Looking around we see information about real estate foreclosures, short-sales, and borrowers defaulting on loans. There is article after article on the Internet, in the newspaper, and on TV. It’s not just about the first-time buyer, either.
The “Real Estate Guru” at Real Estate Investing Blog posted an item about a real estate investor in Las Vegas reporting that he feels forced to walk away from 16 homes he bought and financed just two years ago.
The Guru’s article source was the Real Estate Journal, a blog posting from The Wall Street Journal.
That’s one side of the story.
I know another side.
A couple I know, let’s call them Ray and Edna, had a house with 2 mortgages, 7 credit cards, brand new cars and new furniture. They couldn’t keep up with the payments when they were both employed and Ray supplemented with side jobs. They didn’t lose any jobs, and there wasn’t a disaster in their lives, but for their own reasons they walked away. The bank foreclosed on the home. The creditors nagged. They declared bankruptcy.
That was eight years ago. In that eight years, Ray and Edna have paid cash for everything. They bought many money orders and certified checks. They bought used cars and paid cash for repairs. They rented an apartment closer to their jobs. They ate at relatives houses many times, and never went to a restaurant. They are not addicted to Starbucks.
I could go on and on about what people without credit do. The point is that people without credit can do. They can survive. Having money problems and being in over your head is not a death sentence. It’s tough – no doubt about that. But Ray and Edna picked up the pieces of their shattered lives and moved on.
Today, eight years later, Ray and Edna sought the advice of a mortgage lender about what they would have to do to be homeowners again.
The lender checked their credit score and informed Ray and Edna that they had a score of zero. That’s right, their score was a big fat nothing. They not only don’t have anything bad on their report, they don’t have anything good on it either. The lender told them that they need to get some credit in order to get ready to get a mortgage. He wants them to get one credit card, probably through the bank where their checking account is. He also wants them to buy a car. New cars are being sold at really good prices right now because it’s the end of the model year and there’s a huge amount of inventory that hasn’t sold this year. Financing is available at really good rates, even for people with zero credit scores.
Once Ray and Edna have established the two accounts, credit card and car, they need to make regular and timely payments for 8 to 12 months. Then, and only then, will they be ready to look at buying a house.
A little more work and they will be homeowners again. This time they know more about money and about mortgages, and about being responsible when it comes to money. It was a hard lesson, but they learned it well.
If you are just starting your money lessons, here’s a little more encouragement. It takes seven years to have bankruptcy and foreclosure to clear off your credit record. That’s a long time. But it’s not endless.
Think about what you were doing seven years ago. Where did you live? What were you being paid at your job? Who were your friends? Now that you think about it, doesn’t seven years seem short? It is. And you, too, can get through it.
Don’t do it alone, but get started.
