One Setback Away

When I was a not-so-wee lad taking real estate classes for my Broker's license (this was before the bubble burst), part of the requirements was to take a finance class.  I remember distinctly having a very heated discussion with another student about whether there was ever a better time to rent than buy.  I pointed out in New York and in many other prosperous countries in Europe, there were a lot of people who rented rather than bought and their economies weren't affected.  Others argued that, "The only direction home prices can go is up" and that "No one who ever owned real estate has ever lost money".  Obviously we've learned over the past half decade both arguments are not true.  There are still a lot of people who are underwater or barely treading after purchasing a home.

This new WSJ article points out that many people currently are just 1 setback away from financial ruin.

As I've told all of my clients--
-Talk to a lender and make sure you qualify for a loan BEFORE you start searching.  They'll run your credit, look through your finances, and point out anything you need to fix.
-Don't stretch yourself to the point that you have to worry if something catastrophic happens (see the WSJ article)
-Make a budget! If it's cheaper to own a home than rent (don't depend on the mortgage interest tax deduction), buy.  If not, rent.
-There's no shame in renting. 
-A kid can't tell the difference between a rented home and an owned one.