Enjoying the American Dream

When does the American Dream of owning a home turn into an American nightmare? A sure-fire way is when a homeowner finds themselves “house rich” (owning a home of considerable value) and “cash poor” (having no savings or no wiggle room in their monthly budget and struggling to make ends meet). Many of those who allow themselves to get caught up in the “house rich” emotional swirl find themselves in large homes often with no furniture, no landscaping, and as one client ended up - with no hot water for two months!

Today more than ever Americans are in dire financial straits because of large mortgage payments and rising interest rates according to Realty Trac, www.realtytrac.com . What happened to cause such financial dilemmas? It could be loss of a job or failure of a business, but it could also be that in the purchase of the home an individual bought a property beyond their means to comfortably make the monthly payment or they picked the wrong mortgage loan for their financial circumstances. It’s not often we see people start with a small home then gradually trade up.

Subprime loans and creative financing has made purchasing a “starter” home a thing of the past. Potential homeowners were at one time able to “qualify” easily for higher mortgages and thus larger homes. It’s easy to get seduced into looking at properties that take you beyond your spending comfort level.

On a recent trip to Arizona, my husband and I arrived thinking we would look for a two bedroom condo that we could use as a getaway place during cold winters in Michigan. In only two days and over ten properties later we were then looking at fabulous three-level model homes in new developments with four bedrooms, water views, and a swimming pool to boot! Thankfully we returned to our senses and didn’t sign any contracts during that vacation. We were extremely tired when we returned home, but luckily had not made any commitments or impulse purchases.

If you find yourself in house rich/cash poor circumstances consider these options as a way to improve your situation and save some amount of money monthly:

Reduce your expenses to the bare bones. Spend money on necessities only. Call every creditor and inquire about new plans available to cut your cost.

Increase your income to cover any monthly shortfall. Some hard choices may need to be made, for instance, take in a roommate and share your living space, or take a part-time job for a temporary amount of time.

Contact a reputable credit counseling agency through National Foundation for Credit Counseling, www.nfcc.org or Association of Independent Consumer Credit Counseling Agencies, www.aiccca.org , to review your budget and determine if interest rate and payment reduction on consumer credit through a Debt Management Plan would benefit you.

Do your due diligence and determine what the long-term ramifications will be if the unexpected happens and your situation deteriorates to foreclosure status.

I’ll be sharing more in the next few weeks about foreclosure, the process, and resources that provide assistance. Remember….the key to enjoying the American Dream is not fretting month-to-month on how to pay the mortgage.

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