Whether it’s choosing the wrong location or buying more house than you can afford, almost everyone makes mistakes when it comes to purchasing a home. That being said, certain age groups are more susceptible to particular missteps than others. Here, Bankrate discusses some common mistakes homeowners make at each age, and a few ways to avoid them.
20s: Getting the wrong type of mortgage
People in their 20s are just beginning their careers and usually have less money saved than older home buyers, which means paying less for a mortgage is not just a priority but a necessity. This can be a bad thing if buyers get into an adjustable-rate mortgage (ARM) thinking they will earn more money down the road. If that doesn’t happen, then when interest rates go up in five to seven years, they’ll see their mortgage rates double or even triple. If the rates on ARMs increase dramatically, there’s a chance the borrower no longer will be able to afford the mortgage payment, which could put the house in jeopardy. Before leaping into an ARM with just a dream of a house and a hope for a bigger paycheck, consider other cost-saving alternatives. Along with popular programs, such as FHA and VA loans, other lesser-known initiatives also are geared to home buyers on a fixed income. For example, the HUD-sponsored Good Neighbor Next Door program offers home-buying assistance for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers. Along with federal money, there also are state-sponsored grants for first-time home buyers that can typically be found on your state’s website.
30s: Not thinking about the future
Home buyers in their 30s blunder by not considering a future family when they’re standing in the middle of a downtown condo with gorgeous views and access to a rooftop pool. While snagging the ultimate bachelor or bachelorette pad might seem alluring, it also can cost you money down the road. If you end up having to sell at an inappropriate time to get into another house, you’ll be doing it under duress rather than planning ahead the first time. So, there’s a lot of money lost there. If you plan on having a family, it’s important to consider that when home shopping, even if you’re currently single. Ask yourself these questions before buying a home:
- Who do I imagine living within the future?
- Where do I imagine living?
- How do I imagine living?
Your answers should be an integral part of what you look for in a home. For example, if you think you might want kids or even a dog, you’ll probably want to choose a home with a backyard versus one near a great nightlife.
40s-50s: Overestimating your budget
In your 40s and 50s, you tend to have more money, which can lead to overestimating your budget and buying a house you can’t afford. One way to avoid this is to figure out your lifestyle comfort level. Although you can afford a $500,000 home, that doesn’t mean you should buy one. If you’re married and both you and your spouse are working, determine whether or not you can afford the mortgage payment if one of you gets laid off. Figuring out your budget is a critical step for buyers of all ages. Even experienced home buyers can make the mistake of spending at their limit, which can mean making sacrifices that they weren’t prepared to make. The takeaway for buyers in their 40s and 50s is to leave room in the budget for things you aren’t willing to give up, such as a private school for the kids.
60s and up: Falling in love with that vacation home
Many homeowners in their 60s are retired or getting ready to retire. Among the many decisions retirees make is where to live. While some choose to stay where they are, many plan on moving to warmer climates or even another country. Costly mistake retirees make is going on vacation, falling in love with the place and moving immediately. Relocating and buying a home is an expensive process, so retirees should be sure they familiarize themselves with a new place before buying. Before buying a new house in your vacation paradise, be sure to visit the area in every climate. For example, Florida is great in the winter, but many people might not be comfortable in the humid summer months. The same goes for northern areas—what’s blissful in one season can be awful in another.