is buying a home with a high interest rate a bad thing?

Answer 1

Look at it like this, if the rate is high and you do not buy it what can you do in the next year to change your situation? Will waiting improve your credit/financial situation any? Can you save a 20%-40% down payment if you wait. IMO if you are in a position where you can get approved on a home loan even with a high rate jump on it as long as you can afford it. Make satisfactory payments for 12-18 months and refinance. If possible make a large principal payment after you move in to off set the high rate. Just make sure it is a Simple Interest loan with no penalty's for early pay off. If there is a large penalty for early pay off you may want to rethink it.

Answer 2

A higher rate than the normal due to poor credit rating is not good.

If rates go up and they are this can be a great thing. Hear is how it can be to your advantage.
One of the things that is creating these out of wacky high prices is low interest rates, since you now have more borrowing power" they call it buying power but the truth is it is borrowing power.
When rate increase and the prices also reflect it the monthly payment will be the same.today an example of this would be a 100k loan 30 yr fixed at 5.4% will give you a payment of 562 per month. lets say you have the same payment of 560 per month and the rate goes to 15% you would only be able to brow 43.500$ less then half.
With higher rates sellers will drop there prices and hear is were it is a good thing for you to pay high rates and a low er price.
1 there is a lot more to deduct off your taxes.
2 if you pay your mortgage off or just a little more each month you now have a guaranteed rate of return off your money. this is a good thing.

Answer 3

There are many reasons people pay a high interest rate. It's not necessarily a bad thing. Depends on the circumstances. Can you afford the payments of a high interest rate? Is the property so wonderful that it's worth paying a higher interest rate and then refinancing when your credit is better... which it will be after some time making the mortgage payments in a timely manner... or when interest drops. Interest is very low right now, so why would you be paying high interest? Do you need the high interest rate to offset you income taxes?

Answer 4

Not necessarily. If it takes getting a high interest rate loan to get a below market price, it might be a good thing. I'm assuming the reason you are considering a high interest rate loan is because you may not qualify for a low interest rate loan. If a high rate is all you can get, it may be just what you need to establish good credit. The key is not to only look at the rate. Look at the price and potential of the property. Try to get a as low a rate as you can, but if low rates aren't available to you, make it up in finding an excellent value so you can turn it for a profit down the road and further correct your credit issues.

Answer 5

It's better to buy at a high interest rate than to rent. The money spent on rent just goes down the tube, while buying a home gives you both a tax deduction from the interest paid, and you are building equity. That said, you really need to be sure you can make the payments, and be sure to shop for the best rate you can find.

Answer 6

It all depends on the situation. If you have the opportunity to buy a house for a great price, then maybe the extra money in interest will be worth it. You can always refinance or get an ARM if you think the rates will drop.

If, for example, you take out a $150,000 30 yr. loan at 5%, you will pay almost $290,000 in the end. If you take out the same loan at 10%, you pay almost $475,000 total in the end. Clearly, the rate makes a big difference.

Answer 7

It depends on how bad you want the home? Have you tryed going FHA where the rates are better? There are many loan programs available, have you talked with a mortgage broker (one that underwrites for many companies?

Take into cosideration what you are paying now, add up all your bills (less utilities, cell phone), and decide if you can afford the home you are looking at. When you do decide, have your lender not have a pre-payment on your loan. You can buy out the pp at a cost to the rate of .50 to the rate (that is the norm). But it will allow you to refinance say in 6 months to a year, with out it costing you 2-3 percent pre-payment pentality.

A 100 percent loan - is not totally out of your reach - There are FHA programs, payment assistant programs to help you. Look at your middle credit score, if you do not know your credit scores - have your lender tell you, or pull your credit from the 3 credit reporting agencies - BUT the person you are working with should tell YOU.

Lenders look at the middle score to qualify a person - With a 580 or higher you can get a 100 percent 1 loan. If your credit is low, than you will be going SUB-Prime, and any amount over 80 percent does not have MI - There are alot of companies I underwrite for that does NOT charge MI - normally the rate is slightly higher.

If you go with a FHA loan, FHA has MI included. (With a 580 + you will be going sub-prime the rates are higher by about a 1 percent, but you have no MI. (MI is mortgage insurance in case you default on the loan, it is a way for lenders to have added insurance. It is not the same as Home Owners insurance, ok) VA loans do not have MI insurance.

Conforming A+ borrower's loans have MI included, but the rates are better starting in the mid to high 6's (with rates going up.) The more money you borrow - the higher the rate normally. There are a lot of factors involved.

With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true....


Go to these websites

http://www.nehemiahcorp.org/

http://www.fanniemaefoundation.org/...

http://www.fha-home-loans.com/

http://www.freddiemac.com/


ALSO -
When you Decide to buy, decide on how much you want to spend, if you want to escrow the taxes and insurance. Say the taxes are 1200 a YR and insurance 800 a year (just an estimate, ok) That is 2,000 a year divided by 12 = 166.66 If you paid 1,000 a month now - (166.66) your P/I Principle and Interest would be 833.34. Now you decided on the price range you are looking into. If you have great credit, a 1 loan at 130,000 at a rate of 7 percent over a 30 year time would be 864.89 - This is just a estimate - ok -

It greatly depends if you need help with closing cost, (The seller could do Seller Help toward your closing cost). If that is the case, I normally tell my clients NOT to hackle over the price, since you are asking for closing cost help - especially if the home is thru a realitor, and the seller has to pay the realitor their fee which runs from 3-6 percent of the selling price, and you ask for 3-5 percent toward closing cost -assistance) Follow me so far??

Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.


Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.

Answer 8

If you buy it in the short run and plan on resealing it, then no because you wont be paying that interest very long. The problem in that is that lender put a "early payoff" penalty in there contract that can cost thousand when you sell. You can tell them to remove it and that will cost you even higher interest. The only reason why, other than being an investor, that you would be offered high interest is that you are a high risk and maybe you should keep renting until you settle down.

Answer 9

That depends. The interest is tax deductable first off and if you really want to get into a home that is perfect for you and can afford the payment then do it. You can always refinance later. Be sure to check for a prepayment penalty on the loan so that you know how soon you can refinance without paying any penalties (usually 6 months of interest).

Answer 10

It depends on what your trying to do. If you want tostop paying rent and this is the best rate you can get then do it because if you pay your mortgage on time then it will improve your credit. This process can take just six months to a year.The trick is to do this you have to improve your credit by paying things on time and paying down the balances on those accounts. When your credit improves you refinance for the lower rate. If you need more help call me 410-802-3481or email [e-mail] I'm a Loan Officer.