If only buying a home was as simple as taking a BuzzFeed quiz, as in: Choose your aesthetic — classic boho or modern chic? Pick a backyard fantasy — patio with a fire pit or luxe infinity pool?
Unfortunately, it's rare to get everything you want in a home — and a good number of homebuyers seem to make decisions they come to regret down the road. According to a survey out from Trulia, 44% of Americans say they have a regret about their current home or the process they went through in choosing it.
The top regret among homeowners? Wishing they'd bought a bigger house, a sentiment shared among one-third of those surveyed. But while they dream of extra square footage, actually acquiring it isn't feasible for most: More than one in five Americans said a home purchase they made in the past is now holding them back from changing their current living situation.
Other choices rounding out the top homeowner regrets include wishing they'd done more remodeling when they bought their home (12%) and wishing they'd been more financially secure before deciding to buy (9%).
For renters, the grass is greener on the other side, as long as the "other side" is a private backyard — their biggest regret, shared among 41%, is renting at all instead of buying.
These numbers highlight how complicated it can be to know whether it's time to take the homebuying plunge. What's not up for debate is that owning a home is a big financial decision that shouldn't be made spontaneously. So how do you decide whether ponying up for that white picket fence is worth it?
First off, take a step back and consider whether renting is the better option for your current situation (factors like whether you plan to move in five years or whether you have 20% for a down payment are key considerations).
If you can safely say you're ready to be a homeowner, your next step is to determine how much house you can afford. A good rule of thumb is to look at home prices no higher than between two to three times your annual income, says financial planner Tom Gilmour, CFP®. It's also a good idea to aim for your mortgage payment to account for 28% or less of your monthly gross income — that way you can comfortably cover your other living expenses without stretching yourself thin.
As you start to see some real figures for homes you're interested in, go on a financial trial run by tallying your projected mortgage payment, tax and insurance estimates, HOA fees and home maintenance costs. Seeing those numbers in black and white, compared with how much you spend on rent or what you have available in your monthly budget, can help you determine whether you can really live with the expenses of owning a home.
And don't forget to consider your surroundings, too. Research the neighborhood and school districts near your would-be home before making a decision. The Trulia survey found twice as many parents of school-aged children regretted not knowing enough about the neighborhood than non-parents. Even if you don't plan to raise a family in the area, choosing a home in a good school district can future-proof your home for better resale value in the future.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.