenses.
Shop Around for the Best Loan
Get quotes from multiple lenders to compare terms. As you shop, keep an eye on interest rates and rate trends. Are rates going up or down, or are they holding steady? Even a small difference in rates can affect your monthly payment.
Understand the Housing Market
Know whether you're in a buyer's or seller's market as this can affect how much room you have to negotiate. Prices are typically lower during a buyer's market and there are more homes to choose from. In a seller's market, there are fewer homes available, prices are higher and you have less flexibility to negotiate.
How to Get Prepared to Buy a Home
You can start preparing to buy a home well before you're actually ready to purchase. The earlier you start, the more time you have to get ready.
Review Your Credit
Your credit score affects whether you'll get approved and the interest rate you'll qualify for. The higher your credit score, the lower your interest rate may be. Before shopping for a home, check your credit report and score to see where you stand. After reviewing your credit report, you may need to take additional steps to improve or protect your credit:
- You have the right to dispute credit report inaccuracies with the main credit bureaus (Experian, TransUnion and Equifax) to have them corrected.
- Catch up on past-due payments and pay down high credit card balances to improve your credit score.
- Avoid applying for new credit until after closing to maintain your credit score.
Check Your Debt
Calculate your debt-to-income ratio (DTI), which helps lenders determine whether you could afford to pay a mortgage. Most lenders look for a DTI below 36%, but some may allow up to 45%. Some Federal Housing Administration-insured mortgages allow up to 50%. Make sure your DTI is within lender limits. You can pay down some debt to lower a high DTI.
Save a Bigger Down Payment
Some lenders and loan programs may allow you to make a smaller down payment, but this results in a higher monthly payment. If you have time, contribute more to your down payment so you can borrow less and thus have a lower monthly payment. Or, you can use a bigger down payment to help you afford a bigger home. This may be the route to go if the homes that match your priorities are a little out of your price range. Keep in mind that you'll pay for mortgage insurance if you pay less than 20% down.
Get Preapproved for a Mortgage
Preapproval involves a review of your finances and will give you an accurate estimate of the mortgage loan amount and terms you'll likely qualify for. It will give you an understanding of loan terms, rates and options you're likely to get approved for.
Getting preapproved helps you understand the types of homes you can afford and allows you to focus your home search on houses within your budget. You can avoid the disappointment of falling in love with a home that's outside your price range.
Understand the Costs
Be prepared for the upfront costs you may incur during the homebuying process. When you submit an offer, you'll pay an earnest money deposit—usually 1% to 3% of the sale price to show your commitment to the sale. Earnest money is applied to your closing costs if you complete the purchase. Closing costs, paid when you finalize the purchase, range from 2% to 5% of the home purchase price and includes the appraisal fee, title search, title insurance and other miscellaneous fees.
The Bottom Line
Remember, you won't know every detail about the home before moving in, so some degree of homebuyer's remorse is normal. Being prepared and patient can help you avoid major disappointments. For instance, you can take advantage of free credit monitoring during the process to proactively address credit score changes that could affect your mortgage rate.
Buying a house can be an overwhelming process. That combined with a tight real estate market can easily make you feel pressured to make a quick decision. You may have to make some concessions, but be careful not to compromise your must-haves in desperation.