Best and worst financial moves of 2007
If you had the good credit
to get a prime rate loan and you want to hang
onto the house for a while, 2007 was a great time
move: You snagged a good buy with plans
to hold on.
The big winners: People who bought in markets where the monthly after-tax costs were roughly the same as rent, says Eric Tyson, author of "Personal Finance for Dummies." What they gained: a place to live (or rent out for cash), plus long-term appreciation.
Too many people focused on
getting into a house, rather than shopping for
terms that would allow them to actually stay in
their new home. As a result, they signed up for
mortgages with terms
and conditions they just couldn't meet.
||Worst move: You got in over your head or went subprime.
Adjustable rate mortgages, with
escalating payments, have been a nasty surprise
to many consumers this year.
"People don't like
to stop and think, 'How high could my interest
rate go?'" says Tyson.
Ask yourself, "what's the worst-case scenario, and can I handle it?" says Tyson.
Some buyers settled for subprime mortgages when they could have qualified for prime rate loans, says Ren Essene, research analyst with the Joint Center for Housing Studies at Harvard University. Once there, higher rates and less advantageous terms make it difficult to build equity and "you're stuck in the subprime channel," she says.