Did you read my last blog or watch my latest Facebook Live Session? If you answered yes, did your stomach churn with anxiety at the thought of having to borrow so much money? Or….did your heart jump with excitement at the thought of homeownership becoming a real possibility? For those of you who felt uncomfortable listening to me explain (or reading about) the amount of debt you might incur to own a home, this blog is for you.
I get it. Debt is scary! But it doesn’t have to be. As with most things in life, it’s all about your mindset. If we choose to look at debt as leverage instead of a neverending sinkhole, we can reap its benefits instead of its pitfalls. So today we will talk about how we can change our mindset around debt by unearthing the reasons behind the fear and providing a few simple tricks to alleviate that fear. (Next week we will tackle debt management.)
A lot of people are deterred from getting a mortgage because they are afraid of having their name on such a large loan. Other people won’t even attempt a preapproval application because they are afraid they’ll get denied. So why do we have these fears?
Debit Is NOT The Devil
First, we’ve been pretty much indoctrinated to think that debt is the devil. Some of us have had the “cash-only” speech ingrained in our minds most of our lives that we can’t help but think debt is a bad word. When something is repeated often enough, we tend to accept it as truth. We’ve been taught to work hard, pay cash for everything, and shit….as the Bible says, “owe no man anything.” We don’t want to “owe a man” because we’ve been taught that owing is synonymous with bondage. What if I can’t get out from under it? What if I’m trapped in this debt forever? What if I end up not being able to pay it? I might end up with a terrible credit score, filing for bankruptcy, fighting with my partner, forced to get three or four jobs, in court, tempted to do illegal activities, relegated to living with my parents. AHHH. 🤯 The list of fears could go on and on. But let’s pause. Is all that really rational?
Mortgage Debt Is Leverage
Instead of looking at the mortgage lender (or any other debt service….yes it’s called debt “service” because it is there to serve your needs not to lord over you) as some greedy overseer, let’s just look at the mortgage lender as a businessperson. Way less scary. I’m willing to bet you don’t have an issue going to the store and buying a pair of shoes or paying your favorite restaurant for a sandwich. Do we get our shoes or our sandwich at cost? No. Do we cry about it? No. We understand that businesses need to pay for the product and their overhead and that they also need to make a profit. Most of us have no problem patronizing a business that sells what we want/need. Well….did you know that a mortgage lender (and every other debt service) is simply a business? Instead of selling you shoes, they sell you money. 😯 If you don’t have shoes, you pay someone to give you a pair of shoes. If you don’t have 100k for a house, you pay someone to give you that 100k. You pay them in the form of loan origination fees and interest. So really, we should simply change the word debt to leverage. The money we borrow boosts us to the place we need or want to be. We leverage the food industry so we don’t have to spend 12 hours a day on a farm. We leverage the mortgage industry so we aren’t stuck paying $1300 a month in rent when we could purchase the same exact house for $800 a month (or purchase a much nicer home for that same $1300). But...we will address the pros and cons of renting at a later time.
So, let’s get the entrapment thought out of our minds and instead look at it as utilizing a business service to improve our quality of life. Sound good?
Repaying Your Mortgage Is Not As Bad As It Seems
Now let’s unpack the fear of not being able to repay the mortgage. Instead of looking at the full mortgage amount and freaking out, let’s look at it in bitesize chunks: monthly payments. Whether you rent or own, you are going to have a house payment every month. Do we panic over rent payments and choose to live with our mom forever out of fear that we might not be able to make rent each month? Please. Even if we are scared about that, we just get a roommate. Or two. You can do the same thing with owning a home. If you lose your job, get another one. If you blow all your money and have nothing left over for the mortgage, start budgeting. If you are scared of a 30 year commitment, get a 15 year mortgage. If 15 years scares you, remember that if you choose to rent for the rest of your life that you will then be paying rent for the rest of your life. What’s that...60, 50, 40, 30 more years?? Either way you go, you commit for a very long time to pay for a place to live. So just reframe your mindset. And if at the end of the day you really do end up in a serious mess and need an escape clause, you can always sell your home and be free of your commitment in a relatively short time. Worst case scenario, even if you don’t have the time to sell your home the traditional way, you can always do an off market deal to an investor who will satisfy your mortgage commitment and take your house off your hands at a below market price in as little as seven days. There’s always a way out. But will your landlord let you off the hook with 9 months left on your lease? 🤷🏻♀️ Now that’s a gamble. And for those of you who have very real fears of being denied a mortgage or charged an arm and a leg for it due to the disgusting real estate practices that used to happen back in the day, I can assure you those days are over and that my lenders would never do you dirty.
So listen, debt is not the devil; it’s a service we can use to improve our quality of life. Having a mortgage won’t trap you. You have to make a house payment regardless, and if your life winds up in a way that you can’t make a house payment, you can always sell and free yourself from your mortgage commitment. Finally, as long as your credit score is a 580 or higher and you are employed, you can get a mortgage. If your credit score is below 580, I’ll talk to y’all in a few weeks. And shit if you don’t have a job, literally everyone is hiring right now. 😉