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American Morning
Interview With Marion Asnes
Aired September 12, 2002 - 07:51 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: For many couples, we know owning a home fulfills the American dream, but the housing market right now still remains a pillar of the economy. There are signs, however, of a buckle. The foreclosure rate on home loans approaching a 10-year high right now, as more and more people fall behind on their home mortgages.
Marion Asnes of "Money" magazine, some advice on how to make sure you're not getting in too far over your head.
Great to see you again.
MARION ASNES, "MONEY" MAGAZINE: And good to see you.
HEMMER: Is this a nature of the economy right now that we're seeing? Is that why we're getting so close and so high for 10 years?
ASNES: Well, you're seeing a lot of people who are out of work for a very long time, and that, of course, would cause them to fall behind. But what you're also seeing is the unintended consequence of loosening credit restrictions over the past several years. There has been a very laudable effort to encourage every American to own a home and to help them qualify for that loan, but now we're getting some of the blow backs.
HEMMER: A good thing to note. Listen, the reason we have you on is because you have some tips for folks out there, who may be in this category.
ASNES: That's right.
HEMMER: No. 1: Do not borrow every penny for which you qualify.
ASNES: Yes. You know, what has happened right now with the whole home-buying process is that people go out and they get prequalified before they even start to shop for houses. And what happens is that you get prequalified for the maximum you can borrow. People, then, say, oh, boy, I can borrow so much money. I'm going to get a bigger house than I thought I could. Instead of saying, do I really want to borrow this much? What does that mean to my budget?
HEMMER: Spending money we don't have.
No. 2: Set your own limit.
ASNES: That's right. That is right.
HEMMER: Very critical, and I think a lot of that follows logic, too, if you're being sensible enough.
ASNES: That's right, especially now that credit restrictions have eased up so much from the lending side, in a sense, you have to be your own bank officer. Look at all of your debts, all of your payments, and figure out how much you can afford to pay for a mortgage each month. You should not be paying more than 40 percent of your take-home pay.
HEMMER: Forty percent.
ASNES: That's tippy, tippy, tippy top, and if you have kids who have this habit of, like, growing out of their shoes and stuff...
HEMMER: Right.
ASNES: ... you should pay less than that.
HEMMER: Not just tip top, but tippy, tippy, tippy top.
ASNES: That's right.
HEMMER: Listen, No. 3, I like the most actually: Learn the extra costs of buying a home. Once you get into it, then you find the traps.
ASNES: That's right. Well, one of the things that people don't realize is that if you haven't bought a house before, it's not just a matter of doing the down payment and paying the mortgage. You have big closing costs. You have costs for repairs that you may even know about before you go in...
HEMMER: That's right.
ASNES: ... but underestimate to yourself. And I have to tell you, I've had a few houses in my life, and you move in, and the house is perfect, everything is lovely, something breaks...
HEMMER: Yes.
ASNES: ... because things break in houses. So, you have to have that awareness that you need more money than just signing...
(CROSSTALK)
HEMMER: I'm almost losing time here.
ASNES: OK.
HEMMER: Go back to the tip list. Watch your own back. I want you to describe that a little bit more. Then, No. 5: Set aside emergency cash.
ASNES: OK. Watch your own back really is about being your own bank officer. It's really about saying, this is all that I can do. I want to be comfortable in my life. I am not going to take every loan that's offered to me. HEMMER: And that takes discipline.
ASNES: Well, it takes discipline, and it takes the willingness to protect yourself, because you know, lenders are in the business to lend you money. They're not in the business to give you things. So that you'll have to say, this isn't really worth it to me.
HEMMER: We'll look for the tippy, tippy top next time, too. Thanks, Marion.
ASNES: Thanks so much. Great to see you.
HEMMER: Great to see you.
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