Bad mortgages can kill your credit, devour your paychecks, and leave you, ultimately, evicted from the place you once called home. So, how do you avoid them?
How to Avoid a Bad Mortgage:
Stay within your current means – No matter what you think might happen in the future, make sure you can afford your mortgage payments right now, including any payments that might be higher in the future…
Avoid balloon payments/interest – Generally, a mortgage that gives you a break early will hit you hard at the end, and those are the mortgages people usually fail to pay. For example, a mortgage might have a balloon payment scheme, whereby you pay $1,500/mo for two years, then it increases to $3,000/mo. Avoid these.
Do not offer additional collateral – The home itself should be the only collateral you put up for the loan.
Trust your lender – You lender should know your name. You should have a phone number of someone you can contact in case things go south, so you can refinance. Pretty much, you want your lender to treat you as a person, not a number.
Budget your life – Don’t take out a mortgage until you have budgeted all your expenses and know what, precisely, you can afford.
Consider renting – If your only options involve taking out a bad mortgage, then, you know what? Home ownership isn’t all that important. Consider renting. It’s safer and provides you with more flexibility as you build up toward home ownership.
Learn more about what is a mortgage and .