Pending home sales in the US declined in January, with three of the four major regions reporting month-over-month drops, according to the National Association of Realtors.
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” NAR chief economist Lawrence Yun said. “That said, there has been an increase in permits and requests to build new homes.”
The NAR’s Pending Home Sales Index (PHSI) edged down 2.8% to 122.8 last month. Meanwhile, contract signings jumped 13% year over year, representing the eight-consecutive month of increases in housing permits for single-family homes. Yun said that the rise in contract activity is a good sign that the disparity between housing supply and demand could be easing this coming spring and summer due to seasonal upswing in inventory.
Regionally, pending home sales transactions in the Northeast declined 7.4% month over month to a reading of 101.6 in January. The Midwest PHSI also posted a monthly decline, down 0.9% to 113.2%. In the South, the index climbed 0.1% to 151.3, while the index in the West dwindled 7.8% to 104.6 last month.
Since the coronavirus pandemic took the shine off expensive (and cramped!) urban living, rents have tanked in some of the nation’s top cities. But when it comes to whether it makes more financial sense to buy a home or rent one, it turns out that, in many cases, buying is still your best bet.
In more than 15 of the 50 largest metros, buying a home was as or more affordable than renting in January 2021, according to a recent realtor.com® report, up from 13 markets before the pandemic. And, on top of that, there are several “borderline” cities where the monthly cost of buying a home is within 5% of the cost of the local median rent.
Even with the historic growth in home prices over the past year, the monthly cost of buying a home in many cities across the United States hasn’t changed—mostly because of incredibly low interest rates that dropped to 2.88% in January.
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The economics team at realtor.com looked at the 50 largest metros, ranked by the number of households, to put together the report. It compared the monthly cost of buying a home with a 30-year fixed-rate mortgage at each city’s median listing price, including taxes and insurance, against the monthly rent for two- to four-bedroom apartments and houses in the area. Then the team ranked those numbers to see how they stacked up to local incomes. (Metro areas typically include a city and smaller nearby municipalities; the Chicago metro includes Elgin and Naperville.)
Cities in the Midwest and South tend to offer cheaper homes and a lower cost of living than coastal California and other big tech hubs like Austin, TX, and Seattle. That’s because land is often cheaper and more abundant, construction is less expensive, zoning regulations are often fewer, plus some cities just don’t have as much demand for housing.
“Some of these, they’re Rust Belt markets. Each one of these markets has a net population loss, so that, of course, is going to create an abundance of supply and lower demand than a place that has a net population gain,” says James Wise, an Ohio-based real estate broker and host of HoltonWiseTV.
And yet overall, the number of places where it makes more sense to rent is higher. Looking at the 50 largest metros, the monthly cost to purchase a median home in January 2021 was $1,988, compared with the median monthly rent of $1,727.
But notoriously expensive California and other West Coast metros lead the list of the highest-priced cities where, financially, it makes more sense to rent because the monthly cost of a mortgage far exceeds the median rent. These places also tend to have incomparable natural beauty and outdoor access and are popular vacation destinations. Two had median list prices over $1 million.
These more expensive markets tend to have a higher share of well-paying (often tech) jobs occupied by a high concentration of young professionals who have plenty of cash to spend.
“Wherever there are high-paying jobs and employers supporting them, you’re beginning to see higher-end rental complexes that can start at $3,500,” says Ramesh Rao, a Coldwell Banker Global Luxury agent based in Silicon Valley. “When these people start looking at buying a median price home, their total cost toward any kind of roof over their head goes up two times.”
But for many of these folks, Rao says, it just feels better to pay $3,500 toward equity than give it to someone else. Throw in the tax savings and potential appreciation, that’s what keeps people buying these pricey places despite the monthly math.
So where are the best places to buy a home, or to rent one? Take a look.
After some uncertain months while COVID-19 first emerged, home buying has become hot again. Super-hot.
In fact, homes are being scooped up at the fastest pace in more than two years, per Zillow.
Homes Are Going Pending Fast
Homes went pending in a median 22 days during week ending June 13
Down 9 days month-to-month and 3 days year-over-year
Listings going pending in as few as 5 days in Columbus, Ohio
But slowing down in metros like NYC (up to 70 days from 47 last year)
During the second week of June, the typical listing accepted an offer after just 22 days, the best reading since June 2018, when it was a 21-day average.
It was even faster in certain Midwest cities like Columbus, Cincinnati, and Kansas City, where homes went pending in less than a week, in as little as five days on average.
Of course, this could be a temporary trend related to sellers being more reticent about listing their homes, while home buyers continue to exhibit a relatively strong appetite.
We’ll know as more listings hit the market and eliminate some of the recent scarcity. Zillow said new listings were up 14% month-over-month, so that could balance the market somewhat.
Meanwhile, there are still slow housing markets, with New York properties typically spending a staggering 70 days on the market before an offer is accepted, an increase of more than three weeks from the same time last year.
Similar trends have been seen in cities like Miami (55 days) and Atlanta (38 days), also struggling with COVID-19 related closures and disruptions.
Density Has Become a Problem
Record 27% of prospective home buyers looking outside their metro
Up from 26% in first quarter of 2020 and 25.2% in Q2 2019
Redfin says searching for out-of-town homes could be related to coronavirus
Searches for homes in small towns continue to surge on Redfin website
If there were a word to define 2020 at this moment, it would probably be “distance.”
Whether it’s social distancing, six feet apart, tables spaced apart, walking on different sides of the street, one-way grocery aisles, etc.
Now it appears living too close to someone else is also a problem, as evidenced by the uptrend in rural and small town home searches.
Per Redfin, pageviews of property listings in towns with fewer than 50,000 residents increased 87% year-over-year in May.
That was more than triple the 22% year-over-year increase in pageviews seen for properties in cities with more than one million residents.
So it’s pretty clear a lot of prospective home buyers have the same idea about greener and larger pastures.
Specifically, many of them want to leave once-bustling metropolises like Los Angeles, New York, and San Francisco, which had the biggest net outflows (more leaving than coming) in April and May.
As for where everyone is going, the top destinations are:
– New York residents want to move to Atlanta – San Francisco residents want to move to Sacramento – Los Angeles residents want to move to San Diego – Chicago residents want to move to Phoenix – Boston residents want to move to Portland, Maine
The trend of moving from more expensive cities to cheaper ones isn’t new, but it’s probably more practical now since a lot of people can work remotely without issue.
This is especially true for tech workers, whose companies (Facebook, Twitter and Slack) have embraced the work-from-home movement.
For many, this means moving from expensive urban centers or coastal cities to more spread out, inland metros.
The big question remains whether this is a permanent, lasting sea change, or just a short-term trend that will reverse itself in coming months or years.
If it’s short-lived, it could mean opportunity to buy a home or condo in a once-hot urban center at a discount with less competition. Same goes for properties in vacation locales that have cooled.
Will Hot Housing Market Taper Off Later This Year?
There are possible headwinds facing the housing market in fall
High and lasting unemployment has yet to be factored in
And the end of forbearance programs could lead to a foreclosure surge
A COVID-19 second wave is also a major concern
We’re only halfway through 2020 and it has been beyond painful. It’s hard to imagine what’s to come for the rest of the year.
And it won’t be without fireworks, given we’ve got a presidential election in the fall that could be more contentious than usual thanks to increased mail-in voting.
There’s also the nagging issue of unemployment, which both the stock market and housing market have seemed to shrug off so far.
At some point, we’re going to need to face the music, and the same goes for expiring mortgage forbearance programs.
While some homeowners will be able to pick up where they left off in making monthly mortgage payments, others may not be so fortunate.
This could lead to an increase in defaults, foreclosures, and higher REO inventory, which could hurt the seemingly unscathed housing market.
Of course, an ongoing inventory shortage could provide a strong buffer, assuming the pool of eligible home buyers remains.
Moody’s Analytics chief economist Mark Zandi told CNBC he thinks the housing market will “cool off a bit later this year.”
He added that he doesn’t expect a “sharp downturn,” noting that “there are some very solid underpinnings” giving the housing market strength.
I tend to agree – it’s not 2008 all over again. However, at some point in coming years it might be.
By Miranda Marquit1 Comment – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited January 10, 2014.
Every year, the credit reporting agency Experian puts out a report on credit trends in the United States. The Fourth Annual State of Credit takes a look at trends divided by geography and age, as well as other demographics.
I always find it fascinating to have a look at how I stack up as compared to my peers.
Geographic Trends
First of all, I looked at the report’s map showing the cities with the best and worst credit scores. I found it interesting that almost all of the best credit scores are located in the upper midwest. Minnesota and Wisconsin had most of the cities with the top credit scores, with a some sprinkled in North Dakota, South Dakota, and Iowa.
The 10 cities with the worst scores are all below the Mason-Dixon line, with most of them located in the Southeast, with Riverside, CA and Las Vegas, NV as the two in the Southwest.
None of the cities with the worst or best credit scores are located in Utah, my home state.
Generational Data
The Experian report divides the generational data into four categories: Greatest Generation (66 +), Baby Boomer (47 – 65), Generation X (30 – 46), and Millennial (19 – 29). I’m firmly in Generation X for the purposes of this report.
According to the report, the Millennials need the most help figuring out how to build their credit. This isn’t exactly surprising. After all, few schools teach financial literacy, and lessons many kids get about credit from their parents often consist of this advice: “Don’t get credit!”
This doesn’t prepare young adults to head out into the world and begin building their credit in meaningful ways. Instead of trying to scare kids about credit, I think it makes more sense to teach them about responsible credit use in combination with solid financial skills.
You have a great chance when you’re in your early 20s to create a solid credit profile, and learning how to do that effectively can mean a better financial result down the road.
National Averages
No report of this nature would be complete without national averages. According to the Experian report, the average debt in the United States is $27,887. The good news is that debt isn’t mostly credit cards. Indeed, the average balance on bank cards is $4,501. I remember a few years ago when the average was higher than that, so it’s clear that progress has been made in terms of the average person paying down debt.
The average number of bank cards that consumers have in the United States is 2.19. This is one area in which I am above average. My husband and I have six credit cards between us. This probably isn’t the most efficient use of our credit, though. I need to re-evaluate the cards and their rewards programs and make sure that I’m sticking with some sort of plan. I tend to get lazy and drift off the program if I’m not careful. We pay off what we spend, but I don’t always use the card to give maximum results if I’m not paying attention.
Take a look at the data, and figure out how you stack up. Are you average for your location and generation? Where do you fit with the national average? Answering these questions can help you figure out whether or not you need to make changes.
bank is headquartered in San Francisco, California, and operates 600 branches in 19 states in the Midwest and the Western United States.
Table of Contents:
Bank of West Overview
Although it has been around for almost 150 years, Bank of the West didn’t gain its current name until the 1970s.
This financial organization operates about 600 branches around the Midwest and Western U.S. in 19 states. They offer a wide variety of mortgage and refinance options for homebuyers living in their serviced areas.
Bank of the West has received a fair number of awards for excellence in customer service and philanthropic efforts. However, its customer reviews are relatively mixed on the Better Business Bureau and other online marketplace rating services.
Bank of the West offers its customers competitive rates on its wide selection of mortgage and refinancing options. For individuals living in or buying property in the Midwest or Western U.S., this financial institution may be a smart choice.
Fixed-Rate Loans
These types of conforming loans are good for homebuyers who plan on staying in the home for a long time at lengths of 15 or 30 years. They offer stable monthly rates, which can make for easy budgeting over a course of time.
Adjustable-Rate Loans
Adjustable-rate loans are good for those who plan on living in their home for a short period or who plan on refinancing their home in the next few years. This is also helpful for homebuyers who can pay their mortgages off quickly.
Jumbo Loans: Jumbo loans are best suited to homebuyers who plan on buying an expensive home and need to borrow more than the limits set by Fannie Mae and Freddie Mac, at $453,100 currently. Bank of the West offers jumbo loans for both fixed and adjustable-rate mortgages, at 30 years and 7/1 ARMs, as well as jumbo refinances.
Construction Loans
If you are planning on building a new home, Bank of the West can offer financing for you to cover the construction costs. Once the house is finished, you can change your construction into a fixed-rate or adjustable-rate home loan.
FHA Loans
The Federal Housing Administration provides these types of home loans and refinances for buyers who do not qualify for other loan programs. Perhaps these buyers do not have the funds to put 20 percent down on the home, or maybe their credit score is not up to industry standards.
VA Loans: Veterans, military members, current members of the Armed forces, and their spouses can apply for these types of government home loans. Eligible individuals can put this financing toward either a mortgage or a refinance. VA loans with Bank of the West offer affordable monthly payments and the option to put a low down payment on the home.
HomeReady Loans
A HomeReady loan through Fannie Mae offers affordable monthly payments and low down payment options, as low as 3 percent, for homebuyers low- to moderate-income buyers. These types of loans are specifically intended to serve lower-income communities.
To be eligible for a HomeReady loan with Bank of the West, buyers should have a credit score of at least 620.
Bank of the West Mortgage Application
Bank of the West offers plenty of ways for its customers to apply for mortgages. They have an online application form that consumers can fill out if they’d prefer to complete a questionnaire on their own time rather than waiting on hold to speak with a loan specialist.
Bank of the West’s application site allows consumers to save the progress of their application to complete it at a later time. Customers are also encouraged to call or email a mortgage specialist if they’d like to inquire about a mortgage or home refinance at a more personal level.
Bank of the West also has a variety of helpful resources on its website to educate home buyers about the mortgage process. Their online mortgage calculator allows buyers to budget how much they can borrow from this lender and how much home they can afford.
Their advice can offer insight to first-time buyers as well as those who have purchased multiple homes throughout their lives.
Bank of the West did not rank on the 2017 J.D. Power Primary Mortgage Originator study, nor did it rank on J.D. Power’s 2016 list. It also did not make it onto the Consumer Financial Bureau Monthly Complaint Report most-complained about companies, which is a positive feature worth noting.
Bank of the West Lender Grades
Bank of the West is a financial services company that has been in operation for several decades. This bank offers services to 19 U.S. states in the Midwest and Western regions.
Bank of the West is not currently accredited by the Better Business Bureau, though it has an A+ rating on this site. Overall, the reviews for this lender are relatively mixed. The bank has a BBB average rating just over 1 out of 5 stars of 33 reviews and has 158 complaints made against it in the past three years.
Bank of the West has won many awards in the past few years, including the 2017 Family Wealth Report Award for Best Client Initiative for Strategic Philanthropy and Purpose Investments.
It is also highly recommended by the Private Asset Management, with a 2017 award for Best Client Service. Kiplinger’s Magazine awarded Bank of the West with the honor of Best Regional Bank in the West in 2017.
Information collected on December 14, 2018
Bank of the West Mortgage Qualifications
Bank of the West has similar mortgage qualifications to most of the other lenders in the U.S. Credit score is the most important factor that lenders take into account when qualifying prospective customers for home loans.
Although individuals with a credit score of about 700 should have no trouble getting a mortgage, those with credit scores in the “excellent” range should anticipate the best mortgage rates.
Credit score
Quality
Ease of approval
760+
Excellent
Easy
700-759
Good
Somewhat easy
621-699
Fair
Moderate
620 and below
Poor
Somewhat difficult
n/a
No credit score
Difficult
Borrowers with a good credit score, a debt-to-income ratio of 36 percent or less, and the ability to put at least 20 percent down on the home have the best chances of being approved for a mortgage by a majority of lenders.
Bank of the West Phone Number & Additional Details
Reader Interactions
Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
The Midwest is called the Heart of America for a reason. It has a long history of being home to people from many walks of life, many of whom initially embraced countryside living. However, the encroach of modern living has brought many changes, including to the house styles across the Midwest. Here are a few particularly popular architectural styles of Midwestern homes.
Craftsman
Easily one of the most popular architectural styles for Midwestern homes is the craftsman style. Furniture-maker and art enthusiast Gustav Stickley originally conceived of this type of house. His focus was to create and design goods by emphasizing handmade quality. This was intended to counter the prefab trend and fast production of the early 20th century.
Eventually, the concept moved to virtually every industry, including house-building. The idea is to ensure that the best possible materials go into every inch of the home, including green options and top-notch, handcrafted ones. Every facet has to be sourced accordingly, such as using renewable, local woods for essential structural aspects as well as luxurious details such as solid wood doors.
Farmhouse
It should be no surprise to anyone that homes in the Midwest are sometimes found on farms or at least inspired by them. Some of the oldest buildings on the fields and prairies fall into the farmhouse category. Primarily, these structures are simple and intentionally humble. They tend to follow a very standard and minimalist rectangular floor plan, with a standard first and second floor. The look is very simple, and the home may even be fashioned out of old barn materials. Farmhouse-style homes have a rich, rustic feel that many homeowners dream of.
Ranch
You can find ranch-style homes all over the Midwest. These homes are humble and ideal for the complicated Midwestern weather systems that make height inconvenient. The most important detail is that a ranch home is a single-floor home with a sprawling floor plan. Sometimes a second floor comes in the form of a large basement. The low profile gives these homes an instantly recognizable charm. Many feature sturdy angles, inset faces, and art deco shapes and patterns characteristic of midcentury-modern design.
Modern
Naturally, with the spread of prefabrication and the appearance of home design catalogs, certain trends have gone national. Since the 1960s, the exact details of what constitutes “modern” have shifted. As with any current style, evolution is part of the defining factor. In particular, though, modern houses tend to be a mash-up of other styles, with an emphasis on detail and elegance. Lots of peaks, large windows, and multiple decorative gables are common features. The floor plans typically heavily emphasize open space, broad entryways, and external lighting to supplement natural light.
A gauge of U.S. pending home sales fell to a six-month low in January as buyers competed for a limited number of properties.
The National Association of Realtors’ index of pending home sales decreased 2.8% from the prior month to 122.8, according to data released Thursday. December data was revised to a 0.5% gain after a previously reported decline. The median estimate in a Bloomberg survey of economists called for no change in January.
The decline is the latest sign that the housing boom may be starting to cool amid soaring prices, a lack of inventory and rising mortgage rates. The residential real estate market has been a bright spot in the economy as it recovers from the pandemic. Contract signings are still up 8.2% from a year ago on an unadjusted basis.
“There are simply not enough homes to match the demand on the market” Lawrence Yun, chief economist at the NAR, said in a statement. Still, Yun said he expects inventory to rise in the coming months.
The lack of inventory thus far has driven prices upwards, putting homeownership out of reach for some, said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting.
“Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country,” he said. “While home building has picked up to attempt to meet the high demand, increased listings of existing homes will be needed in the coming months to alleviate this shortage of housing inventory.”
By region, contract signings fell in the West, Northeast and Midwest. In the South, the index for pending home sales rose to the highest since August.
Are you thinking about buying a house? Do you want to avoid common home buying mistakes?
I bought my first house when I was only 20 years old. Even though that was a little over 11 years ago, I have looked back many times and wondered how I did it.
I made so many first time home buyer mistakes!
Of course, I was young and had a lot to learn. But, I definitely could have done more research to avoid many of the home buying mistakes I made, like not comparing interest rates or understanding the total cost of buying a home.
I’m not alone in how I approached buying a house. There are many people who simply do not understand everything that goes into buying a house, and that’s something that can negatively impact your finances and cause stress.
Over the years, I have received many emails about buying a house in your early 20s or when you’re young. I also get lots of questions from people who have been renting and are thinking about buying their first home.
I thought it would be interesting to look back on the home buying mistakes I made and explain how to avoid the same mistakes I made. Hopefully you can be a better prepared home buyer than I was!
The mistakes first time home buyers make can cost you money and may even lead to regret. Perhaps you’re wondering why you even bought your home!
One thing you may not know about me is that the first house I ever lived in was actually my own. Growing up, we always lived in small apartments and rented. I wanted to have a home of my own – moving so often as a child was tiring.
Buying a house and being a homeowner was a completely new thing for me.
I had never done yard work, had to deal with house maintenance, home repairs, or anything like that.
I was as new as could be when it comes to living in a house!
It was a buyer’s market when we started searching. It was back in 2009, so the housing market was coming down. This meant that a monthly mortgage payment wasn’t too much more than rent at an apartment.
I felt like I was ready to buy my first house, and I needed a place to live.
So, buying a house seemed like a logical decision.
I made many home buying mistakes, like I said. While I made it through everything, my mistakes could easily have led to major financial trouble.
Read on below to learn more about mistakes home buyers make and my first-time home buyer tips.
Related content on home buying mistakes:
Here were some of my home buying mistakes.
This was our first house.
I didn’t prepare.
I was only 20, so I didn’t really understand how things worked, even though I thought I did at the time.
I found an online mortgage lender, and back in 2009, that was kind of a new thing. The company ended up doing a bunch of odd things and made a bunch of paperwork mistakes. It almost seemed scammy because online mortgages were so new at the time.
While my realtor was great and a family friend, she recommended a mortgage loan officer to me, and I just used that person.
The loan officer was great and very friendly.
But, I didn’t compare interest rates at all, I didn’t try to raise my credit score before I started looking at homes, and more.
Instead, I should have been paying attention to my credit score and worked to increase it before I started looking at rates. Then, I should have applied with multiple mortgage lenders and found the best interest rate.
Basically, I didn’t prepare.
Had I spent time increasing my credit score and shopping around for better rates, I could have gotten a better interest rate and saved money on mortgage payments.
While a small percentage difference in interest may not sound like much, it makes a big difference in how much you pay each month and how much you pay over the course of your loan.
For example, here’s the difference in two 30-year mortgages on a $200,000 home (this is before annual taxes being added in to the monthly payment):
With an interest rate of 3.25% your monthly payment would be $870, and you would pay $313,349 over the course of your loan.
With an interest rate of 4% your monthly payment would be $955, and you would pay $343,739.
That’s a difference of $85 a month, and you will have paid $30,000 more once your mortgage is paid off.
Looking back, I would have done more research on the home buying process and the factors that impact interest rates.
One of the easiest things you can do to avoid this mistake is to start paying attention to your credit score. You can receive free credit reports and credit scores, and I recommend reading Everything You Need To Know About How To Build Credit to learn more.
I avoided adding up all of the costs because it was scary.
Okay, so I knew that having a house could/would be expensive, and luckily we were fine, but wow, are there a lot of costs!
I avoided adding them all up for a while because I knew they would be higher than I thought. Eventually I did, and I was right – adding everything all together was a doozy.
We didn’t start adding up these costs until we were farther along in the buying process, and this is one of the home buying mistakes many people make.
There are lots of people who only think about their mortgage payment, but there are so many more costs associated with buying a home
Before we purchased a home, we should have gone through all of the typical costs of owning a house and compared it to our housing budget. Comparing your current budget to your new homeowner’s budget will tell you whether or not you can actually afford to buy a home.
Here are some of the homeownership costs you want to consider:
Gas/propane. Many homes run on gas in order to have hot water, to use the stove, and so on.
Electricity. Generally, the bigger your home then the higher your electricity bill will be.
Sewer. On average, your sewer bill may cost around $30 a month from what I’ve seen.
Trash. This isn’t super expensive either, but it’s still a cost to include.
Water. Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may differ by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
Homeowners insurance. Homeowners insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live – not thinking about these was one of the home buying mistakes I made.
Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that will come up eventually. No matter how old your home is, repair and maintenance costs will eventually come into play.
Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may also be rules you don’t like.
Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?
I probably should have spent less on the actual house.
While the house we bought was less than the amount we were pre-approved for, I definitely think that we could have found a house for even less.
We bought at the top of our budget, and this is one home buying mistake that can really get you in trouble.
Thinking back on it, the amount that we were pre-approved for, as young 20 year olds, was pretty insane. I am very glad that we did not buy a house that was that expensive.
It’s not uncommon to be approved for much more than your budget realistically allows for. Just because the bank approves you for a $350,000 mortgage, for example, does not mean you can afford to buy a house at that price.
We bought at the top of our budget thinking that we would get better jobs eventually. While that worked out in our favor since we were each barely making above minimum wage, it was a decision that could have ended quite badly.
We were living paycheck to paycheck and didn’t have an emergency fund.
We were young and didn’t have high paying jobs when we bought our house. In fact, we were barely making more than minimum wage at our jobs.
While we never racked up credit card debt, I did accrue student loans and we were living paycheck to paycheck.
Had one major (or even minor) thing happened with our new house, the only option would have been taking on debt. This is not where you want to be if you have just taken out a big mortgage.
The best way to avoid this first time home buyer mistake is to set some money aside for emergencies before you buy, and to buy a house that fits in your budget. You want to be able to continue saving while making your new monthly home payments.
Make sure your home insurance covers what you need.
While I never had to use my home insurance, there were a few things that it did not cover, and I should have at least thought about them beforehand.
One of the biggest coverage issues was flooding. Flooding is a common problem where we lived in Missouri, yet I didn’t realize until a few years after I had already lived in the house that flooding was not covered unless you signed up for an additional policy.
Now, we weren’t in a floodplain – your lender may require you to buy special flood insurance if you live in a floodplain – but basement flooding was still a fairly common issue where we lived.
Another special insurance consideration are earthquakes. Many normal home insurance policies do not cover earthquakes.
You can avoid this home buying mistake by researching what is the best kind of insurance policy for where you live. Floods and earthquakes aren’t a problem everywhere, but in some places you may want to have that kind of coverage.
Have a larger down payment.
We were 20, and we didn’t have a lot of money saved up before we bought our house.
Therefore, we did not put down a 20% down payment. That might sound like a lot, but 20% is the recommended amount to put down if you want to avoid PMI (private mortgage insurance).
A lender charges PMI because putting less than 20% down makes the loan look like a riskier investment for them. PMI protects lenders from borrowers who default on their loans.
PMI is normally around 0.5% to 1% of the mortgage annually, and it’s added to your monthly payment. If you borrowed a $200,000 mortgage, you would likely pay between $1,000 to $2,000 a year until you paid down enough of your mortgage principal to remove PMI.
We put less than 5% down towards our house purchase, and this led to us having PMI.
I don’t remember exactly how much we paid each month for PMI, but looking back, I could have used that money to pay off my student loans faster, save more, and so on.
While having a larger down payment isn’t one of the home buying mistakes I could have easily changed back then, in general, just saving more money instead of frivolously spending it in the beginning would have been a good decision.
Related content: Can You Remove PMI From Your Mortgage?
So, what’s going on with the house now?
As many of you know, we sold our house over 5 years ago. We wanted to travel more, and selling our house made more sense than keeping it.
We actually sold it for quite a loss, as the market was further down than when we bought it.
I’m happy that we bought the house – it taught us a lot, gave us responsibility, and gave us a place to live! And, it taught us how to avoid home buying mistakes in the future.
One of the things I haven’t mentioned is what we paid each for our mortgage. Our monthly payments were just under $1,000.
Where we lived in the midwest is known for being a low cost of living area. I can’t imagine how we would have bought a house in some other parts of the U.S.
But, the low cost of living meant that buying a house at 20 was more doable.
Is it normal to regret buying a house? Is it normal to have buyers remorse after buying a house?
I don’t know what the statistics are on home buyers remorse, but it does happen. Hopefully with the tips before buying a house above, you can avoid that as much as possible.
Also, being realistic when it comes to what to expect when buying a house can help greatly as well.
What home buying mistakes did you make when you purchased your home?
Are you thinking about buying a house? Do you want to avoid common home buying mistakes?
I bought my first house when I was only 20 years old. Even though that was a little over 11 years ago, I have looked back many times and wondered how I did it.
I made so many first time home buyer mistakes!
Of course, I was young and had a lot to learn. But, I definitely could have done more research to avoid many of the home buying mistakes I made, like not comparing interest rates or understanding the total cost of buying a home.
I’m not alone in how I approached buying a house. There are many people who simply do not understand everything that goes into buying a house, and that’s something that can negatively impact your finances and cause stress.
Over the years, I have received many emails about buying a house in your early 20s or when you’re young. I also get lots of questions from people who have been renting and are thinking about buying their first home.
I thought it would be interesting to look back on the home buying mistakes I made and explain how to avoid the same mistakes I made. Hopefully you can be a better prepared home buyer than I was!
The mistakes first time home buyers make can cost you money and may even lead to regret. Perhaps you’re wondering why you even bought your home!
One thing you may not know about me is that the first house I ever lived in was actually my own. Growing up, we always lived in small apartments and rented. I wanted to have a home of my own – moving so often as a child was tiring.
Buying a house and being a homeowner was a completely new thing for me.
I had never done yard work, had to deal with house maintenance, home repairs, or anything like that.
I was as new as could be when it comes to living in a house!
It was a buyer’s market when we started searching. It was back in 2009, so the housing market was coming down. This meant that a monthly mortgage payment wasn’t too much more than rent at an apartment.
I felt like I was ready to buy my first house, and I needed a place to live.
So, buying a house seemed like a logical decision.
I made many home buying mistakes, like I said. While I made it through everything, my mistakes could easily have led to major financial trouble.
Read on below to learn more about mistakes home buyers make and my first-time home buyer tips.
Related content on home buying mistakes:
Here were some of my home buying mistakes.
This was our first house.
I didn’t prepare.
I was only 20, so I didn’t really understand how things worked, even though I thought I did at the time.
I found an online mortgage lender, and back in 2009, that was kind of a new thing. The company ended up doing a bunch of odd things and made a bunch of paperwork mistakes. It almost seemed scammy because online mortgages were so new at the time.
While my realtor was great and a family friend, she recommended a mortgage loan officer to me, and I just used that person.
The loan officer was great and very friendly.
But, I didn’t compare interest rates at all, I didn’t try to raise my credit score before I started looking at homes, and more.
Instead, I should have been paying attention to my credit score and worked to increase it before I started looking at rates. Then, I should have applied with multiple mortgage lenders and found the best interest rate.
Basically, I didn’t prepare.
Had I spent time increasing my credit score and shopping around for better rates, I could have gotten a better interest rate and saved money on mortgage payments.
While a small percentage difference in interest may not sound like much, it makes a big difference in how much you pay each month and how much you pay over the course of your loan.
For example, here’s the difference in two 30-year mortgages on a $200,000 home (this is before annual taxes being added in to the monthly payment):
With an interest rate of 3.25% your monthly payment would be $870, and you would pay $313,349 over the course of your loan.
With an interest rate of 4% your monthly payment would be $955, and you would pay $343,739.
That’s a difference of $85 a month, and you will have paid $30,000 more once your mortgage is paid off.
Looking back, I would have done more research on the home buying process and the factors that impact interest rates.
One of the easiest things you can do to avoid this mistake is to start paying attention to your credit score. You can receive free credit reports and credit scores, and I recommend reading Everything You Need To Know About How To Build Credit to learn more.
I avoided adding up all of the costs because it was scary.
Okay, so I knew that having a house could/would be expensive, and luckily we were fine, but wow, are there a lot of costs!
I avoided adding them all up for a while because I knew they would be higher than I thought. Eventually I did, and I was right – adding everything all together was a doozy.
We didn’t start adding up these costs until we were farther along in the buying process, and this is one of the home buying mistakes many people make.
There are lots of people who only think about their mortgage payment, but there are so many more costs associated with buying a home
Before we purchased a home, we should have gone through all of the typical costs of owning a house and compared it to our housing budget. Comparing your current budget to your new homeowner’s budget will tell you whether or not you can actually afford to buy a home.
Here are some of the homeownership costs you want to consider:
Gas/propane. Many homes run on gas in order to have hot water, to use the stove, and so on.
Electricity. Generally, the bigger your home then the higher your electricity bill will be.
Sewer. On average, your sewer bill may cost around $30 a month from what I’ve seen.
Trash. This isn’t super expensive either, but it’s still a cost to include.
Water. Water bills can vary widely. I know many who live in areas where the average water bill is a few hundred each month.
Property taxes. Property taxes can vary widely from town to town. You may find yourself looking at two similar houses with similar price tags, but the property taxes may differ by thousands of dollars annually. That is a LOT of money. While it may seem small when compared to the actual home purchase price, remember that you have to pay property taxes annually and a difference of just $3,600 a year is $300 a month for life.
Homeowners insurance. Homeowners insurance can be cheap in some areas but crazy expensive in others. Don’t forget to look into the cost of earthquake, flood, and hurricane insurance as well as that can add up quickly depending on where you live – not thinking about these was one of the home buying mistakes I made.
Maintenance and repairs. Even if your home is brand new, you may have to pay for repairs, which is something that will come up eventually. No matter how old your home is, repair and maintenance costs will eventually come into play.
Homeowners association fees. This can also vary widely. You should always see if the house you are interested in is in an HOA because the fees can be high and there may also be rules you don’t like.
Home furnishings. Furnishing your home can be done cheaply, but I know some who buy huge homes but can’t afford to put anything in them, such as a table, a bed, and so on. Why own a $500,000 house if you don’t have any furniture?
I probably should have spent less on the actual house.
While the house we bought was less than the amount we were pre-approved for, I definitely think that we could have found a house for even less.
We bought at the top of our budget, and this is one home buying mistake that can really get you in trouble.
Thinking back on it, the amount that we were pre-approved for, as young 20 year olds, was pretty insane. I am very glad that we did not buy a house that was that expensive.
It’s not uncommon to be approved for much more than your budget realistically allows for. Just because the bank approves you for a $350,000 mortgage, for example, does not mean you can afford to buy a house at that price.
We bought at the top of our budget thinking that we would get better jobs eventually. While that worked out in our favor since we were each barely making above minimum wage, it was a decision that could have ended quite badly.
We were living paycheck to paycheck and didn’t have an emergency fund.
We were young and didn’t have high paying jobs when we bought our house. In fact, we were barely making more than minimum wage at our jobs.
While we never racked up credit card debt, I did accrue student loans and we were living paycheck to paycheck.
Had one major (or even minor) thing happened with our new house, the only option would have been taking on debt. This is not where you want to be if you have just taken out a big mortgage.
The best way to avoid this first time home buyer mistake is to set some money aside for emergencies before you buy, and to buy a house that fits in your budget. You want to be able to continue saving while making your new monthly home payments.
Make sure your home insurance covers what you need.
While I never had to use my home insurance, there were a few things that it did not cover, and I should have at least thought about them beforehand.
One of the biggest coverage issues was flooding. Flooding is a common problem where we lived in Missouri, yet I didn’t realize until a few years after I had already lived in the house that flooding was not covered unless you signed up for an additional policy.
Now, we weren’t in a floodplain – your lender may require you to buy special flood insurance if you live in a floodplain – but basement flooding was still a fairly common issue where we lived.
Another special insurance consideration are earthquakes. Many normal home insurance policies do not cover earthquakes.
You can avoid this home buying mistake by researching what is the best kind of insurance policy for where you live. Floods and earthquakes aren’t a problem everywhere, but in some places you may want to have that kind of coverage.
Have a larger down payment.
We were 20, and we didn’t have a lot of money saved up before we bought our house.
Therefore, we did not put down a 20% down payment. That might sound like a lot, but 20% is the recommended amount to put down if you want to avoid PMI (private mortgage insurance).
A lender charges PMI because putting less than 20% down makes the loan look like a riskier investment for them. PMI protects lenders from borrowers who default on their loans.
PMI is normally around 0.5% to 1% of the mortgage annually, and it’s added to your monthly payment. If you borrowed a $200,000 mortgage, you would likely pay between $1,000 to $2,000 a year until you paid down enough of your mortgage principal to remove PMI.
We put less than 5% down towards our house purchase, and this led to us having PMI.
I don’t remember exactly how much we paid each month for PMI, but looking back, I could have used that money to pay off my student loans faster, save more, and so on.
While having a larger down payment isn’t one of the home buying mistakes I could have easily changed back then, in general, just saving more money instead of frivolously spending it in the beginning would have been a good decision.
Related content: Can You Remove PMI From Your Mortgage?
So, what’s going on with the house now?
As many of you know, we sold our house over 5 years ago. We wanted to travel more, and selling our house made more sense than keeping it.
We actually sold it for quite a loss, as the market was further down than when we bought it.
I’m happy that we bought the house – it taught us a lot, gave us responsibility, and gave us a place to live! And, it taught us how to avoid home buying mistakes in the future.
One of the things I haven’t mentioned is what we paid each for our mortgage. Our monthly payments were just under $1,000.
Where we lived in the midwest is known for being a low cost of living area. I can’t imagine how we would have bought a house in some other parts of the U.S.
But, the low cost of living meant that buying a house at 20 was more doable.
Is it normal to regret buying a house? Is it normal to have buyers remorse after buying a house?
I don’t know what the statistics are on home buyers remorse, but it does happen. Hopefully with the tips before buying a house above, you can avoid that as much as possible.
Also, being realistic when it comes to what to expect when buying a house can help greatly as well.
What home buying mistakes did you make when you purchased your home?
The year 2020 brought a series of historically severe weather-related disasters all over the United States.
In November, the 2020 Atlantic hurricane season set a new record for the number of tropical and subtropical storms in a single year. The 2020 wildfire season in the western United States burned millions of acres. In the Midwest, an August derecho brought torrential rain, hail, tornadoes, and sustained wind speeds over 100 miles per hour in Iowa and Illinois.
The severe weather events of 2020 are part of a larger trend — the frequency of extreme weather conditions in the U.S. is on the rise as global climate change accelerates. According to the CDC, the effects of climate change are likely to include more variable weather, heat waves, heavy precipitation events, flooding, droughts, more intense storms such as hurricanes, sea-level rise, and air pollution.
Since the 1970s, the frequency of extreme weather conditions in the U.S. has risen
Stratos Brilakis / Shutterstock.com
The frequency of extreme weather conditions in the United States has risen steadily since the 1970s, as demonstrated by the U.S. Climate Extremes Index (CEI). The CEI was developed to quantify observed changes in climate within the contiguous United States. The index includes temperature, precipitation, drought severity, and hurricane/tropical storm intensity. Based on these measures, extreme weather conditions have trended upward for nearly half a century, and four of the five highest years for this measure occurred within the last decade.
Extreme weather is not just more common — it’s also bringing even greater financial impacts to the areas affected through property damage, business interruptions, and other economic losses. Through the first nine months of 2020, 16 weather and climate disasters produced losses exceeding $1 billion, according to NOAA’s National Centers for Environmental Information (NCEI). This year is the sixth consecutive year with 10 or more billion-dollar disasters, an unprecedented milestone.
As both the intensity and number of severe weather events increase, so do the total costs of these disasters for the U.S. The same data from NCEI shows a dramatic increase in five-year average costs associated with severe weather events over the past decade, from around $30 billion in 2010 to over $100 billion in 2020.
Not all states experience severe weather in quite the same way, and some are much more susceptible to highly variable weather conditions. To identify which states have the most extreme weather, researchers at Filterbuy created a composite score for each state. Using data from the National Centers for Environmental Information, researchers created an extreme weather score based on each state’s all-time maximum and minimum temperatures, maximum 24-hour precipitation, maximum 24-hour snowfall, and number of annual tornadoes per 10,000 square miles.
Here are the states with the most extreme weather.
Annual tornadoes per 10,000 square miles: 0.7 per 10,000 square miles
Methodology
NicoElNino / Shutterstock.com
To identify the states with the most extreme weather, researchers at Filterbuy created a composite score based on the following factors weighted equally:
All-time maximum temperature
All-time minimum temperature
All-time greatest 24-hour precipitation
All-time maximum 24-hour snowfall
Annual tornadoes per 10,000 square miles
All of the data used in this analysis is from the National Centers for Environmental Information State Climate Extremes Committee Records.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
