Nothing is more emotional and more highly charged than purchasing the place where you are going to raise your family, put down roots in the community, become involved in schools and other civic organizations. And to make that decision without having an advocate is nothing short of foolhardy. It is in your best interests to be adequately represented in this, the most important of all financial investments for your family’s well being. Although the home buying process varies with each person according to their specific needs, most transactions follow a general path.

To avoid the stress of purchasing a new home, secure all the information you can about a property, make informed intelligent decisions and avoid these 10 Buyer’s Mistakes:

6. More concerned with others’ opinions instead of trusting their gut.

Because buying a house can certainly be emotional, many buyers rely on the opinion of others instead of their own.  Therefore, it is important that you be armed with a practical checklist. Being prepared before you preview homes with your Realtor will help keep your search for the perfect house on track. Begin your home buyer checklist by writing down the minimum requirements you expect in a new home. You can also add some of the wish list items you would like to have but are not absolute necessities. Once you review potential homes against your list, trust your gut. Remember, this is going to be your home.

7. Choose the wrong agent to represent them.

It’s just as important to shop around for the right real estate agent as it is to shop for the right home. A wrong person leading you through this extensive process can lead to hassles and headaches. To find the right real estate agent, get referrals from family and friends. Do research online. Ask your potential real estate agents lots of questions! They should seem willing and able to answer any and all questions you may have. The more you ask, the more educated you can be to make the right decisions.

8. Think that by dealing with the listing agent they will get a better deal.

Buying a home without a real estate agent doesn’t necessarily mean you’ll save a bundle.

Many home buyers believe they can negotiate a discount off the price of the home they want to purchase if they forgo the services of a real estate agent and instead contact the seller’s realty agent or the seller directly on their own. This strategy may be successful on some occasions; however, it could also flop and potentially alienate both the seller’s agent and the seller. In some cases, the seller’s agent will not talk to you without the representation of a buyer’s agent.

9. They try to time the market or interest rates.

Now is a good time to buy – prices are down,  interest rates are low, there are lots of homes to choose from and you can bargain with sellers. If you try to wait and time the market, you are likely to lose out. Just as no one can accurately predict the peaks and valleys of the stock market, the same holds true for housing. Most likely, your guess on market timing would be wrong. But if you choose to buy now, you will not only be in the driver’s seat during the buying process, you will also reap the gains of price appreciation once you become a home owner.

10. More focused on finding a good deal than finding a good house.

A low price is not always a good value. In fact, it may be no bargain at all if the maintenance costs are prohibitive. Find out when the house was last painted and re-roofed. Ask the seller to provide copies of utility bills so you can accurately budget the ongoing cost of your home purchase. Home inspections may reveal more extensive repair work requiring greater expenditure than you anticipate. Also, if the house has a large yard, trees, a swimming pool or a spa, and you don’t have the time or expertise to do pool cleaning or yard work, find out what the current owner pays to maintain those amenities.

Nothing is more emotional and more highly charged than purchasing the place where you are going to raise your family, put down roots in the community, become involved in schools and other civic organizations. And to make that decision without having an advocate is nothing short of foolhardy. It is in your best interests to be adequately represented in this, the most important of all financial investments for your family’s well being. Although the home buying process varies with each person according to their specific needs, most transactions follow a general path.

To avoid the stress of purchasing a new home, secure all the information you can about a property, make informed intelligent decisions and avoid these 10 Buyer’s Mistakes:

1. They get penny wise and pound foolish when it comes time to make an offer.

If you are certain that you have found your dream home, don’t place an unreasonably low offer, especially if there is buyer competition. If the home truly is as dream worthy as you consider it to be, it is highly unlikely that you are the only interested buyer. So if the home is well within your budget, consider placing an offer that is towards the top of your budget in order to knock your real estate competition out of the ball park or risk losing the house.

2. They believe something better is around the corner.

Some buyers give into fears that prevent them from making a decision to purchase. These fears can manifest in different ways, one of which is “waiting for something better” to come along. These buyers will ultimately waste too much time and lose out on the opportunity to purchase quality homes. If you sit on the fence and wait, you could end up literally waiting for years. When you find the perfect home (which is only ever 85% perfect), make an offer to buy it.

3. They lack imagination when seeing home.

People shopping for a new house usually lack imagination. Generally, buyers only know what they see not the way it is going be. Some people might initially want a turn-key house, a house that is ready to be lived in, not a home where they will immediately have to begin painting and remodeling. Try to use your imagination and picture yourself and your belongings in homes you visit because you may be overlooking your dream home.

4. Focus on who is right or wrong vs. getting their home.

Imagine you found a house and decided on an offer.

The seller will often counter the best offers to see who’s willing to pay more. It’s easy to get embroiled in a “right and wrong” debate and keep countering offers. Don’t expect several rounds of these counters, however. This isn’t an auction, and you wont have unlimited opportunities to raise your bid. The seller will typically snatch the most attractive counter to their counter. If you haven’t made your best showing, you’ll lose out to someone who did. Right or wrong won’t matter here. You will not get your home.

5. Listen to water cooler talk instead of their trusted advisor.

Everybody is getting exposed to news from varied sources these days. The internet can be a powerful albeit unreliable source. Sadly, many bloggers, think that because they constantly preach about how prices are crumbling and everyone will lose all their money that somehow that makes them trustworthy, like, “See I’m telling you bad news so you can trust me.” Unfortunately, your friends and colleagues pass this information on as credible and it could cost you dearly. Trust your Realtor to give you accurate information and advice during the buying process.

Stay tuned for part 1 . . .

The original posting of this story by Report On Business spurred me to add my commentary, is italics throughout.

Over-exuberant Christmas shoppers only have months to get control of their overspending before higher interest rates risk further complicating their lives, credit counselling experts warn.

With Canadians swimming in debt, forecasts of higher interest rates midway through 2010 could push more people over the edge by hampering their ability to pay off expenses.

“It’s a huge concern,” says Laurie Campbell, executive director of the non-profit counselling service Credit Canada.

Those most at risk are homeowners who must renegotiate their mortgages. Higher rates would increase monthly payments, leaving less to pay other debt.

I don’t read mainstream media consistently, because of the melodramatic way they report things. In Mississauga, with the average house value being in the $360,000 range and a 20% equity, people would have an 80% mortgage, or a mortgage of $288,000. If rates rise 1% all in one fell swoop, the payment would go up by $155 a month. While that is no small chunk of change, it is an easily-manageable amount. That’s less than the cost of buying lunch every working day; it’s less than many spend at Tim Horton’s in a month; and it’s far less than the average person spends unnecessarily on discretionary stuff. Oh, sorry, my readers, I forgot, logic doesn’t trump lousy reporting and scare tactics in the media. My bad.

Spending by Canadian households averaged $71,360 last year, 2 per cent more than in 2007, with shelter representing about 20 per cent of the load.

The Bank of Canada has repeatedly warned of late that record household debt is the biggest risk facing the country’s financial system. Bank Governor Mark Carney said that up to 10 per cent of households could face difficulties in meeting monthly payments when interest rates rise to normal levels.

However, an estimated 40 per cent of mortgage holders with high debt payments could increase their flexibility by suspending accelerated pay-downs on principal.

Um, yeah, okay, I guess the writer has never tried to do that! It’s one thing to increase your principal payments – they love to let you do that. But, in a completely absurd twist of logic, they make you re-apply for a mortgage if you want to lessen the principal payments. Yeah, makes sense to me – when you take away the banks interest income, by paying your mortgage off faster, they greet you with open arms; give them the opportunity to make more interest income and they make you jump through so many hoops. Once again, my bad for thinking logic has any part of all this. No wonder it’s easier to buy a $75,000 car that you could drive to LA & sell for $45,000 than it is to buy a house that ain’t goin’ anywhere!

Of course, presuming you used a great mortgage broker to get your mortgage, and he/she advised you not to write the loan at the higher principal payments, you’ll be fine with this and can just stop making the extra principal payment.

High interest rates have a major effect on a person’s cash flow, said Paul Salewski of Ottawa-based financial, credit and debt counselling agency Doyle Salewski. A doubling of mortgage rates to eight per cent would, for example, increase monthly payments by nearly $500 for homeowners with a $200,000 mortgage.

Please, don’t be so insulting! Talk about fear-mongering!! First of all, does a single breathing person actually believe that they’ll double rates overnight? Does anyone believe that there won’t be massive media attention paid in advance? Your great mortgage broker will be completely on top of things and advising you when to move your mortgage from a Variable Rate to Closed Rate. I’m equally sure that they will have had a chat with you when arranging your mortgage about what the payments would be at higher rates.

“All of a sudden they’re maybe have to increase their payments or who knows what they have to do in order to get by,” he said.

Since it’s too late to avoid the commercialization of Christmas, credit counsellors suggest people look at strategies for dealing with their spending spree as soon as the holidays wind up.

Recommendations include tackling high-interest credit card debt first — obtain a line of credit or consolidation loan if possible, stick to a spending budget and try to amass an emergency fund.

Yeah, that’s the ticket – arrange a line of credit, which usually means it’s going to be tied to prime, and increase your exposure. No, the answer is to start right now on eliminating all that discretionary spending.

Whatever you do, don’t rack up more credit card charges as you develop a plan of action to tackle debt.

Ms. Campbell said there’s no need to have more than one or two charge cards. Paring the number of cards over time will also limit the ability to make foolish decisions.

Despite increased restrictions, she expects that more Canadians will turn to bankruptcy to address their financial problems in 2010. Among them will be high-income earners who have begun to seek credit counselling in greater numbers.

“I think it’s really important for people to understand not to panic,” Ms. Campbell said, adding that help from counsellors is available.

Mark says a huge weight has been lifted off his shoulders since he sought such help to address $10,000 of debt he had amassed following his divorce several years ago.

“I just didn’t know how to quite handle my new freedom,” he said in an interview.

His credit woes caused him mental anxiety, depression and loss of sleep.

The 56-year-old caretaker said his problems worsened when he turned to pay-day loans to accommodate his increased spending on cigarettes, alcohol and general living expenses.

Every two weeks he would pay $25 interest for each $100 borrowed at a store-front operation in Toronto.

“You get to a point where you have to borrow again to get yourself back to where you were,” said Mark, who didn’t want to be identified.

Consolidation of his debt and regular monthly payments should allow him to resolve his financial problems and re-establish his credit within two years.

“As long as I keep a handle on it, it’s OK.”

Sorry, I know that more and more people are facing financial difficulty these days, and a lot of it is brought on by their emotional approach to things. When I was active as a mortgage lender, I was amazed at how many people would have $100,000 in high-interest debt, and $200,000 in equity in their house. They wouldn’t dream of re-financing their house at 7% to pay off their 20% debt, because of the emotional attachment to owning their house free-&-clear. That’s plain crazy!

IF you have a VRM, you need to start now paying attention to all the talk about where interest rates are going. You need to hook up with a mortgage broker, NOT talk to your bank about things, and you need to consider locking in your mortgage NOW.

Sure, I’m pretty conservative when it comes to this, and haven’t taken the ride on the VRM-train.

If you need contact info for a great mortgage broker, just ask.

This article came from The Financial Post; I’ll comment on it throughout, in italics.

Think of Canada’s housing market as a ticking time bomb. Think of Finance Minister Jim Flaherty as the unlucky bomb disposal expert called in to deal with the problem.

Flaherty is moving slowly — oh, so slowly — to snip a wire here and there in an attempt to defuse the mess. Problem is, the ticking is getting louder by the minute.

This commentary seems somewhat melodramatic to me, from the perspective of someone working in the trenches of the real estate business.

If the bomb explodes, home prices could plunge. In the worst case, plunging prices could bring on an economic downfall such as the United States, Ireland and Spain suffered after their real estate markets collapsed.

All these people who insist on comparing the Canadian housing market to the US housing market are so misguided – they could not be more different whilst retaining some similarity.

But to make Flaherty’s challenge even more difficult, he still has to convince most people the bomb even exists. At the moment, he’s being cautious in how he describes the problem. He’s being even more cautious in how he deals with it. Perhaps too cautious.

The mere fact that he’s talking about it, and the mainstream media is giving it so much play, would seem to be enough.

Flaherty told Canwest News Service last week that he’s monitoring the real estate market and is ready to intervene if it reaches “irrational” levels. The Finance Minister says he may require homebuyers to put down higher down payments. He may also force them to amortize their mortgages over shorter periods.

No doubt these are excellent ideas. But Flaherty has already tried them.

Seems to me that I keep on reading words to the effect of ‘Where the housing market goes, so goes the national economy’. Who’s going to define ‘irrational levels’? Surely not a bunch of politicians who are watching the national debt grow while raking in untold tens of millions of dollars in lottery revenue each week? Sure, let’s make it harder for people to buy a house, yeah, makes sense to me. NOT!

In July 2008, he made his first tentative move to defuse the housing sector by requiring homebuyers to put down at least 5% of the purchase price of a home.

Actually, he didn’t do that at all. 100% Financing is alive and well and able to be done a number of legitimate ways – need to get 100% finance? Call me for details!

At the same time, Flaherty reduced the maximum amortization period on home mortgages to 35 years from the previous limit of 40 years.

BIG DEAL! Window dressing and nothing more!! Ask your local mortgage broker how many people took a 40-year amortization and you’ll find that few did and the ones who did were the ones the program was aimed at helping – young professionals graduating from school with massive debts and investors looking to turn an iffy ROI into positive cash flow.

His cautious strategy accomplished absolutely nothing. The Canadian Real Estate Association reported the resale price of an average Canadian home hit $337,231 in November, up a stunning 19% from a year earlier.

If a red-hot real estate market during the brutal recession of the past year doesn’t meet Flaherty’s definition of an “irrational” market, it’s difficult to know what would.

Might you want to stop and ask WHY the market has seen prices rise the way it has? Even the most uninformed of Realtors knows why – it’s the beauty of the laws of supply & demand at work. In case the reporter doesn’t know, the less of something there is available, the more it will cost. So the question becomes ‘Why are there less houses available?’ Ummm, perhaps because people are worried about their jobs? And so we have a government who supposedly knows that we are in a Recession and they’re trying to kill off one of the sectors that is doing well? Yeah, makes sense to me!

Yes, interest rates are historically low, but any rational homebuyer has to realize interest rates will inevitably rise. When that happens, many homeowners will face much larger mortgage payments.

Canadians appear unshaken by the risk of higher rates, perhaps because home prices have doubled over the past decade and many buyers assume more gains lie ahead.

If Mr. Flaherty wants some real information, he needs to talk with real estate agents who deal with consumers every day. Then, and probably only then, will he hear that Buyers are NOT going out and spending anywhere near to the max of what they could spend. He’d hear of the many conversations between Buyers and their agents, where the Buyers are figuring what their carrying costs would be in rates jumped by a couple of percent. But hey, that wouldn’t happen for 5 years anyway, right? Surely Mr. Flaherty doesn’t know what the economy will be like in 5 years?

It is difficult, though, to come up with a rational explanation of why home prices should climb from here.

Oh, really? If you look at average house prices across Canada, as a national average, you will see that the average price increase comes out to around 4% per year over the last 50 years. Sure, some years it goes up and some years it goes down, but the trend-line is 4% annual increase. Why is that bad?

Canada’s population growth has been nothing extraordinary. Wage increases have crawled. The supply of new homes has surged and the level of home ownership stands at a four-decade high. Meanwhile, Canadians are aging, which suggests the pace of household formation should be slowing down.

So why are homes still being bid higher? It seems to come down to the widespread conviction that a house is a great investment.

Oh really? Not what we real estate agents hear; we hear that buyers don’t want to enrich someone else, that they’ve got to live somewhere, not why not build their equity instead of someone else’s. Surely Mr. Flaherty is not naive enough to think that people buy a house expecting it to double in value every 3, 5, 8 years?

History suggests this is true only sporadically. Robert Shiller, the Yale economist who warned of both the dot-com bubble and the U.S. housing bubble, has accumulated a mountain of data to demonstrate that the price of a home in the United States over the past century has barely beaten the rate of inflation.

Piet Eichholtz, a professor of real estate finance at Maastricht University in the Netherlands, came to a similar conclusion when he studied real estate prices in an Amsterdam neighbourhood from 1628 to 1973. He found that home prices required 350 years to double in real terms.

If you assume home prices should rise in line with inflation, you come to a dire outlook for Canadian real estate. Taking figures from 1990, 1995 and 2000, and boosting them by inflation during the intervening years, suggests the national average home price should check in around $200,000 — a third less than the current figure.

More sophisticated calculations arrive at similar estimates. David Rosenberg, chief economist at the money manager Gluskin Sheff in Toronto, examined home prices in relation to personal incomes and residential rents. He concluded that prices are between 15% and 35% above levels that are consistent with fundamentals.

“If being 15% to 35% overvalued isn’t a bubble, then it’s the next closest thing,” he writes.

Yeah, yeah, yeah. You lot are missing out on one important factor here – the humanoid emotional

factor. What on earth does a Dutch study have to do with the Canadian housing market? Why on earth would you assume house prices should only rise in line with inflation?

So what can Flaherty do? He’s already missed the opportunity to defuse the real estate bomb at an early stage. He’s understandably reluctant to raise interest rates when the recovery is still tentative.

He should follow through on his vows to increase down payment requirements and shorten amortization periods. Most important, though, he should loudly caution Canadians on the dangers of taking on more mortgage debt when home prices seem unsustainably high. After all, when a bomb disposal expert can’t do anything else, he can at least warn people to run for cover.

Flaherty should let the markets do what the markets do! The Canadian lending industry is regulated well, and is sufficiently good at protecting itself, by having made it much more difficult to get a mortgage that we don’t need any more government intervention!

You government people want to do something, like maybe what you’re supposed to be doing, why don’t you worry about putting people TO work instead of trying to put them out of work!!!

Of course, this is just my opinion.

I received this email from Daryl Colin thru Facebook yesterday, and think it is valuable information for anyone considering a new mortgage.

Daryl Colin November 25 at 5:35pm

You may be attracted to a mortgage rate that’s 10 bps or more below the market, but that rate may signal a no-frills product that comes with significant limitations on what you can do within the contract terms.

No-frills mortgages are stripped-down to eliminate features that add costs. Typically, no-frills products are designed to appeal to purchasers who are highly cost-sensitive, such as those who might not qualify at higher rates, and first-time buyers with limited opportunities to make prepayments. No frills products are also suited to purchasers who want a re-advanceable mortgage with a low-rate fixed portion that they don’t plan to pre-pay, and for investors, for whom interest costs are deductible.

You generally give up the following:

• No frills is fully closed

This usually means you are committed to the full term of the mortgage. Restrictions to an early payout may be more than a traditional mortgage or have certain requirements that need to be met prior to doing so. Lenders may vary on their definition of fully closed so it’s important that the fine print is explained.

• Prepayment privileges are restricted

Most lenders offer at 10-20% annual prepayment privilege against your mortgage going directly against principle . A no frills product may not have this or offer a significantly reduced amount or in some cases have it eliminated.

• No top-up options

This means there may be restrictions if you decide to refinance or want to borrower more.. Additional penalties or fees may be charged.

• Quick closings/No pre-approvals and longer-than-average approval times

Your mortgage must close in a certain time period in order to qualify for the no frills (low rate) mortgage. In some cases you may not be able to have rate guarantee longer than 30 days.. It’s important to make sure you know the rate hold policy.

• Limited choice of lender from which you can transfer without legal fees

In today’s competitive market most lenders will absorb the legal fees to transfer a mortgage to their institution on the renewal date. Since no frill mortgages are set up with terms and conditions that are unique to the norm it may require additional legal work for the new lender to facilitate the transfer.

The bottom line: Mortgages differ from lender to lender so it’s important that you sit down with an accredited mortgage professional to understand all your options.