Loan officers say this is a "major red flag": 77% of recent home buyers went over their budget when buying their new home, with 10% saying they went a whopping $80,000 or more above what they wanted to spend.
The data are from a recent ServiceLink survey of more than 1,500 U.S. residents who bought a home in the past two years.
A total of 77% of buyers said they went over budget, while only 21% said they didn't. The most common amounts over budget were $10K to $19,999 and $20K to $29,999, with 11% of survey respondents saying that's how much they overspent.
It's no surprise that loan officers called this "a major red flag" in the survey, and rightly so. Going over budget makes for a bigger monthly mortgage payment, which can have all kinds of repercussions on your personal finances:
- Cash flow stress -- i.e., less money available for other necessities, not to mention discretionary spending
- Home emergencies -- less money available for am HVAC breakdown, roof repair, and other unexpected expenses
- Higher debt risk -- it can be harder to pay off credit cards, student loans, and other obligations
You may have heard of the saying, "house poor." This is when someone owns a nice house, but has little money left over for other essentials and priorities. It can happen when you spend more than what your budget suggests you should spend.
As you might expect, younger buyers are more likely to say they spent more than their original budget, while baby boomers were least likely -- 53% said they didn't go over budget.
Quick Piece of Advice
Most of the real estate agents and lenders I know would never encourage their clients to spend more than they can afford. I certainly wouldn't!! But if your agent and/or lender are doing that, you have every right to take a step back, slow down, and focus on the decision that's best for you over the long haul.
And if you don't have an agent, but need someone to listen to your concerns about the buying process, reach out anytime. I'm happy to help, and I can also connect you with a few great loan officers who, like me, won't pressure you into buying before you're ready, buying more home than you can afford, etc.
-Cari
