Property Crossroads - Real Estate Info

Real Estate Tip No. 2: Be Financially Prepared

by Maricel Ferrer-Custodio on April 23rd, 2007

All these hype about foreclosures and subprime mortgage meltdown can be minimized if not avoided, if more potential buyers were financially educated and prepared.

In this era, where competition has opened more mortgage channels than ever before, more people are falling into the trap of living in a property they can’t really afford. A vast number of traditional and non-traditional financial institutions are releasing new products to compete in the mortgage market; banking on the great American dream of owning a property.  They were successful for awhile, but until recently their own financial products are starting to kill them.

These accentuates the importance of financial readiness when buying a property.  Not everyone is equipped to buy a property in cash.  However, even those who are equipped to buy in cash would rather utilize a loan to get more for their money. Thus in the end, it is not about how much money you have, choosing to buy in cash or take out a loan.  It is all about being financially ready to take on the commitment of buying a property and religiously paying the loan that comes with it.

Personally, I’m not an advocate of  "no down payment" loans.  Saving for a deposit involves financial discipline which I consider very important for someone taking out a mortgage.  If you can’t save for a deposit no matter how small it is, how can you be so sure that you can commit to decades of paying for a mortgage?

How much money you’re earning is an important factor in taking out a mortgage, but how you spend it is equally important. If you are really serious about buying a property and getting a loan, why don’t you practice paying for the loan before actually taking out one. In doing so, you will have a clear understanding of how your financial life will be when you actually take out a mortgage.  To add, it will give you room and the liberty of time to adjust your lifestyle or your budget range while you still can.

Being financially prepared can make buying any property a more enjoyable experience.  It can save you from the stress, insanity and thousands, hundreds or millions of dollars in losses when you default in your payments and face foreclosure.

Learn from others and don’t ride the real estate roller coaster financially unprepared. Make sure you know what you are getting into. Buying your house could be the biggest financial commitment you will ever have. It can pave the way to riches for you or bring you down the pits; with huge debts you can’t pay.

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POSTED IN: Buying a Property, Educational Tools