26 Things You Should REALLY Know Before Buying a House

Catherine Collins

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Catherine Collins

November 17th, 2022
Updated November 17th, 2022

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A recent survey by Clever found that three out of four home buyers had regrets about their purchase.

So before you start shopping for your dream home, it pays to educate yourself about the mistakes that first-time home buyers can make.

From little-known advice on home financing to tips for scoping out your future neighborhood, here are 26 things people really wish they'd known before buying. These tips could save you major headaches down the road.

Unhappy confused millennial couple homeowners holding cardboard boxes walking in new house.

1. You don't actually need 20% for a down payment

Many people think they’ll need a 20% down payment. However, the reality is that 44% of buyers put down less than that, according to an April report from the National Association of Realtors.

Many programs can help first-time home buyers with their down payment, and many lenders offer mortgages with less than 20% down.

However, there are trade-offs with a lower down payment. For example, you will likely pay a higher interest rate. And you'll probably have to buy private mortgage insurance, which Freddie Mac estimates can run from $30 to $70 per month for every $100,000 borrowed. However, for many people, these trade-offs are worth it to achieve the dream of owning a home.

2. The bank might pre-approve you for more than you can afford

The bank's pre-approval process uses several factors, including your gross income, employment history, credit score, and debt-to-income ratio. While these are all important factors in determining your ability to repay a loan, they give only part of the picture.

The bank doesn't know your other financial obligations, such as childcare expenses, taking care of elderly parents, or extracurricular activities. They might not know how much of your paycheck goes to your retirement accounts or health insurance before your net income hits your bank account.

As a result, it's possible to be pre-approved for a loan you can't afford. That's why it's important to be honest with yourself about your budget before you start home shopping. Run the numbers to get a more accurate picture of the housing expenses you can actually cover.

3. Try different lenders — make them compete for your business

One of the best things you can do for your home-buying budget is to make multiple lenders compete for your loan. Call one and get a loan estimate, then call a few more and see if they can beat it.

Michael Quan, founder of Financially Alert, advises, “You can shop your loan to different banks and compare the APR, not just the interest rate.” Not only that, he said, “You may even negotiate origination fees, rate buydowns, and other closing costs.”

“Taking the time to learn more about the financing process can literally save you many tens of thousands of dollars over the course of a mortgage," explains Quan. "Don’t just blindly accept what a bank offers you on the first pass.”

4. You’re responsible for more expenses than the down payment

Zinnia Adams, founder of Perspectives, says homeowners tend to focus on the pre-approval process without realizing other expenses will come up during the home-buying process.

Some of these costs include:

  • Earnest money deposit: 1-3% of the purchase price (which later applies to your down payment or closing costs)
  • Home inspections: $250-700
  • Appraisal $250-500
  • Closing costs: 2-5% of purchase price
  • Down payment: 3.5-20% of purchase price
  • Moving expenses: $1,250-$5,000

Adams cautions that some people will need more than a general home inspection. For example, depending on the house and the area, you might also request a mold or septic tank inspection — and these fees vary by location. Therefore, homeowners should be prepared not only with a down payment but also with significant cash for these expenses and closing costs.

5. Many types of mortgages are available

Different types of mortgages are available, each with its terms and conditions. The most common type of mortgage is a fixed-rate mortgage, which offers a set interest rate for the life of the loan. Adjustable-rate mortgages (ARMs) also exist, which offer an initial interest rate that is lower than that of a fixed-rate mortgage but can fluctuate over time based on market conditions. There are also government-backed mortgages, such as those offered by the Federal Housing Administration (FHA), which can help those with less-than-perfect credit to qualify for a loan.

With so many options available, it's important to do your research and speak with a qualified mortgage lender before deciding.

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6. Know if you're a DIY person or not

Home improvement is tedious work. When something goes wrong, it can quickly drain your budget and even strain your relationships. When it comes to house projects, it's important to know your limitations. Many people like the idea of tackling a project themselves to save money or enjoy the satisfaction of a job well done. However, not everyone has the skills, knowledge, or follow-through to complete a project successfully.

Before buying a house that needs love and embarking on a do-it-yourself adventure, ask yourself the following questions:

  • Am I reasonably handy?
  • Do I have the ability to learn new skills?
  • Do I have the time to dedicate to this project?
  • Do I finish the projects I start?

Knowing the answers to these questions will help you determine if you should buy a fixer-upper or focus your home search on something move-in ready.

7. Find out how energy-efficient the house is

Andrew Daniels, co-founder of Millennial Homeowner, explains, "When looking for a new home, it is important to consider the energy efficiency of the property and whether or not you can afford to heat and cool it properly each month."

Although many factors contribute to a home's energy efficiency, two of the most important are the insulation and the windows. Insulation helps to keep heat in during the winter and out during the summer, while windows can let in heat from the sun or lose heat through drafts.

If a home is not properly insulated or has poor-quality windows, the cost of heating and cooling the property will be higher than that of a more energy-efficient home. It is important to consider energy efficiency when choosing a new home. Not only will it save money in the long run, but it will also help to protect the environment by reducing energy consumption.

8. Research property taxes and homeowners insurance

When you purchase a home, you will be responsible for paying two ongoing expenses: property taxes and homeowners insurance. The amount you pay for each will depend on various factors, including the value of your home, the local tax rate, and the coverage level you choose for your insurance policy.

Generally, you can expect to pay several thousand dollars each year for these expenses. While this may seem like a significant sum, it is important to remember that property taxes and homeowners insurance help to protect your most valuable asset — your home. As such, they are essential expenses that every homeowner needs to budget for.

9. A home costs more than just the monthly mortgage

When deciding whether or not to keep renting or buy, many people only compare their monthly rent to a potential monthly mortgage payment. However, Eric Nisall, an accountant and founder of Understand Finances, explains, “There are a ton more expenses that you will encounter when owning a home."

For example, he says to consider “multiple insurances” from windstorm to flood insurance to business insurance (if you run a business from home.) Then there are property taxes, potential HOA fees, utilities, and even furniture. For these reasons, those interested in homeownership should consider a fuller budget picture than just the mortgage payment.

10. Some people may spend more than 30% of their income on housing

You’ll often read the advice not to spend more than 25-30% of your monthly income on a mortgage payment. However, depending on your personal finances, the amount of debt you have, and where you live, it might make sense to bend this rule.

John Pham, founder of The Money Ninja, explains, “A person with no debt can easily handle housing costs higher than 30% of their gross income. However, someone with significant debt may find that housing expense ratio difficult to manage.”

Unfortunately, many people with higher incomes take on mortgages that are not realistic due to their equally high monthly expenses and debt payments. “That’s why it’s extremely important to calculate what you can comfortably allocate to a mortgage before committing to buying a house,” Pham explains.

11. Appliances break, and it's a huge bummer

“When you make a home purchase with appliances included, give yourself a conservative timetable for when you think these appliances will need replacing,” says CPA Riley Adams. “In my experience," he adds, "a big-ticket expense inevitably falls to you sooner than you'd like.”

For that reason, see the next tip.

12. A home maintenance account can save you

A home maintenance savings account is a great way to save money and keep your home in good repair. By setting aside a fixed amount of money each month, you can build up a fund that can be used for unexpected repairs or maintenance projects. “Having a healthy emergency fund prior to purchasing your home will ensure you can handle any expenses that come your way,” says Kristin Stones, founder of Cents and Purpose.

A home maintenance savings account allows you to budget for larger projects, such as painting the house or replacing the roof. Perhaps most important, a maintenance fund can give you peace of mind, knowing that you are prepared for whatever comes your way.

13. Check if there's enough storage space

When most people are looking for a new home, they tend to focus on factors like the number of bedrooms and bathrooms, the size of the yard, and the location. However, one often-overlooked factor is storage space.

A home with plenty of storage space can be a lifesaver, especially if you have a lot of belongings. But, even if you don't have a lot of stuff, it's still nice to have somewhere to put things like holiday decorations, out-of-season clothes, and extra household supplies.

It can be easy to convince yourself you don’t actually need big closets or a large garage, but most people benefit from having a place to store their belongings neatly.

14. There won’t ever be a perfect house

You may have visions of the perfect house, down to the color of the kitchen cabinets you want. However, personal finance blogger Jackie Beck says, “If you hunt for perfection and only put in an offer on your dream home, chances are you will overpay or lose the house to a better offer.” This is especially true in a seller’s market, she explains.

Instead, be willing to be flexible. This is one way you can pay under asking, even in red-hot markets. You can often get a better deal by seeing the potential in a home or being willing to live without a certain amenity most people want.

15. Check your commute to work

Before buying a house, it's important to consider your commute to work. You may want to live closer to your office if you have a long drive. If you rely on public transportation, make sure there are buses or trains that go to your desired neighborhood. If a house is near a busy train line, the noise and traffic can be a nuisance.

By taking the time to research your commute, you can choose a house that will make getting to work easier and less stressful. Kelan and Brittany Kline, owners of The Savvy Couple, say to ask yourself the following:

  • How much is your commute to work going to change your daily routine?
  • How long will it take you to get to work?
  • How long will it take you to get home?

The answers to these questions will affect your quality of life daily and are worth factoring into your home-buying decision.

16. Don’t assume a home will give you a big tax break

This might come as a shock, but “you should pretty much ignore the whole ‘buying a house comes with so many tax benefits’ spiel unless you've run the numbers yourself,” says CPA Logan Allec.

When figuring out your taxes, consider the mortgage interest you pay annually, your property taxes, your marginal tax rate, and any other itemized deductions you might have. Reach out to an accountant if you need help doing so. You might realize that while you might get some tax benefits from homeownership, it might not be as significant as you originally thought.

17. You don’t have to ask people their opinions on the house

When you’re a first-time homebuyer, it’s tempting to get as much advice as possible. For example, you might ask your parents to come along for a tour. While it might be helpful to get outside opinions at times, especially if you have a friend who is an experienced contractor, the truth is that the only opinion that matters is yours.

Forrest McCall, founder of Don’t Work Another Day, said, “When purchasing a home, you'll likely get opinions from many different people.” However, he also stressed that “avoiding others' opinions will make the process less stressful and ensure that you find the right home that suits your wants and needs.”

The truth is, you’re the one who has to live there. If you’re spending your own money on the home, it's what you want that's most important. Your family, Realtor, and even your friends might have their own ideas about what’s best for you, but you don’t have to take their advice if you don’t want to.

18. Look beyond aesthetics. The wiring is more important

When purchasing a home, it’s wise to look beyond a carefully curated staged home to understand whether it is updated or full of costly, hidden repairs.

Michelle Onake, an Intentional Money Coach, says to look to see whether or not the outlets are three-prong. “If so,” she says, “verify that they are actually grounded if the house was built pre-1970s.” (A grounded outlet helps protect your devices from a power surge.)

Onake also recommends asking what the water pipes are made of, what type of foundation the home is on, whether or not the house has natural gas, and when the furnace was replaced.

19. Ask if the basement has ever flooded

Homes are a big investment, and basement flooding can cause significant damage. Before buying a home, it is important to ask if the basement has ever flooded. If the answer is yes, you should find out how much water was involved, what caused the flood, and whether the problem has been remediated. Flooding can occur for various reasons, including heavy rains, faulty sump pumps, and broken pipes.

In some cases, mitigating the risk of flooding may be possible by making repairs or taking preventive action. However, in other cases, such as when a home is built in a floodplain, the flood risk may be too high to justify the purchase.

Asking about flooding incidents before buying a house can help you make an informed decision about whether or not to proceed with the purchase. You can also talk to the neighbors to see if their houses have flooded.

20. Consider that you might want to rent it out someday

“Each property you buy, unless it is your forever house, should be viewed as a future rental,” says Dustin Heiner, founder of Master Passive Income. “Each time you move," he explains, "keep the original property, rent it to tenants, make money in passive income, and use it to help you pay the mortgage for your new house.” Once you do this several times, Heiner says, you’ll acquire a portfolio of properties that can create cash flow in the future.

Whitney Hansen, host of the Money Nerds Podcast, agrees. She said, “If I could go back and give myself advice, I would only look at properties that had the potential to generate income.”

21. New kitchens and bathrooms cost more than you think

Many people buy homes with outdated kitchens and bathrooms, thinking they’ll save money on the cost of the house and upgrade down the road. However, Jacob Wade, founder of Roadmap Money, says consumers often underestimate the cost of renovations.

He explained, “After pricing out kitchen and bathroom remodels, it was mind-blowing to see that costs could be as high as $100,000 just to improve the house.” Wade decided to DIY many renovations, but “still dumped $20,000-plus into the house for basic upgrades.”

22. Calculate the cost of maintaining the landscaping or hiring it out

“The surprise for us was outside of the house," says Jim Wang, founder of Wallet Hacks. “We missed how much maintenance we had on our trees, which sometimes meant we had to take some of them down when they endangered the house."

Apart from tree care, you can also expect to deal with weeds, overgrowth, and pests. These landscaping expenses can add up, so it’s something to be aware of when purchasing a home.

23. Ask if the house comes with a home warranty

A home warranty is a type of insurance that helps to protect homeowners from the costs of repairs and replacements for their major home systems and appliances. Many people purchase a home warranty when they buy a new home to have peace of mind in case something goes wrong.

However, before buying a home warranty, it is important to research and ask some important questions. First, what does the warranty cover? Some home warranties cover only certain items, such as appliances or the HVAC system. Others may provide more comprehensive coverage. It is important to know what's included to ensure you get the coverage you need.

Second, what is the term of the warranty? Home warranties typically last for one year, but some companies offer multi-year plans. Make sure to ask about the coverage length to be prepared for any eventualities. Finally, what is the cost of maintaining the warranty? Home warranties can vary widely in price.

24. Don't expect an inspection to catch every issue

Most potential home buyers rely on an inspection to catch costly maintenance issues. However, it’s still possible for an inspector to miss things. “During our home inspection, the air conditioner was tested and passed because it kicked on as expected,” says Tana Williams, owner of Debt Free Forties. “However, the home inspector did not check that it actually cooled correctly.”

Williams purchased her home during the cooler months, so the A/C seemed to work fine. But once summer arrived, her 20-year-old A/C unit couldn’t keep up with temperatures in the high 80’s. This resulted in a costly repair.

Additionally, Rachel Hernandez, author and real estate investor, says, “Be sure to hire your own home inspector… It’s worth it to hire someone who works for you but you must also be part of the inspection process to have total peace of mind."

25. Ask about neighborhood restrictions and rules

When buying a house, it's important to ask about neighborhood restrictions. These restrictions can be imposed by the homeowners association (HOA) or the city or county. They can limit what you can do with your property, how you can maintain your yard, and even what kind of home improvements you can make.

For example, your neighborhood could regulate exterior paint colors or whether you can park an RV or boat in your driveway. So before you sign on the dotted line, make sure you understand all restrictions that apply to the property.

26. Don't assume the curtains come with the house

Many home purchases may include items like curtains and blinds. However, it's important to ask if that's the case. For example, a couple of weeks before I bought my home, I learned the homeowner wanted to take the curtains with her but offered to sell them to me. The same went for a light fixture and a wine fridge.

This was a bit of a surprise, and we ended up negotiating with them since I didn’t want to purchase all new curtains and a wine fridge. In the end, I didn't have to buy the light fixture, but I did end up paying $500 for the mini-fridge and curtains, a last-minute expense I didn't expect.

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