Solid Finances: The First Step in Homebuying
Don't rush into a home purchase. Unstable credit and demanding terms can undermine the experience and your financial future.
There's no place like home, unless you have a mortgage with ridiculous terms that make paying it painful. Here's a recipe for unhappy homeownership:
- Get a mortgage with an exceedingly high interest rate.
- Get a mortgage that has a pre-payment penalty, meaning that if you refinance to lower your payments you'll have to pay a hefty fee.
- Stretch your financial situation until you're not sure how you'll make the mortgage payment for the rest of the year.
Unfortunately, that's the sort of mortgage a lot of people with shaky credit end up obtaining. They end up in financial hot water instead of making a good investment.
So what gets you classified as having bad credit?
- You’ve made a mortgage payment 60 days late.
- You’ve declared bankruptcy.
- You’ve been through foreclosure in the past three years.
- You’ve had a car repossessed.
- You’ve had a bill referred to a collection agency.
- Your credit cards are maxed out.
- You get paid in cash.
- You have no credit cards.
If your credit is weak or unstable, it may be wiser to put yourself in a better financial position before buying a house. It's better to wait and get a mortgage with better terms than buy now and end up with house payments you can't make and the foreclosure boys knocking on your door.