If you've ever been in the market for a home, you can relate - You walk into the "perfect" home, and you can't believe it's still on the market. The family loves it, you love it, the location is perfect, and the price tag is...well, a "little more than we wanted to spend."
By now you're drooling over the home, the family has emotionally committed, and the sudden pressure to make the numbers work begins to overtake you. The realtor mentions "alternative financing options" that are sure to get you into the home and keep the payments affordable. In a few hours on a Sunday afternoon, you've gone from financially responsible to being ready and willing to do almost anything to get this perfect house!
Never make a permanent decision based on a temporary emotion! Remember this on every outing with your realtor! When you come across a home that seemingly fits all your wants and needs but breaks the budget, the temptation to get way too creative in your financing can overtake you.
Always know your boundaries before even looking at homes! Nothing is more frustrating than making a quick decision on something as large as a home, only to realize you've just traded your life for a house. It happens every day when people choose to put emotion above sound financial principles. Remember that once you take out a mortgage, the payments NEVER drop unless you pay the house off in full or refinance later. Additionally, while using financing tools such as an Adjustable Rate Mortgage (ARM) or balloon mortgage may give you lower payments, they also translate into little or no equity for 5-10 years.
The best way to combat buyer's remorse is to avoid it. Always have a financial plan in every situation. This plan should tell you how to behave with money instead of letting your emotions control your choices.
One suggestion is to take fixed-rate, conventional mortgages, specifically a 15-year fixed. It is recommended to put a minimum of 10% down, preferably 20% to avoid paying Private Mortgage Insurance (PMI). Your monthly payments should never exceed 25% of your net (take home) pay each month.
A sound plan like this:
Sets boundaries for your next home purchase before you even start looking
Builds equity
Saves for emergencies
Sets you free from being a slave to your mortgage
Nothing will ruin a new house faster than paying too much for it. Set your boundaries early, and you'll enjoy your new home for many years to come.
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