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What Homebuyers Can Learn From the Most Successful Investors

By Nathan Hamilton - Apr 10, 2017 at 8:23PM

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Here's what the top investors have in common.

Stock investors know that the markets are a roller coaster that is fueled by both short-term emotions and true business fundamentals. The investor who is most aware of the market's driving forces may be the richest when retirement approaches.

With this in mind, Motley Fool analysts Kristine Harjes and Nathan Hamilton talk more about the traits of successful investors and what homebuyers can learn from them.

Kristine Harjes: Today, we are here to talk about what homebuyers can learn from the most successful investors.

Nathan Hamilton: Yeah and there's a lot that any home buyer can really learn from investors, because it's somewhat of an investment in your financial future. Getting more on a deeper level, just looking at it psychologically speaking, and what's happening with rates right now, and you look at it and say, "OK, there's something called anchoring." If you look at mortgage rates in 2016, they were below 4%. So, if you're looking right now, with the Fed having raised rates, with mortgage rates looking to increase even further in 2017, they're now around 4.3%. So, a home buyer looking and saying, "Okay, I'm going to refinance, or I'm going to buy a home and say oh man, I missed out on the opportunity." That happens with investing. But some of the most successful investors have actually bought at higher highs, or having so much anchored on the previous price and saying, "I missed out because..."

When you look at investing, the winners tend to keep on winning. For mortgages, you look at it, OK, let's put it in context. Rates are higher than where they were a few months ago. Maybe you missed out on the opportunity. But if you look at the bigger picture, rates are still historically low.

Harjes: Right. It's not too late. This is an extremely common concept in behavioral psychology. You see it all the time in marketing. You know, you go to the car salesmen and they pitch you one price, and that way, when they bring it down a little bit, you're going, "Oh..."

Hamilton: You're anchored on it.

Harjes: Exactly. So, this is just a psychological concept that it's important to be aware of, really, in all facets of your financial life, and especially when you're looking at a mortgage, since that is likely going to be the biggest financial decision that you ever make.

Hamilton: If you look at it, OK, maybe you're buying a new home or refinancing. Just looking at what could happen in 2017, the Fed has already signaled -- on top of two rate increases in the past few months -- that there could be possibly two more in 2017. So, the opportunity to refinance to get a home at a cheaper cost, there certainly are those opportunities right now, which it may make sense for some people.

Harjes: So, if you are one of those people, take a cue from the greatest investors in the world, and don't be afraid of jumping in, even if after you might have missed the very lowest rate. It's still not too late.

Hamilton: Yep.

Harjes: If you're looking for more information about mortgages, head to fool.com/mortgages to get started finding a low rate including access to highly rated lenders and our free guide, Five Tips to Increase Your Credit Score Over 800.

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