First Person: Bad Credit Turned Into an Extra $200 a Month on My Mortgage Payment

Although my credit is strong now and as a retiree my home buying days may be finished, I had an incident in my past where bad credit cost me money, every month, in the form of a higher mortgage payment. Each and every month I was reminded of my mistakes, and I knew exactly how much it was costing me. My mortgage payment at that time was $180 per month higher than what it would have been if I had perfect credit. And that was $180 per month on a payment that only totaled $1,100.

Several house purchases ago I was a struggling young public relations manager for Prudential Financial Inc. I had a wife and young son and a very small house just outside of Philadelphia. We wanted to have more children and knew it was time to buy a bigger home. We listed our existing house with a local realty company and began to shop around in the neighborhoods and school districts we knew were good. The real estate market was reasonably strong at this time and we didn't anticipate too many problems selling the house.

We began shopping around, mainly finding properties and open houses on our own, which I now feel is the wrong way to buy a house. Now, I find the best, most-effective Realtor in the area I'm interested in buying into and let them find properties for me. I shop around on my own, but always run anything I find on my own through the Realtor I'm working with. Experienced Realtors know about properties for sale far before the general public searching on websites does.

The problem that caused my bad credit started when we broke the cardinal rule of home buying. We bought a new house before we sold our old one. No matter how great the house is, or how much you love the area, never buy the next house until you sell the last one. And by sell, I mean signed off, check cleared in the bank, not just an deposit and agreement.

We trusted a local Realtor who advertised a "we'll buy your house if we can't sell it" guarantee, so based on that, we signed the deal for the new house. The guarantee turned out to be little more than a sales pitch, when it came time to honor the guarantee, as they had not sold the house within the allotted 90 days as promised. They balked at the price, and we were forced to take legal action against them. Meanwhile we had signed the contract for the new house and made arrangements to move our family already. Suddenly I had two mortgages.

The mortgage we got for the new house was an adjustable one, so a month later when the impact of having two mortgages (a huge amount of debt compared to my income) hit my credit, it raised our rate 2 points, causing the monthly payment to rise $180. The effect was a serious hit on my credit that lasted for a year or so, even after selling the first house.

We eventually settled with the Realtor who listed the old house and were free and clear, but to this day it's a very bad memory and one of the biggest financial struggles I've had to endure.

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