Dave Ramsey: Not Factoring In This Cost Is the No. 1 Homebuying Mistake
Written by
J. Arky
Edited by
Levi Leidy
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Buying a home can be an expensive undertaking, especially if it is your first one. Financial expert Dave Ramsey warns that lots of people who are in the market tend to make a big mistake that ends up costing them more money in the long run.
In a post on his website, Ramsey Solutions, the Ramsey team urged homebuyers to factor in closing costs to their final totals. This helps make sure they are not taken by surprise when the dollars add up beyond what they had budgeted for.
What Are Closing Costs?
According to Freddie Mac, closing costs range between 2% and 5%, or an average of $20,185 based on the median price of an American home ($403,700). Plenty of homebuyers see the upfront price of the house and determine how much they’ll need to put down in order to buy it. Ramsey urged buyers that these fees need to be accounted for prior to going into the homebuying process.
Cameron Walker, manager of the agent network at Clever Real Estate, agreed with Ramsey that not considering closing costs is one of the worst mistakes first-time homebuyers make.
“Many people become so focused on the down payment that they overlook the other costs, which can add up to thousands,” Walker said. “These can be for lender’s fees, title insurance, escrow costs, prepaid taxes and homeowners insurance, among others.”
Other Homebuying Mistakes
Jeff Lichtenstein, the CEO of Echo Fine Properties in Palm Beach Gardens, Florida, counters Ramsey’s notion that closing costs are what put homebuyers in a bad financial position. Rather, it’s other factors outside of that money.
“Each state and county has different closing costs as it relates to title costs. Some of those are different regarding who pays for the title,” Lichtenstein explained. “It’s customary in Palm Beach County for the seller to pay for title insurance, but much more negotiable in Martin County.”
Beyond closing costs, homebuyers need to do their research and make sure they are not just buying for the sake of owning property, but that they are actually happy and secure with this major investment.
“I know the biggest mistake buyers make is they buy the house first instead of the neighborhood,” Lichtenstein said. “If you like your house but don’t like the amenities of the neighborhood, vibe or location, you’ll regret it and be back on the market in no time.”
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Sources
- Ramsey Solutions, “First-Time Home-Buyer Mistakes.”
- Cameron Walker, Clever Real Estate
- Jeff Lichtenstein, Echo Fine Properties
