Time and time again, homebuyer wannabes state that the
reason they are still fence-sitting is that they don't want to end up in the
same trouble the last generation of homeowners did.
Well, there's a very slim chance of that happening, given
the changes in the market climate: Homes are at rock-bottom prices (not
sky-high), and mortgage guidelines are so conservative it is nearly impossible
to even find one of the zero-down, quick-to-adjust, stated-income mortgages of
yesteryear.
With that said, though, there is a handful of rules
today's homebuyers and homeowners can follow to dramatically minimize the
chances they will ever face losing their homes:
1. Never a borrower or a lender be. OK, so maybe NEVER is
strong, but you'd be surprised at how many foreclosed homeowners actually
bought their homes with conservative loans and at low prices many years ago,
but got into trouble taking new mortgages and pulling cash out at the top of
the market (then not being able to refinance or make the adjusted payment at
the bottom).
Today's homebuyers can avoid this fate by starting out
their home owning careers with some ground rules in place around borrowing
against their homes.
A good (albeit conservative) place to start is this rule:
Decide not to borrow against your home equity for anything but well-planned
home improvements.
Here's another one: Whatever you do, don't borrow against
your home to lend money to someone else.
Many homeowners over the years have borrowed to make an
"investment" in a friend's business or to lend money to a child or a
parent. Borrowing against your home's equity to make an investment in a
business you know nothing about is a complete gamble with your home. Don't do
it.
2. Stop financial codependency. Related to the rule of thumb
about borrowing to lend is this change of the bad habit of financial
codependency. This comes up the most
often when homeowners borrow money against their home or tap into their
emergency cash cushion (leaving themselves unable to make their mortgage
payments if they lose their job, etc.) to help an adult child make their own
mortgage payments or bail them out of another crisis situation. It also comes
up where one spouse supports another spouse's habit of overspending, debting,
under earning, gambling or even substance abuse, and ends up going into a
financial hole as a result. Over time, these cases can create the temptation or
even desperation to further leverage your home, and can run through a savings
account, leaving the homeowner exposed and vulnerable in the face of a temporary
disability, job loss or recession. There are a number of powerful books on the
market about how to cease being codependent including the Melody Beattie
classic, "Codependent No More," but many people struggle to recognize
they even have this issue until it's too late. Here's a hint: If you regularly
use money to protect a loved one from the natural consequences of their
behavior, you are engaging in codependent behavior.
3. Stay conscious.
Going on money autopilot, without occasional check-ins, is the root of many
financial woes. Many money experts recommend automating your monthly payments
so that your recurring bills are paid on time, every time. And almost any
homeowner will vouch that there are few bills that seem to come up as
frequently as your mortgage! The problem
is that once you automate your payments, it's very easy to fall into the habit
of simply ignoring your actual statements -- and they may contain information
that flags issues before they snowball into serious problems. A homeowner recently realized that through no
fault of her own, and despite never having missed an auto-payment, her home was
facing foreclosure -- all because the bank had somehow erroneously started
crediting her payments to someone else's mortgage account! Also, financial autopilot mode can support
habits like over spending and over debting; the minimum payments may always get
made without much attention from you, but the overall balances will rear their
ugly heads and possibly pose a threat to your ability to pay your mortgage, in
the event you ever face a job loss, medical bills or other financial crisis.
4. Do your own math before you buy. Only you can know the
full extent of your non-housing-related financial obligations and values.
Things like catch-up retirement savings, tithing and charitable giving, private
school tuition, medical costs and the like can take big chunks out of your
monthly budget that your mortgage pro is not accounting for when he or she
tells you how much of a mortgage you're qualified to borrow. So, before you ever speak with a mortgage
broker, it's up to you as a responsible buyer and adult to get a very clear
understanding of your own personal income and expenses, assets and priorities,
and to use that knowledge to decide how much you can afford to put down and to
spend monthly for a home. An increasing
number of buyers doing this, and actually choosing to buy a home that costs
much less than they are technically qualified for.
5. Don't buy a house to fix a family or psychological
problem. In Alcoholics Anonymous, they admonish addicts to avoid what they call
"pulling a geographic" -- moving to a new neighborhood or town to try
to run from your problems and bad habits.
They caution against expecting the move to solve the problem on the grounds
that, in the words of mindfulness guru Jon Kabat-Zinn, "wherever you go,
there you are." If you have bad habits in Chicago, moving to L.A. doesn't
purge the bad habits -- only working on the actual dysfunction itself will do
that. There's a real estate-specfic
version of pulling a geographic, which is called "pulling a
residential." This is where people buy a home or buy a new home in an
effort to cure a deeper family or psychological issue; sort of like that old
(and equally bad) idea of having a baby to try to save your marriage. If your children are fighting because they
lack personal space, that's one thing. But if there are deeper issues going on
with your children, your family or your relationship (even your relationship
with yourself), do not fantasize that owning a home or moving up is going to
automatically solve them. In fact, the
opposite is often true: The larger the financial and maintenance obligations
that come with a home, the more a mortgage and property taxes can add strain to
already troubled relationships.
Inman News®
Monday, February 27, 2012
9612 White Castle Drive in the News
This beautiful home is listed at $259,900. It has all the bells and whistles and shows like a brand new home. It was recently featured on WKRG News 5. Contact me for more information!
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