Overbuying and under buying can each be dangerous for home buyers. Many first time home buyers find that their wants outweigh their budgets, well many second time home buyers (especially in today’s economy) try to be too frugal and end up unhappy with their purchase.
Many home buyers find the loan amount that they are approved for and immediately shop in that price range. What they don’t think about is how much money that may need for home repairs, kids, cars, or emergencies.
Overbuying can often times lead to financial messes such as excessive debt, poorly maintained houses or in extreme cases foreclosure.
While it is a good idea to know what types of homes are available at the top of your price range, it is also a good idea to look at homes below your price range. You may find that their are homes that are less than your maximum amount that fit all of the needs you have, or you may find that a couple of compromises for financial stability are worth the trade off.
On the other side of the spectrum is under buying. With today’s economy people are watching their money more than ever. This becomes a problem when people settle for a home that is so much less that what they want that they are not happy with their home after a short amount of time and are looking to move within a couple of years. When you move this fast, any savings that you may have had by purchasing a cheaper home are lost in the fee’s of moving.
For example: When Tom and Nancy purchased their home, they believed that they should live within their means. This is a great thing and many people do not follow this thinking. But Tom and Nancy purchased a home for $140,000 when they were approved for a loan of over $300,000. Tom and Nancy soon discovered that they wanted to move again within 3 years. This created new closing costs for selling their home and buying their new one.
While it is extremely important to buy a house that you can afford, even if times get rough. Make sure that you are purchasing a house that you will be happy with for at least the next five to ten years. Moving over and over again will eat up any savings you have buy under buying in the first place.
Ryan Cunningham is a fomer MN Realtor turned marketer in Minnesoat.