For several months Wall Street employees and consumers have pointed the finger at many people who they feel should be responsible for the recession and financial crisis the country is experiencing. Some consumers believe President Bush is to blame, some feel Alan Greenspan is to blame, some feel Wall Street bankers, loan officers and mortgage companies are to blame and some feel consumers are to blame. No matter who messed up the economy, it is time to fix it and we can't wait for the government to fix it, we have be accountable for our actions and start with ourselves to help minimize the impact of the recession and future financial crises.
If any of the following conditions apply to you, start today to develop a plan to improve your financial life and your knowledge about the banking industry, housing industry and personal finance.
1. You got approved for a mortgage but had a gut feeling that something was wrong but didn't say anything about it.
2. You got approved for a mortgage and knew you couldn’t afford it but hoped that you would be able to work overtime or get some extra income to make the monthly payments.
3. Assumed you would not lose your job.
4. Assumed you would not get sick.
5. Assumed you would not experience loss of a family member.
6. Assumed the mortgage industry professionals were your friends and would be honest with you about everything regarding your mortgage application and mortgage loan paperwork and the process.
7. Were unaware of your housing rights as a consumer.
8. Lived paycheck to paycheck, day by day and did not worry about the future.
9. Did not have health, life or disability insurance.
10. Did not understand basic housing industry terms such as balloon, arm, and interest only.
Unfortunately the housing industry failure has taught all consumers that the only way to survive a crisis is to plan for the future, to live below your means, to save and to properly manage your finances.
To ensure that you do not become a victim again follow these 7 steps:
1. Read. Before signing a mortgage or loan application read the application in its entirety. Ask questions and write down the answers. Take the application home with you and read it in its entirety several more times. Jot down any additional questions you may have and contact the mortgage professional to get your questions answered. Do research at a library or on the internet about how to buy a home and the mortgage application process.
2. Say no to Bad Credit Companies. Do business with a reputable company. Search to see if a company has had any complaints filed with the past 2 or 3 years with the Better Business Bureau or FTC. Ask family, friends, co-workers or relatives if they have done business with the company. Be sure the company is licensed to do business in your state.
3. Don’t fall for gimmicks or false information. Verify everything told to you regarding your mortgage application. Hire a real estate attorney if necessary to review the mortgage application with you prior to signing it.
4. Slow down. Take your time and don't let the settlement company, your realtor or the seller of the home rush you into signing the mortgage application and/or settlement paperwork. Once you sign the paperwork you are bound by law to go forward with the loan unless the paperwork provides a rescind clause that allows you to cancel the loan within 3 days from the date of your signature.
5. Plan. Plan for your future by creating an emergency fund to cover all of your monthly bills and household expenses for at least 6-9 months.
6. Insurance. Get insured and get at least basic health, life and disability insurance to protect you if you become ill or are unable to work.
7. Track. Track your spending and live below your means. Your total monthly bills should be no more than 28% of your net income. Your total monthly debt should be no more than 15% of your net income. Your total housing expenses including mortgage payment should be no more than 35% of your total net monthly income.
Following these tips will ensure that you do not become a victim of predatory lending, that you properly manage your money and that you are prepared for the unexpected.
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