3 Signs That Dream Home Could Actually Be Your Worst Nightmare

Owning a home is the American Dream. And when you start to buy a house and find your dream property, you may end up feeling as if that dream has come true. And hopefully, it has.

Unfortunately, not every real estate sale works out as well as the buyer was hoping it would. In fact, in some situations, the purchase of a dream home could turn into a major financial and personal disaster. You don't want that to happen to you, so watch out for these three signs that the home you've been dreaming about could turn into a huge nightmare.

1. You're committing too much of your income to payments

One of the single biggest signs that your home purchase is going to be a huge mistake is if you are committing too much of your monthly income to covering the costs.

Mortgage lenders sometimes allow you to devote up to 50% of your total income to debt, including your housing costs and other payments. But, doing so can be a huge mistake. In fact, ideally you'll want no more than 28% of your income to go to your property taxes, mortgage, homeowners insurance, and HOA fees. And you want no more than 36% of your total income to go debt payoff including your home loan.

If you have too much money going to cover your housing costs and other debts, you may not have the flexibility you need to save for retirement or big purchases, or to make lifestyle changes like switching jobs. You don't want to be trapped for 30 years by home payments that are really hard to afford.

2. You don't understand your mortgage

Not understanding your mortgage is another major red flag. You should have a clear idea of how much your upfront closing costs will be, what fees you'll pay, what your monthly payments will be, whether your payments could change over time, and how much your total costs will be over the life of the loan. You should also know if you have any prepayment penalties you'll get stuck with if you decide to pay off your mortgage ahead of schedule. Your mortgage lender is required to provide you with this information, so be sure you read and understand it -- and ask questions if you don't.

If you end up signing up for a mortgage with an adjustable rate and don't know how high the rate could go, you could find yourself with a payment that's not affordable. For most people, the best option is a 30-year fixed-rate mortgage that has no prepayment penalties. That way, there will be no surprises and you can confirm your payment will be affordable for the life of the loan.

3. You have a long and unpleasant commute

Finally, the last major red flag that you could end up unhappy in your dream home is if you have a long commute. The average American has a 28-minute commute to and from work, but unfortunately a long commute has been tied to a decrease in overall well-being. Adding 20 minutes to your daily commute is also the equivalent of taking around a 19% annual pay cut.

If you're committing to buy a home that's very far from work or loved ones, think very seriously about how this will impact your free time and stress levels, as you may quickly come to regret your choice.

If you spot any of these three signs that your home purchase could turn into a nightmare, you may want to pause before moving forward, because there's a very big chance you could end up with regrets. It's worth looking at other loan options and other homes out there that would be more within your price range and that would allow you to avoid the stress of a long drive every day for years to come.