I’m sure we all have something in our past that we regret. I envy those lucky souls whose mistakes were constricted to a particular time in their lives with virtually no subsequent effects. Unfortunately, my greatest regrettable decision did not remain frozen in my past. Instead, it snowballed into a series of financial and emotional hardships.
To be clear, my husband and I are no financial planners. We are more impulsive, live-for-the-moment kind of people. Several years back, we never thought that an innocent Sunday outing to look at new homes would spiral into several years of disappointment. Honestly, we never expected to be approved for the $250,000 newly built home due to our debt-to-income ratio and lack of savings. We were wrong. Within days the mortgage company sent us an approval letter with a gamut of incentives to close the deal. The $1,000 earnest money held for deposit was returned to us at closing as an incentive in addition to first-time home buyer perks.
After the excitement of our beautiful new home lessened, we realized the mounting responsibilities and expenses that we faced. We had to furnish the 2,600 square foot home, which included a cost of $600 for window coverings, $6,500 in furniture and another $2,500 for an air conditioner. Additionally, the HOA imposed a short-time frame on finishing our landscaping, which added an additional expense of $6,000. We also had to purchase lawn equipment to maintain the yard costing approximately $500 for the basics. So with no savings and that high debt-to-income ratio I mentioned, we had to take out some high interest loans to meet all of the demands of our new home.
Part of being able to afford the exorbitant expenses, we had to refinance. The mortgage company we dealt with guided us toward an ARM loan, allowing us to believe that we could easily refinance to a fixed-rate mortgage before the interest rate could balloon. Another brilliant gift from this refinance experience included a second mortgage.
Flash forward several years when the interest rate climbed. In our blatantly naïve mindset we were actually shocked when we were denied the ability to refinance by the mortgage company. We were stuck with two high-cost mortgage payments in addition to multiple high-interest loans. You can probably guess what proceeded. Unable to negotiate with the bank or short sale the home, we became yet one more incident of foreclosure in our emptying neighborhood.
As a result of this devastating and shameful experience, we have learned to take time to acknowledge all potential consequences of major decisions that we are faced with. Looking back, I think my husband would agree that a hike or a pleasant lunch out would have been a far less costly option that Sunday afternoon all those years ago.