Much of the mortgage crisis comes back to personal responsibility. In the heat of the moment, buyers rushed out to purchase homes they really couldn’t afford. In some cases, those in the mortgage industry may have sweet-talked them into thinking they could afford their loans. Agents earned their commissions on the house sale and went on their way.
Did buyers hear a little voice in the back of their heads saying “Maybe this isn’t a good idea?” What are some of the takeaway lessons from this?
Always read the fine print. If it sounds too good to be true it probably is. When the lender tells you that you can afford a $500,000 house on a $50,000 annual salary and you only have 3 percent to put down in cash, you can’t afford the house — it’s a pipe dream that will quickly turn into a nightmare if you proceed.
And speaking of numbers, be sure to run them before you sign on the dotted line. Consider how much you earn, how much you currently pay in rent/mortgage and all the fees and commissions involved in taking on a new mortgage. Consider scenarios with various interest rates. If you’re not a math person you can always hire someone who is. An accountant you trust. Or, your real estate attorney may be able to help. It may be worth the money you’re charged to avoid financial problems down the line.
Do your homework. There are plenty of good books published on and off-line about buying real estate (Check out Ilyce Glink’s 100 Questions Every First-Time Home Buyer Should Ask). Pay attention to the news about the industry. Be as informed as you can be so that you can spot problems before they affect you. It will also help you decide what you want to do and how much you want to spend.
Published: Sep 14, 2007