Rachel Cruze: Don’t Make These 10 Mistakes When Buying a Home

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In a recent video, financial expert and author Rachel Cruze lists ten mistakes people should avoid when buying a home. From anticipating costs to keeping a cool head in a competitive market, Cruze advises to make sure you stay on budget when making one of your biggest life purchases. Here are ten mistakes she says to avoid.

Buying at the Top of Your Budget

It can be tempting to go to the top of your budget when buying a house, especially in a competitive market. But, Cruze explains, buying a house at the top of your budget leaves little room for other expenses. For example, she says homeowners often want to buy furniture, curtains, and more for their new homes. However, spending at the top of your budget can make it hard to afford extras.

Going All-in on a Bidding War You Can’t Afford

Buying a home is an emotional process. Many people get competitive when they see a house they believe is their dream home. Cruze says many houses are out there and advises that people not get carried away no matter how much they love the house. Instead, she advises only buying a house when you’re financially ready. Getting caught up in a bidding war might lead to spending more than you intended on a home.

Feeling Pressured by Increasing Interest Rates

There’s a lot of pressure to buy a home before interest rates increase even more. But, Cruze says to buy a home when you are financially ready, regardless of circumstances. Rushing to buy a home can create financial stress if you’re not prepared for homeownership. Interest rates fluctuate and can be unpredictable, so it’s best to be on your timeline rather than rushing to avoid an interest rate increase.

Not Having a Big Enough Down Payment

Cruze advises her listeners to save a 10%-20% downpayment for a house. Preferably, she says, put 20% down to avoid PMI. PMI stands for private mortgage insurance. It’s another bill you must pay on top of your mortgage and property taxes that protects your lender if you default on your loan. 

Overlooking Details You Might Have to Fix Later

Cruze says to pay attention to the details when buying a house, especially regarding repairs. Take the time to understand your property’s condition. If you don’t, you might have unexpected repair expenses in the future. This includes paying for an inspection so you know the property’s condition fully.

Not Thinking About Selling the House Someday

Cruze says people typically stay in their homes for about ten years. So, think about the neighborhood, schools, and any future updates the neighborhood has planned. Positive updates to water lines and utility services can increase your home’s value. However, new highways or buildings that become eyesores can negatively affect your resale value down the road.

Not Using a Real Estate Agent

Buying a house is overwhelming. Cruze says not to go it alone. Use a real estate agent because they can negotiate on your behalf. They might also be privy to upcoming homes for sale that aren’t listed yet.

Buying a Home Without an Inspection

It can be tempting to waive inspections, especially during a bidding war. But, Cruze says, inspections are always worth it. They do cost money, but one can save you thousands of dollars. A home inspector will look at all the home’s structural elements, like your electrical, cooling, and plumbing systems, so it’s worth it to ensure everything is in working order.

Getting the Wrong Type of Mortgage

Cruze recommends getting a 15-year fixed-rate mortgage, not a 30-year fixed-rate or an adjustable rate. The goal, she says, is to get out of debt as fast as possible and enjoy a life of no payments.

Forgetting About Closing and Moving Costs

Homebuyers have to save for more than just a downpayment. Cruze reminds her listeners that closing costs, which include appraisal fees, inspection fees, property taxes, and more, can be 3-4% of your home’s value. She shares that in 2021, the average closing cost was $6,837. Once you close, you’ll also have moving expenses.

Final Thoughts

Rachel Cruze’s tips can help save homeowners thousands of dollars by helping them make financially sound decisions. While it’s not easy to wait to buy a house or step away from a bidding war, Cruze says taking your time and buying a house when it’s right for you is best for your finances.

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