Are you ready to own a house and a mortgage? By Michael
D. Larson • Bankrate.com
Test to see whether your mortgage
habits are naughty or nice:
1. Have you talked about exactly what
homeownership will mean to your life?
2. Can you afford to put at least 10
percent or even 20 percent down for the selected home?
3. Do you have several instances of
late payments or other problems in your credit file?
4. If your loan was made at greater
than 80 percent loan-to-value, have you been tracking the
amortization on your loan as well as how properties in your
area have changed in value?
5. Is more than 36 percent of your gross
monthly income going toward your mortgage, credit card, auto
loan and other debt payments?
ANSWERS
1. Before you purchase, you need to
sit down and discuss the ramifications of entering into such
a large financial commitment. While mortgage lenders might
just run a few numbers and say you're ready to buy, you need
to evaluate homeownership with a level head.
2. The answer to this one doesn't necessarily
have to be "Yes," especially not these days. But if you're
not going to have an equity cushion, remember that if times
get tough and your house falls in value, you may get stuck
paying on a mortgage that's worth more than your home.
3. A "Yes" won't always disqualify
you to buy, but you should understand why you ran into trouble.
If you're already struggling to make credit card payments,
you might be better off waiting to buy a home. If the problems
stemmed from a one-time event, such as an unexpected medical
crisis that cost a lot of money to get through, then you're
probably OK.
4. It's important to do this because
you may be able to eliminate the private mortgage insurance,
or PMI, that you've been paying after a relatively short amount
of time.
5. If so, be careful and try to get
rid of at least one of those payments as soon as possible.
You could be stretching your income too far.
