According to a survey by LendingTree, the majority of consumers would overshoot their budgets for the right home as both interest rates and the housing stock are at historic lows.
In tough competition, 64% of potential buyers said they would spend more than planned if they found the perfect home. A quarter of respondents said they were sticking to the budget and the remaining 11% weren't sure.
Increasing sales and demand continue to drive values. Median sales price hit an all-time high of $ 316,375 in the four weeks ending August 16 – an 11% annual increase and the biggest jump in over six years, Redfin said.
While breaking the bank for something out of the ordinary might not seem too unreasonable – especially given the tough conditions for buyers – it could be financially short-sighted and potentially lead to future mortgage problems.
"I urge home buyers to be very careful with their budget. Many people underestimate the cost of maintaining a home," said Tendayi Kapfidze, chief economist at LendingTree, in the report. "If you're financially overwhelmed and don't invest in maintenance, it can reduce the value of your home."
One of the biggest lessons from the housing crisis was how to make sure consumers don't stretch too thin. In a December 2018 interview, Stan Middleman, CEO of Freedom Mortgage, said, "The best mortgage is not a mortgage." He pointed out that the strongest buyers make purchases that they can afford, not what they can afford.
Finding a home within budget is currently the biggest stressor for consumers. 37% of potential buyers choose this as the worst part of the process. Finding a home in their search area due to low supply was the most stressful for 17%, and 16% said they are trying to sell their current home.
Additionally, 10% were most concerned about applying for a mortgage. However, that equates to 9% of white shoppers versus 16% of black and 18% of Hispanic shoppers – percentages that match mortgage denial rates depending on their race.