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Slow Down, You Move Too Fast

The call started innocently enough, with a possible buyer asking questions to educate himself about the process.  Then it veered off into 2007 without much warning:  “So, I want to hurry up and take advantage of the low prices, rates, and the $8,000 tax credit.  Problem is, I don’t have anywhere near enough money for a downpayment yet.  Is it smart for me to borrow the downpayment money?”

I’m sure my caller heard the thud of my head as it hit the desk.  Yes, there are still people saying “ooh, it’s a good time to buy according to the commercials, rates are at ‘historic’ lows according to TV analysts, and the government will give me a free $8,000-- I have to jump on this train before it pulls out of the station!”  I can’t say it often enough:  if you can just barely manage to scrape together the downpayment (or worse, want to borrow it), you can’t afford the house!

Yes, 5% down loans are out there. As are no money down + finance the closing costs loans.  But what happens when the roof springs a leak or the fence falls down or the driveway needs resealing?  Do you have the funds left over after you close on your new home?  How about if all that happens at once, plus your washer ups and dies?  Do you have the resources to repair and replace and still make your mortgage and tax payments?  If you do, great.  End of lecture:  enjoy your new home. 

But if you scrimp and save to buy into homeownership and count on the 2010 tax credit to get you out of the financial hole you’re going to dig until Uncle Sam pays up, you’ll probably regret your haste.  That commercial that shows people kicking themselves for not buying now?  Those people all have 20% to put down, stable jobs, and enough left in savings after they pay the closing costs.  

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