The Case for Common Sense

http://www.msnbc.msn.com/id/25002611/

By now, you've likely heard that foreclosures on homes are even impacting celebrities like Ed McMahon.
The irony of course is that McMahon spent years helping others win millions, and now a confluence of factors has affected his ability to pay his own mortgage.
But (how refreshing) McMahon isn't playing the blame game.
In an interview with Larry King, McMahon said poor planning on his own part led to his current situation. Don't get me wrong, I am not saying that the subprime mess that's sweeping the nation isn't a factor.
It is, of course.
But financial responsibility starts at home.
If you are living beyond your means, as McMahon confesses he did, it's only a matter of time before the math catches up with you. Pamela McMahon is alongside Ed, confessing that they could have done a better job handling their finances.
From a personal standpoint, we watched many of our friends buy homes that they just simply couldn't afford. Everybody was being approved. As a matter of fact, a friend who had no traceable income and was living on student loans was approved to buy a home. And that person did buy a home with a loan that was based on an adjustable interest rate.
There was something fundamentally wrong with this picture, and now we're seeing the fallout.
You know what you can afford. Be your own financial planner and the one who knows the most about your finances.
If you can't afford to own a home, there is no rush, trust me. Dante and I have been married for 10 years and we didn't buy a home until we had been married for seven years.
You have to live with the consquences of your own financial decisions. DON'T BE STUPID.

LIVE BY THE PERCENTAGE RULE
Don't agree to a payment on a house or apartment or condo that is 25 percent or more of your total household income.
FAMILIARIZE YOURSELF WITH THE OTHER EXPENSES ASSOCIATED WITH HOME OWNERSHIP
Owning a house requires so much more than the mortgage payment; it's the upkeep; it's the homeowners' association annual fee if you happen to live in a neighborhood that has a homeowners' association; it's the lawn and landscape care, especially if you have to hire someone to come in and do the work for you.
It's the utilities, etc.
I can go on and on here; you have to do an analysis of the fixed and variable costs of home ownership. What are those costs that are stable month to month or what are the variable costs that will change depending on the season? Before you buy the property, ask the current owners to show you one year's history of utility bills.
Remember geography. The expense of home ownership varies by state, of course. In Oklahoma, we have to have annual pest inspections for pests like carpenter ants and termites.
KNOW YOUR HOME THE BEST, ESPECIALLY WHEN THE APPRAISAL IS TAKING PLACE
Show up. Ask questions. Be nosy. Moreover, be the expert on the property you are about to acquire.
KNOW YOUR OWN CREDIT SCORE AND HISTORY
If you know you deserve a better interest rate on your loan, negotiate for it. We're talking a 20 or 30 year mortgage where interest rate can mean everything.
DON'T FORGET FUTURE PLANNING
If you are buying a home based on two incomes (assuming your income and that of your wife/husband/partner), how long will your household be a two-income household?
That is, can you afford your mortgage if there is a job loss; you decide to have a baby and want to stay home; or if you decide or your significant other decides he or she wants to go back to school.