How to Be a Real Estate Statistic
- The Good Kind
by Brandon Cornett
2007 was a year of record-breaking
real estate statistics in the United
States. Unfortunately, most of those
stats were bad. Just ask the hundreds
of thousands of homeowners who faced
foreclosure last year!
On the up side, there is a lot you
can do to prevent this kind of real
estate misery, and to avoid becoming
a negative real estate statistic.
Education goes a long way in this
regard, and that's why I continue
to publish articles like this.
So with that said, here are five
ways to be a good real estate statistic
in 2008, instead of a negative one:
1. Understand and Guard Your
Good credit has always been important
for home buyers who are shopping
for a mortgage loan. But it will
be even more important this year,
and for the foreseeable future. Last
year's subprime mortgage crisis has
led to tougher regulation of the
lending industry. As a result, most
lenders (those that are regulated
anyway) will be paying closer attention
to the credit scores of borrowers.
So your first step is to understand
the importance of credit in the real
estate world. Your next step should
be ordering a copy of your credit
report so you'll know where you stand,
compared to the average consumer
in this country. You should also
check your credit reports for errors
and work to get them corrected if
You are entitled to one free credit
report per year, from all three of
the credit-reporting companies. There
are several websites you can use
(including my own) to request all
three reports at once, which is certainly
the convenient way to do things.
Also, if your credit score is low
-- lower than average, this is --
you should work on improving it.
You can do this by paying down your
debt, paying all of you bills on
time, and being financially responsible
2. Don't Buy Over Your Head
Many of the negative real estate
statistics from 2007 were people
who bought more home than they could
rightfully afford. Of course, some
of the lenders were to blame as well,
mainly for offering ARM loans with
low teaser rates during the introductory
period, and glossing over the potential
rise in monthly payments that would
Here's the bottom
line. If you can't afford a home,
you just can't afford
a home. Instead of pursuing dangerously "creative" financing
methods to purchase that new home,
focus on improving your financial
situation first. Reduce your debt.
Save up some cash. Try to increase
your income, if at all possible.
You might even relocate to an area
where the housing costs are more
within your reach. Heck, that's the
main reason I moved from San Diego
Avoid buying beyond your financial
means. It never ends well, and you
will likely end up as a bad real
estate statistic instead of a good
3. Choose Your Mortgage Type
In the previous point, I talked
about the perils of the adjustable
rate mortgage (ARM) loan, for people
who don't truly understand the ARM.
Don't get me wrong ... an adjustable-rate
mortgage can be a good idea, mainly
if you have plans to sell or refinance
the home within a few years. In that
case, you could save yourself some
money by paying lower interest rates
in the short term.
Here's the key to success when choosing
a type of mortgage loan. First of
all, you have to understand the pros
and cons of the different mortgage
types. Secondly, you have to be realistic
about your future plans. If you'll
be staying in the home for many years,
you might be better off with a fixed-rate
mortgage that can weather the financial
storms of the future without being
affected by them.
Research the different types of
mortgage loans, and then match your
loan to your home-buying situation
and future plans.
4. Don't Trust Lenders ... Or
Here's a real "shocker." Mortgage
lenders are in the business of lending
money to people, and making a profit
while doing so. Surprised by this?
I told you it was a revelation! Mortgage
lenders will do everything they can
to get somebody to borrow from them,
as long as they don't get burned
in the short term.
So you really can't trust a lender
to tell you what you can and cannot
afford to pay each month. The only
thing a lender can tell you with
certainty is whether or not you're
qualified for the mortgage ... not
whether or not you can realistically
afford it. And if they sell the loan
to the secondary market after granting
it to you, then they don't really
have to worry about your financial
woes down the road.
But what about the government? Surely
they are looking out for home buyers,
right? Well, not always. You see,
there are these people called lobbyists,
and many of them represent the lending
industry. They make big contributions
to certain political campaigns (like
Schwarzenegger and Bush, to name
only two) in order to influence regulations
-- or the lack of regulations --
on the lending industry as a whole.
So don't expect the government to
come riding to your rescue if you
get in over your head with a mortgage
loan. You must be a smart consumer,
an educated consumer, and a self-reliant
5. Be Proactive in Times of Trouble
Even if you adhere to the other
four guidelines on this list, but
you still find yourself in trouble,
you should be proactive about finding
a solution. In other words, don't
Here's an example of what I mean.
Let's say you buy a new home and
take on a mortgage loan to pay for
it. Everything is fine for the first
two or three years, but then you
run into some unexpected hospital
bills and other expenses. So you
get behind on your mortgage payments.
But you fully expect to be back on
track in a few months.
Here's where it pays to be proactive.
If you contact your mortgage lender
and explain that your financial problems
are only temporary, they probably
have ways to help you out.
Generally speaking, mortgage lenders
want to avoid foreclosure as much
as the homeowner does. After all,
they are in the business of loaning
money, not managing and selling properties.
That's why most lenders will work
with homeowners to come up with a
solution to temporary setbacks. Some
lenders have tools at their disposal
to help in such cases, such as repayment
plans and lump-sum reinstatements.
But you won't know about them unless
you're proactive about it.
About the Author: Brandon
Cornett publishes the popular Mortgage
Refi Blog and several other real
estate websites. Visit the author
online at http://www.mortgage-refinance-advice.com/blog/