After working in real estate for 20 years, I’ve noticed a number of common financial mistakes that home buyers make that often result in stress and unhappiness down the road.

Here are the Top Five.

We’re often told that making a home buying budget is a key step before buying a home, but the way most buyers approach such budgets actually leads us to make very bad real estate decisions - without us even realizing it.

There is something very wrong about how we buy homes in North America. Even though banks ask buyers questions about their income and debt levels in order to determine how big a mortgage they can afford and many home buyers create home buying budgets, surveys have found that once a buyer has purchased and moved in, virtually all feel like they spent too much on their home.

When buyers start their home search, they typically start by developing a home buying budget which, in theory, tells them what they should be spending on a home.  

The big problem with this approach, which I see most home buyers making, is that their budgets are not a reflection of who they actually are and how they actually live, they’re a reflection of who they think they should be financially.

Deciding whether to rent or buy a home is one of the biggest decisions many of us will have to make in our lives -- though many of us don’t realize just how big this decision is.  

Whether you have a preference towards renting or owning or are just unsure about which option is best for you, I hope these five questions will help you think through this big decision.

When we start thinking about whether or not we want to buy a home, many of us turn to online rent versus buy calculators to help us figure out what makes more sense financially - renting or buying a home.

There are two main problems with these types of calculators.

If you ask a random group of people whether real estate is a good investment, you’ll find that the majority will say: “Yes, real estate is a good investment.”

Setting aside the question of when real estate is a good investment -- and when it might not be -- is the more important question of why so many people simply assume it is. This automatic belief puts down our guard and results in very lazy and bad decisions about real estate.

One of the things I often hear working in real estate is that "renting is a waste of money", most often from real estate agents and parents trying to get their kids to buy a house.

But how true are these statements?

Is renting always a waste of money?

To paraphrase the Nobel prize winning economist Robert Shiller: Bubbles are situations in which just hearing stories of friends and family benefitting from home prices going up, attracts more people to buy through a combination of envy and gambler’s excitement.

To measure this, Shiller and his long time collaborator Karl Case sent out surveys to buyers and sellers in a number of US cities and identified a number of red flag responses that are indicative of a housing bubble.  

What are some of these red flags?

Many buyers turn to their parents for advice before buying a home for a number of reasons.

First, many of them have bought a house before even if it’s been a long time , so we believe they can offer valuable insights based on their own personal experiences.

Second, we have an underlying trust that our parents are looking after our best interests.

So what could go wrong?