The Facts of Life

You can’t always get what you want. Whether you are looking to buy a home or refinancing your existing mortgage, you need to realize that compromises need to be made.

It’s easy to become over-selective when shopping for a home in a market that has a record high inventory of properties. It’s natural to think that you will be able to find a home that has every possible attribute you want. Unfortunately, that never happens and compromises need to be made or you will never be a homeowner. House hunting is a part time job and it comes with all the same stresses as working your regular job. The only difference is that “burnout” comes much quicker.

When deciding to refinance your current mortgage during what is now being called a “recession” by many, it’s easy to get greedy. When rates are drifting down, you continue to wait for even better rates to appear and you end up missing out on a good rate because you’re waiting for a great rate. The great rate doesn’t come and you miss the window of opportunity to refinance and save some money.

Being realistic with your housing needs or rate target is the prudent thing to do.

There are no free rides. In your house hunting, don’t feel rushed into making a purchase. You may be led to believe that you’re going to lose the deal if you don’t move quickly. Give yourself adequate time to completely analyse the purchase. Don’t take shortcuts such as forgoing an engineer’s inspection or making commitments without proper legal advise.

Don’t feel pressured when shopping for financing. If a rate quote seems too low or the monthly payments work out to be lower than you expected, look deeper into the details. Maybe the closing costs are inconsistent with other quotes; take the time to find out why. The majority of borrowers who find themselves in financial trouble got there because they jumped into a mortgage without thinking it through.

The most common error is looking at the initial monthly payment and nothing else. This is how people unknowingly get into an adjustable rate mortgage or end up with closing costs that are much higher than were expected. They heard only what they wanted to hear.

You can’t afford to win if you can’t afford to lose. There are no sure bets in life. Every decision we make can be good, bad or anything in between. People have entered into a contract to purchase a house or condo with the expectation that they could sell the property without having to close on it. They saw the potential profit in the transaction. Many ignored the potential loss if things didn’t work out as planned.

Any investment decision that you make needs to be based on realistic projections as well as your acknowledgement that things don’t always go as planned. The questions “how much money can I afford to lose” or “how long can I afford to wait” need to be addressed before entering into the investment. If you can’t afford to lose on the investment, you shouldn’t make the investment.

The only thing worse than a bad decision is no decision. If you never buy that house you wanted or never made that investment you liked, you can’t be wrong. Of course, you’ll never be in your dream house or make a profitable investment. By not making a decision you are stagnant, you will never improve yourself. By making a bad decision, you will take your losses but at the same time learn from the experience. This will make you better prepared in making the next decision.

Mistakes will be made. Accept that fact and move on. Make the best choices you can, based on the information you have at the time. The goal is simple; be right more times than you’re wrong. This yields you a comfortable life.

Learn from the mistakes that others make. We’ve all heard the expression “an education is expensive.” Whether we are paying for a formal education or paying the price of a bad decision there is an expense to be paid. However, if we watch what others are doing and try to understand what they did wrong, we can learn a lot without paying the price.

It’s easy to fall into the trap of following others blindly. Your neighbor makes money on a stock so you buy the same stock. Your neighbor loses money on an investment and you compliment yourself that you didn’t make the same mistake. You need to take the time to understand the reasoning behind each of these transactions. Was the stock purchase just a lucky guess? Why did the second investment go bad? Knowledge is power; it’s all around you. You just need to take the time and look out for it.

Don’t get caught in mob psychology. When real estate values were rising everyday, the push was to buy as soon as possible to avoid paying more for the same house at a later date. Now the general consensus is home prices are falling and waiting to buy is the best course of action. It’s great to be able to buy at the bottom of the market. Unfortunately, the only way to find the bottom is after it has passed. Remember, a house is primarily a place to live. The investment component is secondary. You need to buy when the time is right for you, based on your family needs, your proximity to work and schools, your financial situation, etc.

There is a great opportunity now for renters to become homeowners. Inventory of homes are high, interest rates are low. House prices have come down from their peak. If buying a home is a goal of yours do not let the fear of making a mistake or the gloom and doom of the news media decide for you. Take advantage of the market, move forward and don’t look back.

Purchasing a home is a long term investment and as such will ride the ups and downs of the marketplace. Your home provides shelter for your family over the years. It’s only when the time comes that you need to move on and sell your home will you see how profitable the investment component of the purchase decision was. If history is any guide, you will find that buying will prove to have been the right choice.