If you read MP Dunleavey on MSN, well she's also taken to writing for the NY Times. I like reading the message board hosted by MP called the Women In Red. There is a lot discussion about money from a female perspective. Anyway this week Mia writes about her decision to purchase a new home.
This does not sound like a bad idea at first. Great time to buy with lower interest rates recently, prices of homes dropping meaning good deals to be had. However, reading the article it sounds like a clear cut case of the GIMMES, and I WANT IT NOW!
Mia chose to make a full price offer on the house. Because location is everything, no one knows if this is a good or bad deal. However a day after their offer a second competiting offer in cash came in. She felt she had NO CHOICE but upping their offer to match the deal or lose the house.
What's the problem? First, her initial offer was already at the edge of her price range, because the counter offer was SOLIDLY out of their price range. But they went and offered it anyway. What? Well MP DUNLEAVEY literally said they "Bid first and did calculations later."
That is the worse possible financial advice or dribble ever written. I nearly spewed my drink reading her justifications about why they needed this "dream home". That if they missed this home they would only have regrets. She says they moved forward against her better judgement and logic because it felt right.
Of course not having all the numbers she isn't even worried. Well neither would I, because MP Dunleavey probably has NO IDEA how much debt she just took on. Do you think she calculated how much the Principal, Interest, Taxes, and Insurance (PITI) for each house is individually and how much of her gross income it is? How much the two mortgage would be of her sole income? Nope.
Instead they are flying by the seat of their pants. They have no cash reserves in case they are unable to sell their old home, find a tenant, or if a major repair comes up. They cannot afford a new washer and dryer! They can't handle if anything breaks in the new house.
How is this in any way, shape, or form a good idea? This is a roadmap to bankruptcy. I hate to say it, but she's quickly travelling down the path of no return. One misstep and they will fall into a deep abyss of debt. But hey, writing this makes it seem all the more real. The mortgage mess we're in as a society, here's another contributor!