Best and worst financial moves of 2007 – mortgages

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Best move: You snagged a good buy with plans to hold on.

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 to buy.

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.

Worst move: You got in over your head or went subprime.

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.

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.