Skip to main content
_FB_2018-Icons-finalized-cleaned-up_new_FB_2018-Icons-finalized-cleaned-up_newGroup 9
Back
Scroll to top

How to Avoid Paying Too Much for a House

Homebuying 4 min read
Miniature green house on coins base

Ready to talk to an expert?

Imagine you just crossed the threshold of your dream home. It has a spacious two-car garage, bedrooms for each of your kids, and way more counter space than your current rental.

There’s only one problem: price. It seems a bit on the high side, even for a home this perfect—but is it?

If you ask Cara Pierce, a real estate broker with Fonville Morisey in North Carolina’s Triangle region, the best way to answer that question is through due diligence. “Buyers should consider recent home sales data for the area they want to live,” Pierce says. “In many parts of our local market, overpricing is the primary reason homes are still for sale after 30 to 60 days.”

But whether a home’s price complements local sales data only addresses part of the pricing issue. You should also get to know the neighborhood and be willing to ask very specific questions about a property before making a commitment.

Feeling the neighborhood vibe

If a neighborhood isn’t a good fit for you and your family, the home’s price will always be too high. Remember, you’re not just buying the home. You’re paying for the location, too.

“Buyers should visit a house on at least 4 different occasions and at different times of day before deciding to buy,” says Fidel Davila, a real estate agent at Ed Price & Associates in High Point, North Carolina. “You should get a feel for the dynamics of the neighborhood.”

Does the quality of the surrounding area justify a home’s price? Access to good schools and recreational facilities can increase property values over time just as traffic noise and crime can lower them.

To the extent possible, try to determine whether a community will be as desirable 10 years from now as it is today. If you aren’t confident that the value of your investment will rise substantially over time, a seemingly high-priced home might be exactly that: too expensive.

The thinking is similar when it comes to a home’s overall condition. “Buyers should ask lots of questions about a house’s condition,” says Pierce. “How old is the roof? Will you need to replace it soon? The same goes for heating and air systems, windows, and exterior painting. You’ve got to scrutinize every potential expense when evaluating a home’s list price.”

Buyers in North Carolina should also consider how new construction influences a home’s price tag. If you’re set on buying a brand new house, be aware that you’re probably paying extra for the new materials used to build it. According to Pierce, “High construction material costs, high land prices, and high consumer demand are making new homes more expensive in the current market.”

If you can find an appealing older home in the same area as the new one that’s tempting you, you might end up with a better deal.

Preparing your finances

One thing many homebuyers forget is that a large portion of a home’s price lies in the long-term cost of the mortgage. If you only have an average credit score and haven’t saved much for a down payment, you might end up paying more than you should for a house—if you’re approved for a loan at all.

Consider how your repayment history will affect your interest rate. If you’ve missed some payments or carry credit card debt, focus on repairing your credit before buying a home.

As Pierce explains, “Good credit, a history of on-time payments, and being gainfully employed will make you a good lending candidate.” And a better lending candidate will get a better rate.

Having a sizable down payment comes in handy, too. Putting down 20% means you won’t have to purchase private mortgage insurance, lowering a home’s overall costs even further.

You could also qualify for a lower interest rate and begin your homeownership journey with substantial equity. In the end, you pay thousands of dollars less over the course of a 30-year mortgage.

In any case, never buy a home on impulse or just because you love the property features. North Carolina buyers should note that only sellers pay real estate commissions to brokers, so connecting with a licensed broker is a great way to obtain realistic guidance about a home’s price relative to its market value. A broker will also represent you throughout the buying process, free of charge.

“If you’re looking at a house listed at $150K but everything else in the neighborhood sells for around $125K, it’s time to start asking questions,” says Davila. “Otherwise, you could end up paying too much.”

Ready to talk to an expert?

Share:
First Bank’s Good To Know Logo
Sign up for our newsletter and be the first to know about new tips, insights, and products from First Bank.
First Bank may use this email address to contact you about products, services, and promotions.

You may be interested in...

First Time Buyer? For most of us, buying a home is the largest purchase we’ll ever make. If you are a first-time homebuyer, you may be asking questions like, “What is a first home mortgage?” What is a First Home Mortgage? A first home mortgage is a loan you will use to purchase your first home. These loans can come in a variety of forms, from conventional home loans to FHA loans for first-time homebuyers. First Bank offers the following mortgage loans* for first-time homebuyers: Conventional Loans Government loans Professional loans Construction loans Jumbo loans In addition to providing a selection of mortgage opportunities, First Bank also offers a wealth of information about what a first home mortgage is and what can be expected when shopping for your first home. Tips for Buying Your First Home Knowing what a first home mortgage is can go a long way toward easing the process of turning that key for the very first time. U.S. News and World Report highlighted some of the most common mistakes first-time home buyers make and how you can avoid them. Among them were: Searching for your dream home before being pre-qualified for a loan. The reality of what a first home mortgage is can be vastly different than what you were hoping for. Take the time to seek out a mortgage loan specialist at a place like First Bank so you can find out what you can afford and what your expected monthly expenses will be. Thinking short-term. First-time buyers are often so focused on moving in that they don’t ever consider moving out. Chances are, you’ll one day be ready to move into another home as you start a family or change jobs. Think about the factors that will affect how you’ll be able to sell your home in five years such as economic growth in the area or neighborhood expansion. Making an emotional decision. It’s important to sign a mortgage paper with your head and not with your heart. You may be overlooking some serious red flags such as expensive repairs, structural damage, or mold simply because you’re in love with the open layout. Find a First Bank Near You Ready to get started? Check out First Bank’s guide 3 min read
FHA Loans vs. Conventional Loans: How to Tell the Difference Overwhelmed with the prospect of buying a home? FHA loans and conventional loans are likely two sources of financing that you’ve considered. Let First Bank help you understand these options and come to a conclusion about which best suits your needs and budget. After all, choosing the right loan is key for timely, affordable payments. Choose the Right Loan with First Bank If you’re a first-time homebuyer or interested in purchasing your second home, there are different qualifications for each loan you should consider: FHA loans—The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by approved lenders. Single and multi-family homes in the United States (and U.S. territories) can qualify. First Bank can help put you on the right track to securing one of these loans. The advantages of an FHA loan can be: Owing a lesser down payment, as low as 3.5%. Enjoying quicker eligibility following a major credit issue such as bankruptcy or foreclosure. Allowing a co-applicant to help you get the loan, even if you don’t live in the same household. Conventional Loans—A non-government insured loan that can be used with a second home purchase or an investment. Unlike FHA loans, conventional loans can require a higher credit score (often a minimum of 640), but they can have some major advantages for you. Conventional loans can allow: A risk-based premium, unlike FHA where one set premium rate is required from everybody, MI if applicable. Your monthly payments to be lower, even if you have a higher interest rate. Your loan to cover a higher loan amount. You to cover different types of loans like, investment or second home (FHA doesn’t do those types). When considering an FHA loan versus a conventional loan, keep in mind that conventional loans are not affiliated or insured with the government like FHA loans. Additionally, an FHA requires mortgage insurance and conventional loans do not, unless the LTV exceeds 80%. There is an upfront MI premium (1.75%) that is required on FHA loans that is not required on Conventional loans. For a more detailed look at FHA loans versus conventional loans, or assistance with applying, call or meet with your local mortgage loan professionals. *Loans subject to credit approval. 3 min read
First Bank logo
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognizing you when you return to our website and helping our team to understand which sections of the website are the most popular and useful.