Practice what you learned

Select the advice you feel is best.

Donte is 30 years old, a good age to be thinking about getting a home. But he has some complications:
  • He has no down payment. He's been spending 100% of what he makes, even though he knows that he should have been saving something out of every paycheck
  • He has big credit card balances. It seems he has actually been spending 110% of what he makes.
  • He has some missed payments, showing irresponsible credit history.
  • He has two leased cars with large monthly payments.


Correct! Donte's spending habits show that he needs to learn how to live within his means. He should stick to his budget for several months to prove to himself that he is capable of living happily within the limits he has established.

Before he even thinks about buying a home, he should change his understanding of his financial responsibilities so that he won ’t have to stretch his budget to afford a traditional mortgage.
Incorrect. Donte is better off establishing good spending habits before thinking about home ownership. He definitely should live on a budget that will help him pay down his debt and improve his credit. His spending habits show that he probably needs to learn how to live within his means. He should stick to this budget for several months to prove to himself that he is capable of living happily within the limits he has established.

He should not focus on getting a mortgage with a low down payment and low monthly payments. Borrowers who fail to qualify for traditional fixed interest loans have often ended up with exotic loans that are costly in the long term.

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