Crisis? What Mortgage Crisis?
As I write this there is a crisis in America in the
sub-prime lending industry.
A sub-prime loan happens when homebuyers with low credit
ratings are offered mortgages with high interest rates.
Advocates of sub-prime financing tout it as a way for
low-income residents to own their first home. This crisis
clearly shows sub-prime loans are having the opposite
Well, knock me over with a feather.
You mean to tell me that low-income people with bad credit
and poor money habits are having a hard time keeping up
with the payments on a high-interest mortgage and the
myriad expenses of home ownership?
That's crazy! I don't believe it.
As the kids today say, "Well, duh."
Truth be told, I haven't really thought much about the
I consider one of my jobs to be educating people about the
pitfalls of homeownership and debt.
If you need a sub-prime mortgage to get into a house, you
have no business trying to buy that house. Your American
dream can quickly turn into an American nightmare.
Buying a home doesn't just mean mortgage payments. There
are property taxes, running around $300-$400 a month for a
modest home here in upstate New York. Then there are
utilities--usually higher for a house that is twice the
size of a typical apartment. Don't forget maintenance and
repairs, and extra appliances and lawn equipment. You'll
have to buy furniture to fill the house. Don't forget the
decorating--window treatments, new floors or carpets, paint
If you have a low income and bad credit you should have ONE
goal in life. Ok, TWO goals. Well, now that I think about
it, THREE goals: earn more money, learn good money
management skills and improve your credit.
Get yourself to the library and get some books on making
extra money. Invest what little money you have in making
some extra money and learning how to manage that
effectively. As you do, you'll your credit score will go
up and up.
The old "I'm building equity argument" is a crock.
Low-income earners buying their first home with sub-prime
loans are not buying houses that go up in value.
They have no money for upkeep or to make improvements so
the value of the house goes DOWN.
So, if you've been thinking about getting a sub-prime loan,
FORGET it. You won't be better off.
If you're feeling pressured to buy a home, you definitely
want to avoid a subprime mortgage. "Feeling pressured" is
the same thing as "peer pressure". WHY do you have to buy
a home right now? Who says?
If 95% of the American public aren't financially
independent at retirement, I would venture a guess that
most Americans don't know what they're doing when it comes
to money. So why would you follow their "conventional
wisdom"? I will hazard a guess that you can say the same
in just about any other country with consumer debt issues.
Be different. Have the courage to wait while everyone else
rushes in. Learn how to make more money and become an
expert at saving and investing. There is absolutely
nothing like the feeling of buying a home with a large down
payment and plenty of money in the bank to handle all the
expenses that come along with home ownership.
It's priceless (and it isn't bought with a credit card).
After all, what good is a new home if you can't sleep at
night wondering how to pay for it?
Avoid those subprime mortgages and wait a bit. You'll be
infinitely glad you did.
About the Author:
A financial educator for over ten years, Leo Quinn Jr.
specializes in helping people get out of debt and stay that
way. His "How to Own Your Paycheck Again" program has
helped thousands of families improve their finances and
escape the debt trap. Visit Leo at: