15 Jul 08 Can I Get A Mortgage? Should I Get A Mortgage?

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Housing crash, mortgage crisis, credit crunch… it’s hard to read a newspaper these days without a flock of fearsome ‘c words’ jumping out to remind us of the problems plaguing us on a nationwide / global level.

One thing you won’t find, however, is the one thing the papers can’t report on. However smart the writers, they won’t know anything about the single most important factor in any financial decision you make – your own situation.

Markets might be struggling or booming; house prices might be rocketing or plummeting, but what really counts is what’s going on in your own life. After all, problems in the housing market might cost you 15% of your home’s value, but that won’t affect your finances anywhere near as much as losing your job, having a baby, or inheriting $50,000.

So, if you’re one of the many tenants teetering on the verge of buying a home, the most important question may be “Can I get a mortgage?”, but “Should I get a mortgage?” comes a close second – and both answers depend largely on your own situation. The macro-economics do matter, but not as much as your own ‘micro-economics’.

Let’s split your finances into the two simplest groups: income and expenditure.

Income

· How’s the job security – low, medium or excellent? Are you expecting your salary to go up, down or nowhere?

· Do you receive any state handouts? If you do, how reliable (and how significant) is this money? If you don’t, could you? Is anything about to change that could affect this one way or the other?

· Is there any money ‘in the pipeline’? Inheritances, insurance pay-outs, legal settlements, sale of assets…?

Expenditure

· How much do you spend? If you really cut it back, how long would it take to get that deposit together? If you already have a deposit, would a larger deposit help you get a better mortgage deal?

· Do you have debts? Could you pay them off any faster? Are you paying (e.g.) child support or alimony? How much longer will you be paying?

· Are you planning any major – and expensive – changes to your lifestyle? Getting married, for example, or starting a family? Some things can’t be delayed, but others can. Would it make sense to wait until you’ve bought the house?

They’re just examples, but these are the kind of factors that can really help you make your mind up. They’re not just more relevant to you as an individual – they’re probably more predictable than the macro-economic stuff you’ll find on the news. OK, you can’t know where you’ll stand 12 months from now, but your own future finances are probably a lot clearer than the world’s, the USA’s, or even your own state’s.

Finally, a look at the alternative

In closing, let’s take a quick look at a major factor that so often gets overlooked: the alternative.

Everyone worries about the possibility of losing money as house prices go down, and waiting years for that value to reappear. But unless you’re living with relatives, your rent is probably costing you thousands of dollars that you know you’ll never see again.

It’s true that waiting a year before you buy might bring the purchase price down by $15,000 – but if you’re spending $15,000 on rent, what’s the point?

Tags: affordable mortgage payments, credit crunch, house prices, housing crash, macro economics, micro economics, mortgage, mortgage crisis, mortgage deal, mortgage payments, struggling markets