3 Signs Your Dream Home Could Actually Be Your Worst Nightmare

Owning a home is the American dream. And when you start buying a home and find the property of your dreams, it may feel like your dream has finally come true. And fortunately, it did.

Unfortunately, not every real estate sale goes as well as buyers expect. In fact, in some situations, purchasing your dream home can become a major financial and personal disaster. You don’t want that to happen. So watch out for these three signs that your dream home could be turning into a giant nightmare.

1. You are spending too much of your income on payments.

One of the biggest signs that buying a home will be a big mistake is if you’re spending too much of your monthly income to cover the costs.

Mortgage lenders sometimes allow up to 50% of your gross income, including housing costs and other payments, to be invested in debt. But doing so could be a big mistake. In fact, ideally you should spend no more than 28% of your income on property taxes, mortgage, homeowners insurance and HOA fees. And you want to spend no more than 36% of your gross income on debt repayments, including your home loan.

If you have too much money to cover housing costs and other debts, you may not have the flexibility you need to make lifestyle changes, such as saving for retirement or a large purchase, or changing jobs. You don’t want to be stuck for 30 years with housing costs that you can’t afford.

2. You don’t understand your mortgage

Not understanding your mortgage is another major red flag. You should have a clear idea of ​​what your upfront closing costs will be, what fees you will pay, what your monthly payments will be, whether your payments may change over time, and what your total costs will be over the life of the contract. loan. You should also know if there are any prepayment penalties that will be assessed if you decide to pay off your mortgage ahead of schedule. Your mortgage lender will need to give you this information, so make sure you have read and understand it, and if not, ask questions.

If you apply for a mortgage with an adjustable rate and don’t know how high the interest rate will rise, you could end up with a payment you can’t afford. The best option for most people is a 30-year fixed-rate mortgage with no prepayment penalty. That way, you can be assured that there will be no surprises and that your payments will be affordable over the life of the loan.

3. The commute is long and inconvenient.

Finally, one last major red flag that could make you unhappy in your dream home is if you have a long commute. The average American’s commute to work is 28 minutes, but unfortunately, long commute times are associated with decreased overall well-being. Adding 20 minutes to your daily commute is equivalent to a roughly 19% cut in annual pay.

If you’ve committed to buying a home very far away from work or loved ones, think very seriously about how this will affect your free time and stress levels. Because you may quickly regret your choice.

If you notice any of these three signs that home buying could be turning into a nightmare, you may want to pause before moving forward. Because there is a very high possibility that you will end up regretting it. It may be worth looking at other loan options and other homes that are more within your price range and will allow you to avoid the stress of driving long distances every day for years to come.