- Subprime Mortgages aren't the only Culprits - Salvatore Vuono
A home is probably the most expensive purchase most people will ever make. Regardless of the type of home, country setting, city loft, Florida condo or mid-town Manhattan apartment, it is a wise step to crunch the numbers before making a commitment by signing a mortgage agreement. Be certain to consider the other costs associated with the home. The size of the down payment, the size of the personal budget, property maintenance fees and repairs that pop out of nowhere can all throw a shaky financial situation into turmoil.
Steps to Avoid Financial Woes
A mortgage meltdown occurs when the overhead costs plus the mortgage costs more than one-fourth the amount of household income. This can happen to almost anyone that is caught up in the dream of the moment. It is hard to resist when a mortgage lender makes a sweet deal on a dream home. That dream home will turn into a night mare if the borrower is not careful. Before signing the dotted line, add up all the real costs associated with home ownership....and the time requirements.
- Evaluate all the numbers, this includes the mortgage payment amount, the final mortgage costs, monthly utility expenses, community fees, maintenance, upkeep, repairs, add in everything. Some items many people forget to consider are the buyer's sales tax, property taxes, closing costs, condo fees, transfer fees and filing fees. In some cities, parking is sold separately.
- Play pretend. Yes, just like a child, pretend the mortgage is already a part of the financial situation. Live as if the money is already going out. Notice the difference in the amount of "extra money" available for spontaneous activities, is there anything left for vacations, is there money left to put gas in the car or pay medical bills and co-pays?
- Demand a home inspection. It doesn't matter if the home is being purchased from a relative or stranger, don't sign an agreement without first getting a home inspection. This will costs about $500. Can't afford it? Then you can't afford to buy a home, so walk away. The expense of a home inspection is saved when a major repair is uncovered. Sometimes the home owner will reduce the price of the house to help with the repair. Other times the potential buyer will know to stop the negotiations and look elsewhere. If nothing is found, the buyer will have peace of mind and that is worth a lot more than the fee.
- Avoid newly renovated homes. Fresh paint and new floors are pretty but they can also be tale-tale signs that something is amiss. In order to avoid a financial disaster, keep a close eye on areas that may not have been renovated. Watch for watermarks and foundation cracks, mold and other signs of damage.
- Live within the means. This should probably be tip number one. Too often the temptation is too great and people opt for the over the top house. An over the top house is a fast track to an over the head mortgage. The smaller mortgage that comes with a smaller house can save a lot of money over the years. With this money the buyer can purchase items that will make the house more personable to them. They will also have more money to use on vacations and personal interest. The peace of mind that comes from having a buffer zone will be more enjoyable than the extra square footage.
- Perhaps the number one mistake people make is not negotiating the mortgage. Home loan borrowers are so worried the lender will not "let them" borrow the money, they neglect negotiating for a better rate. Ask for it and shop around. Remember, the lender is like any other sales person, they don't make money unless they make a sale. Shop around and wait for the lender to return the call. Pass on the perks and gift certificates. Instead ask for a discount on the interest rate. If the bank does not seem to want to deal, contact a mortgage broker. He has more flexibility in what he can do and receives the same fee regardless of the amount charged.
Avoid Mortgage Foreclosures
Utilizing these tips can help the home buyer avoid mortgage foreclosures. Just live within the income limits and use gut judgment. If the deal seems to good to be true, scrutinize it more. This is a buyer's market for homes. People are willing to negotiate the price. Banks are usually willing to negotiate the terms. The purchaser will have to plan their home budget and determine the amount they can comfortably afford to pay. Don't use emotions when purchasing the home and reviewing the budget, let the numbers talk for themselves.
Jennifer Terry - Jennifer Terry has worked to promote self-determination and consumer education for 10 years. She has been writing since 2004 and has been ...
