Homeownership Isn't for Everyone Is it a right, or earned?
One of the hardest things for people to understand is that not everyone can own a home - that is, not everyone is cut out for it. Homeownership is a privilege that has nothing to do with skin color, ethnicity, race, religion, or any of the current "buzz" words. The only deterrents to this privilege is that you have to earn it with an income, and good money management. If you have an income, you're on the right track. That leaves money management.
A lot of us suffer with the "if I want it, I'll get it" attitude and forget what Mick Jagger said; we can't always get what we want. If we can manage to stray away from this attitude and remember that it's sometimes best to want and not get, then the things we want the most will be within reach.
Please don't think that I presume to lecture. That's not my intent. Everyone, at some point in their lives, struggle with finances. We all learn good money management skills in our own time. For me, it was in my Home Economics class in high school. It was a very useful class that taught me things like balancing a check book and the true value of money. From what I understand, that class isn't offered to high-schoolers anymore and that's a real shame.
The ability to manage money well is all too often a skill we don't acquire until much later in life and only then through the hardships of experience. Another fact with money management is that we all need help learning to do it. I had help in my economics class. Other's get help from parents, teachers, books, seminars, employers, money management firms, and credit counselors. Recognizing that we need help is the first step to good money management and asking for help is commendable.
To be clear, having an income and good money management skills aren’t the only factors associated with homeownership, but they are the most important to money lenders. Think about it. Two questions everyone is asked when trying to get a loan are, “do you have a job?” and, “what’s your credit score?”. All lenders need to know if you’re working and if you’re able to pay back the money.
Your credit score is a direct reflection of your money management skills in the minds of a lender. How it arrived at its value is associated with your management history; and your history will help them determine your future ability. Your capacity to return the money is very important to any money lender; perhaps the most important.
Failure to repay a home loan goes a long way in assessing your money management skills. That’s why a foreclosure is so damaging to your credit score. Even though, as we discuss in the “Credit Repair” article, it’s still possible to get another home loan within five years of a foreclosure on your credit history, that type of negative hit on your credit score goes a long way in driving down your loan potential; and, furthermore, increasing the interest rates you’re likely to be offered.
With all that being said, it is still possible to have a descent to good credit score but be horrible at managing money. In some circumstances we can make a purchase on credit and then come into a sum of money with which we pay that account off in full. To the creditor we’ve done a good thing and managed our money well. But that circumstance isn’t an accurate portrayal of our credit competency. It’s the same as having a job and paying our bills on time. Just because we can do what’s right under some circumstances, doesn’t mean we’ll do it every time. I’m certainly a good example of that.
So, you see, I’m not trying to lecture anyone, but simply hoping to share some information of value. It’s worth the time for everyone to try and accurately assess their own proficiency in money management especially when considering a home loan. Failure to do so could have hazardous results with long term consequences.