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1. Buying too much home. He fantasized about the day when he could buy the house of his dreams. The house has everything you wanted or imagined. It’s in a great neighborhood, great schools, great amenities, and takes pride in welcoming visitors. Family and friends envy him alike. Everything seems perfect, but is it really? You just moved out of a smaller, less expensive apartment or home. You thought you can handle an additional $ 700 a month. One problem with a larger home is a higher cost of maintenance and utilities. Utilities alone could add an additional $ 400- $ 500 a month that you hadn’t anticipated. Possibly you hadn’t thought about the HOA fees that must be paid annually. Many home buyers make the mistake of being excited when buying a home. Count the cost first, then determine if you can really afford the home you’ve dreamed of. You don’t want your dream home to turn into a real life nightmare.
2. Enter a house “poor house”. Saved for the down payment and all closing costs. You paid creditors to improve your credit score. He emptied his retirement or 401K to get all the funds needed to get into the house. Moving can be expensive and you only had to buy appliances for your new home. Well you did, you got the house but now you have little or no money left in your bank account. Here’s the problem, you just moved in and will have to live paycheck to paycheck. Your utilities are due soon, as well as your mortgage payment, and you have no additional resources. What if your car breaks down, you lose your job, or some other unexpected situation occurs? Your best option is to save at least 4-6 months of mortgage payments when considering buying a home.
3. Depending on a second job, spouse’s income, or inconsistent income. If you need a second job to make sure you can make your mortgage payments, you’re doing it wrong. If you have to rely on overtime to make your mortgage payments, you’re doing it wrong. If your spouse has to work so that everyone can make the mortgage payments, both of you are doing it wrong. Maybe you have a commission-based income. What if the company reduces overtime hours or eliminates them entirely? What if the second job is getting unhealthy for you? What if your spouse loses his job? Any and all of the above scenarios could happen. When you are considering buying your home, only count the income you earn without overtime, second job, or income from your spouse. If you don’t have to depend on the additional income, your quality of life will improve and you will truly enjoy your new home.
4. Do not deposit taxes and insurance. In a perfect world, the 80-20 loan was a dream come true. In 2004, when I was selling houses for a production builder, the one item that put pressure on me more than anyone else was the 80-20 loan. The 80-20 loan works like this, 80% of the loan is amortized over a period of 30 years like a traditional mortgage. The remaining 20% is a separate loan generally at a higher interest rate. The loans are executed at the same time, but the 20% portion drops after 15 years. The benefit was that it allowed home buyers the opportunity to purchase more homes. The 80-20 allowed home buyers to pay their taxes and insurance on their own, allowing for a more manageable monthly mortgage payment. Well, this is where it gets dangerous, YOU must pay the entire tax bill at the end of the year. You must keep up to date with your insurance. If you don’t pay your taxes, you could lose your home to foreclosure. I have found that only 25% of homebuyers who did 80-20 were successful, the other 75% lost their homes in most cases. Opt for a traditional mortgage and keep your home.
5. Not paying on time. A mortgage works on momentum. The more you pay, the more you pay. The danger of not paying your mortgage on time is that once you miss a payment, you are 40% more likely to miss a second payment and 75% more likely to miss a third. Why? Most people live from paycheck to paycheck and do not have several months of mortgage payments in the bank. By the way, when you miss the third payment, you will receive a certified letter in the mail notifying you of the foreclosure procedure. Don’t miss a payment! Do what you have to do, but don’t push a mortgage stone downhill.
6. Pay a high or adjustable interest rate. Just say no! Adjustable rate mortgages are probably responsible for the majority of foreclosures. If you are offered a higher interest rate than normal for a house, don’t let your emotions make your decision. Stop, build your credit, and try again. Many home buyers were tricked into making adjustable mortgages. Homebuyers were told they could easily refinance later, it never happened, and when the interest rate went too high, they lost their home.
7. Ignore the lender. Here’s the deal, you’re behind on your mortgage. Avoid attempts by your lender to contact you. Don’t cut off communication with your lender. Communication is the key if you want to come up with a strategy for maintaining your home. The lender does not want your home. Most lenders lose $ 50,000 on average when a home goes into foreclosure. Explain to the lender what is going on in your life. Whether it’s a job loss or something more personal catastrophic, you can probably find a way to keep your home. Remember, a silent voice gives consent.