Credit worthiness and down payments matter more than ever in today's market.
Although the recent housing slump and tighter lending standards have affected the ability of some people to buy a home, millions of people are buying homes across the country, often at great prices. If you are one of them, here are three things to keep in mind:
1. Having a down payment of 10 to 20 percent will make it easier to qualify for a mortgage in today’s market. If you can’t come up with that much cash there are still loan programs that don’t require buyers to put a lot of money down. However, you have to have good credit, and you must be able to document your income and assets to qualify for those loans when buying a home.
We still do some loans that are 100 percent financing for people with 700 credit scores and are able to document enough income. The interest rate on such loans might be higher than for loans where borrowers make larger down payments.
2. Mortgage interest rates are still on par with historic lows. You’ll likely get a lower interest rate if you can make a 20 percent down payment when buying a home and the rates will go up if you make a smaller down payment.
Ten percent is better than 5 percent, and 5 percent is better than no down payment. You’ll also save money on your monthly payments if you make a 20 percent down payment because you won’t need private mortgage insurance (PMI). Most people pay their PMI premiums monthly as part of their house payment.
3. Carefully consider neighborhoods when you’re looking at buying a home. Areas where home values are falling or where many homes have been on the market for several months may be risky if you don’t plan on staying in the home for very long. When you go to sell the home, you want to be able to sell quickly, and get at least as much for the house as you still owe on the loan principal. Lenders will also look at the value of the home when you apply for a mortgage and may be less likely to extend credit if the neighborhood’s recent sales (and thus the property’s appraised value) look shaky.
If you have any questions, please give me a call or send me an email.
Geno A. Tucci, Sr.
United Mortgage Services, Inc.