Don’t ruin your chances for buying your dream home

Okay people I’m only going to say this once (more). Houses aren’t FREE. They cost money. In fact they cost a lot of money. BUT financially speaking, buying a home is one of the smartest moves you’ll ever make. Whether it’s a 6,000 square foot house on the golf course or a 1,600 square foot condo, you OWN it. This is the American dream. This is in large part what makes this country so great – we have the right to own property, as much as we can afford - plain and simple.Besides, you can deduct your mortgage interest, your mortgage insurance (if you have it) and your property taxes from your income tax bill each year and eventually, when you sell, it will have gone up in value, and if you’ve managed your finances well you’ll have a nice little pile of cash (equity) for your efforts. Try that with renting!

Having said all of that, buying a house can be a difficult and trying process (yes I freely admit that, even as a real estate agent). Unless you’re paying all cash, you have to qualify for a mortgage and this is where your past can really come back to haunt you.

In order to keep this from happening my advice here is PAY YOUR BILLS. Somehow. Somewhere. Someway. PAY YOUR BILLS. Even if you have to call your creditors and cut a deal with them to pay a small amount each month, it’s better than hoping it will all just go away. Do everything in your power to keep your bills from going to collections and honest to Pete don’t let it get to the judgment stage.

According to Eric Grandcourt, Mortgage Planner at Waterstone Mortgage, “credit history counts for more than a third of your credit score.” Which means if you have numerous collections and judgments this can seriously clobber your FICO score and your chances to own your dream home. (Which isn’t to say that if you have these types of problems you should give up – but you’ll have to work to pay them off to get your credit score back into the acceptable range.)

There are a variety of things you can do to appease your creditors. (Especially if you take it on when the trouble first starts.) Swallow your pride (come on, you’ve been through worse, you know you have) and call them. Be nice, be polite, be humble. You’ll get a lot further with honey than you will with vinegar (or however that goes). Tell them you’re having trouble paying your bills but that you really want to pay them. Explain your situation - you got laid off for 3 months but now you’re working again, or your lousy husband ran off with his secretary and left you to pay the bills, or whatever. Cry! (Seriously. Who here hasn’t cried to get out of a speeding ticket? Same principle applies.)

Ask if they would be willing to cut the interest rate, or the finance charges or accept a lower monthly payment, etc. Now granted, at this point some will be jerks and say no but keep paying anyway because at least the record will show that you made an effort to pay your bills.An old friend of mine refused to pay his student loans because he felt college should be free for everyone. (!) Whatever. But now they garnish his entire tax refund every year. And how would you like to see that little bugger on your credit report?

And yes, I am on a rant about this because I’ve seen one too many good, honest, decent people who, for whatever reason, got in over their heads with debt, but instead of doing something about it, they ignored it and/or tried to blame someone else for their problems.Then they wake up one day and decide they want to own a home. So they go and find their dream home, but when it comes time to get qualified for a mortgage, all those mistakes they had hidden carefully away in the closet come tumbling out on their heads. No mortgage. No dream home. Sorry.

Don’t let this happen to you. Make a vow that you will start to turn things around today by ordering a FREE copy of your credit report, check to see if there are any surprises on it (there may be some bills that you have actually paid that still show up as unpaid), start to pay off the debt you currently owe, and rebuild a higher FICO score so that when you do spot that dream home you can actually buy it.

(photo courtesy of http://www.freedigitalphotos.net/)

Beth Skinner is a real estate professional who actually returns phone calls and emails! Click here to search the MLS for your dream home.

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