If you’re planning to buy a house, you may want to leave a little wiggle room in your budget. More than a third of homebuyers are spending thousands of dollars more than they expected in order to land the house of their dreams, a new survey suggests.
Owners.com, a real estate brokerage service, surveyed 1,800 consumers who had bought a house in the last four years to get their views on the homebuying process. While saving for a down payment and finding the best lender may cause headaches for some, the most difficult aspect of buying a house for the largest percentage of respondents (49%) was finding the ideal property.
The average amount buyers went over budget: $20,000
The quest for the right home has been so challenging that many homebuyers were willing to go over budget once they found what they were looking for. More than one-third (38%) of recent buyers went over budget by an average of $20,000 to buy their ideal property.
The survey also suggests that this year’s housing market is more competitive for homebuyers than last year’s. In 2018, only 32% of homebuyers went over budget and spent an average of $16,510 more than expected.
Gen Xers were willing to stretch their budgets the most to get into their ideal homes, with 39% going over budget by an average of $35,000. Baby boomers were next, with 27% willing to exceed their budgets by an average of $25,000.
While a higher percentage of millennials went over budget than other generations, they did so by a lower margin than their older counterparts. The survey found that 46% of millennials exceeded their budgets, but they only spent on average of $12,000 more than they planned to spend.
One reason millennials aren’t going as far over budget as other generations could be because they have less money saved up to put toward buying a house. A higher percentage of millennials (21%) said saving for their house purchase was the most difficult part of the homebuying process compared with 15% of Gen Xers and 6% of boomers.
The survey also suggests millennials may be less picky than their older counterparts, perhaps because they believe they have time to move up to their dream house. Only 41% of millennials found it most challenging to find the right house compared with 52% of Gen Xers and 56% of boomers.
When determining how much house you can afford, consider whether you’re buying in a seller’s market. If you are, there will likely be more competition among homebuyers for a particular house so you may have to spend more to get a seller to consider your offer. As you come up with the funds you’ll need to purchase your home, don’t forget to look for and take advantage of homebuying programs that may provide assistance with down payment and closing costs, particularly if you are a first-time homebuyer.