10 Brutally Honest Truths About Buying a House You Can’t Afford To Ignore

Avoid these common pitfalls first-time buyers fall for.
Updated April 9, 2024
Fact checked
couple moving in

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Buying a house is one of the biggest financial decisions you can make. It requires significant cash upfront and usually includes signing up for 15 or 30 years of monthly payments before you own the house outright. 

But it’s also often seen as one of the best ways to build long-term wealth. Before shopping for your dream home, be sure you understand the financial aspects so you’ll feel confident that purchasing the property is the right decision. 

That can make the difference between feeling comfortable in your new home and feeling underwater.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today”
  • Create your account (important!) by answering a few simple questions
  • Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

You may not be able to afford what you want

M Moller/peopleimages.com/Adobe mature couple research at home

There’s a difference between what the bank tells you you can afford and what you can actually afford month-to-month.

Sit down and create a housing budget detailing all the costs you’ll pay, including property taxes, utilities, homeowners association fees, maintenance, insurance, and other regular expenses. 

Then, work backward from there to decide what’s a realistic monthly expense.

You should improve your credit score

Song_about_summer/Adobe woman sitting in front of laptop at table reviewing documents in hand

Your mortgage lender will look at your credit score and report to determine what you can afford and approve you for a home loan, so make sure your credit score is top-notch.

You can do that by paying your credit card and bills on time and maintaining a maximum debt-to-income ratio of 43%. You can get a free credit report from Equifax, Experian, and TransUnion once a year.

You need to pay down your debt

Vitalii Vodolazskyi/Adobe note with words pay off debt

Part of a bank’s calculation for how much money it will lend you involves your debt-to-income ratio. Before you go house hunting, pay down as much debt as possible.

Add up car payments, student loans, credit card debt, and any other monthly debt commitments you may have. Take on extra work if you’re looking for ways to get out of debt.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.1

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

Preapproval can tip the scales

fizkes/Adobe happy african american guy received banking loan approval

Before your Zillow scrolling turns into making an offer, you will want to have a mortgage preapproval from a bank or credit union. 

When you go through the preapproval process, the lender will verify your income and employment, check your credit report, and review your financial health. 

The lender will then give you a letter spelling out the amount and type of mortgage you can get. When you find the home you want, you can act quickly in this competitive market to make a deal.

You may pay PMI with a lower down payment

RyanAusty/Adobe house signers signing signature loan

While programs exist to help first-time homebuyers who may not have the cash on hand for a 20% down payment, there are still downsides to making a smaller down payment. 

If you put down less than 20% of the home price, you may have to pay private mortgage insurance (PMI).

This will be in place until you reach 78% to 80% equity in the home, which you would have had with the 20% down payment.

Closing costs aren’t cheap

itchaznong/Adobe agents giving house keys to customer

The down payment isn’t the only cost you’ll pay on closing day. Closing costs can also run up your bill that day, thanks to title insurance, property taxes, and other fees.

Expect to pay 2% to 6% in addition to the down payment. It's possible to include closing costs in your loan, or you may want to take advantage of first-time homebuyer programs that assist with these costs.

You need extra money beyond the down payment

Tongpool/Adobe carpenter concentrates on ruler drawing

You may want to pour every penny into the down payment, but it’s important to have a savings account specifically for repairs and expenses that may happen after you’ve moved in.

From a kitchen appliance that breaks on move-in day to an HVAC that gives out before its time, you’ll be glad to have a rainy-day maintenance fund from day one.

You need to do your loan research

mrmohock/Adobe businesswoman using tablet

Beyond the fun research, like looking at neighborhoods and deciding if you prefer a fixer-upper or a new build, you also need to do your financial research.

Banks, credit unions, or mortgage lenders may have different rates, types of mortgages, and other terms. It’s up to you to determine which mortgage will be the best for you. 

Remember, this loan may be with you for 30 years and could impact your finances.

A backup lender can be a wise decision

insta_photos/Adobe manager sitting at desk

After all the excitement leading up to closing day, the last thing you want is for the loan to fall apart in the final hours. That’s why some experts recommend having a backup lender on standby.

Get a preapproval with that lender so that if you need to lean on them and switch midway through the process, you’re already prepared to keep things moving.

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!2

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

Property isn’t a retirement plan

bernardbodo/Adobe senior couple sitting at table calculating bills using calculator

You may be watching the property values in your neighborhood tick up, and you’re thinking that investing in a piece of real estate would be a surefire way to build wealth for your retirement.

That can be true, but it’s also not a liquid asset; to tap into that value, you have to sell the house. Is that a contingency you want in place for retirement?

Bottom line

ldprod/Adobe couple meeting real estate agent

In addition to signs of financial fitness like saving money in investments and a healthy emergency fund, there are other economic realities to face when buying a house. It’s a huge commitment and one that will make a dent in your cash on hand.

But it can also be a way to build long-term wealth. Using first-time homebuyer programs and creative ways to pay your mortgage, the investment can be worth it if you go in with open eyes.

Choice Home Warranty Benefits

  • First month free
  • Protection for unexpected expense
  • 24/7 claims hotline
  • Network of over 15,000 technicians

Author Details

Heather Bien Heather Bien is a writer covering personal finance and budgeting and how those relate to life, travel, entertaining, and more. With bylines that include The Spruce, Apartment Therapy, and mindbodygreen, she's covered everything from tax tips for freelancers to budgeting hacks to how to get the highest ROI out of your home renovations.

Want to learn how to make an extra $200?

Get proven ways to earn extra cash from your phone, computer, & more with Extra.

You will receive emails from FinanceBuzz.com. Unsubscribe at any time. Privacy Policy

  • Vetted side hustles
  • Exclusive offers to save money daily
  • Expert tips to help manage and escape debt