Photo: Marc Royce
Q: Since 1999 my husband has been a struggling entrepreneur in the restaurant industry. He didn't qualify for any small business loans, so most of the start-up costs and maintenance fell to me, the breadwinner. Here we are, eight years later, with no retirement plan or education fund for our three daughters. I'm at my wit's end and told my husband that after the commercial lease is up, I won't be investing more time or money in his dream. Instead I want to focus on purchasing a home. Everyone is saying to buy now because of the favorable market. But my credit score isn't great, and I owe the state approximately $8,000 in taxes from the failing business. Does it matter whether we buy soon or wait until our checkbook is in order?
A: Whoa, you sound angry with your husband. Before we get to the financial advice, step back and think about how he feels. It's not as though he wanted to fail. I'm sure nothing would have made him happier than to be able to support his family on the success of his business. It was your choice to finance the venture and pay the bills; no one forced you. My point is that you both bear responsibility for the situation, so acknowledge your role in where you are today and work together toward improving the next phase of your lives.
If your husband hasn't turned a profit yet, then it makes sense to close the business. But that doesn't mean it's time to buy a house. Whether the real estate market is hot or cold isn't the deciding factor. A house is probably one of the biggest investments you'll ever make, and you should dive in only from a position of financial strength.
Right now your finances are too weak for you to buy a home. The interest rate you're offered on a mortgage greatly depends on your FICO credit score. A low score means you'll be stuck with a higher rate that can end up costing you hundreds of dollars more a month. For example, based on recent rates, you could pay nearly $500 more per month on a $225,000 mortgage than someone with a great score. But just because your husband's business didn't take off doesn't mean your finances can't. Start raising your FICO score now, and stay focused on the goal of home ownership.