Debt: Who's fault is it?

I hate to repeat myself. My very first blog was about debt. The subject came up again today, though. Originally, I, as my mom would say, "gave the devil" to those of you who choose to dig yourselves into a hole of debt, and "don't know how I got there". You know how you got there. Unfortunately, you definitely had help. And today, I am focusing on those evil people who take advantage of you...

"Pre-qualifying" for a home loan is such a marketing crock. Banks, mortgage companies, and real estate companies all have a hand in using "pre-qualification" to get you somewhere you didn't mean to go. I was in real-estate 13 years ago. I quit when I figured out you don't make good money unless you screw your customer. Real estate agents...another blog, another day.

Pre-qualification = The bank simply looks at your income, your car payments, and some of your other financial commitments, and then tells YOU what you can afford.

So you look at your budget and figure you can afford an $800 house payment. Then the bank says, based on your income, you can afford a $1500 house payment! Then, for some reason, you believe them. "Oh, if they say I can afford it, I guess I can! After all, finances are their speciality." What?! (Umm, the bank forgot you also have to by groceries and heat the house with your income.) THEN, you, with your false sense of security, start looking for "more house" because the bank says you can afford it, and you start to get excited about those houses that you're looking at now, and when you go to get your actual loan approval for that fancy-dancy house, you work harder and do what you have to do for the bank to approve your loan (like asking friends and family for $$ and paying off OTHER BANKS loans and credit cards), because now you're all wrapped up in the house emotionally! It's just like emotionally buying a car (another mistake-another blog), only now you have a signed contract (your offer to purchase the house) that binds you legally to the purchase... as long as you are approved for financing. Yep, when you put an offer on a house, you are signing a contract that says that you WILL purchase the property. It is common in these contracts that your only out is if you can't get approved for a loan. The contract you signed also says that you will use due diligence to secure that loan. Therefore, you cannot get out of the contract by simply NOT looking for financing. There are also other stipulations in the offer, such as inspection results, etc., IF you write them in, but many real estate agents have a "don't ask; don't tell" policy on that. After all, if the sale goes through, your loss is their gain. After closing, it's not their problem. It's yours.

So you struggle to get the financing because of the pressure of the contract you signed AND emotion (and your need to keep up with the Joneses), and when you're sitting there at the closing, and signing all those scary papers, and it hits you that you really can't afford that payment...TOO LATE! You can't back out because you signed that contract with the seller that says you promise to buy the house as long as you are approved by the bank...and they approved you. AHHHHHH!!!! And the bank doesn't care if you can afford it or not, because they are going to sell your loan off to someone else once they get the majority of the interest payments from you, anyway.

And those damn credit card companies... they can also sell off your account to someone else who can change your interest and/or terms any time they want to! BUT, you, the consumer, signed the credit card application with the tiny little print that said you agree to allow the issuer of the card to sell your account any time they want to, to anyone they want to, and the new terms of the new company will be accepted... by you. Ugh.

So the mortgage and credit card companies are manipulative A**HOLES, but bottom line is... there's a signature on the bottom of the contract. Yours. You lose.

One word on contracts: If you feel you have been emotionally pressured or bullied into signing a contract, quickly look into the business laws in your area. Chances are you can rescind by giving written notice to the other party within 3 business days. Your best bet is to sign a contract on a Friday. That way you also get Saturday and Sunday for free to think about it, and have until Wednesday to rescind. On the other hand, the contract may have a cancellation clause, so (duh!) read it carefully before signing it.

Once more...even though I hate repeating myself...
-If you can save the money for it in six months, wait, save, and pay cash.
-If you can't make payments AND put money in savings at the same time, you can't afford it.
-If you can't afford it, don't buy it.
-If you don't read every word of the contract and agree to it, don't sign it.
-If you signed it, don't whine about it. Pay it.
-And, if you have to make payments, don't finance anything else until it's paid off.