Would you pay a higher interest rate on a loan?

Question

just to get the loan. My fiance and I have no credit and bad credit. We qualify for a home loan with 10% interest rate, but we can refi in a year with a lower fixed rate. If it was you and this was your last resort would you do it???

Also, any ideas on home owner's insurance companies??

Part of the problem is lack of credit. Also the house is selling for $90,000, but appraised for $150,000. And yes, we can refi in a year, because we will have built credit. We don't have negative credit history, we just don't have any credit history, and the payments are less than $800 a month, well within our range.

Answer 1

Boy thats a tough one. The key question is can you afford the monthly payment. The worst thing you could do sign up for something you can't afford and then lose it later because you couldn't keep up.

As for refinancing, yes you could certainly do that, but why are you under the impression you will get a lower rate? Won't you still have bad credit in a year? To establish solid credit you need more than a years worth of timely payments. Plus don't forget, you will have to shell out more money to refinance.

You should also make sure the prices of the housing market in your area is not on the decline. If it is on the decline, then my advice is to wait. Save more money for a larger down payment and at the same time work hard and improving your credit. Buy one in one to two years time.

If, however, housing prices are increasing in your area, then get in the game right away. It will only benefit you in the long run. But please only do it if you can afford it.

Answer 2

That's a tough question. Do you have to get a house right now? What about renting for a little longer and saving more money to use as a down payment? Besides, you have annual property/school taxes, house insurance, yard upkeep, and other costs to maintain your home that you may or may not be able to include in your mortgage.
And you could try working on fixing your credit. Pay off or pay down more debt and your credit will increase. Run a report to see if there are any discrepencies on it and get them fixed ASAP.
The interest rate seems high. And there isn't any guarantee that you would be able to refinance in a year for lower. What is one of you loses a job or something? Besides, refinancing includes more closing costs. Even though some companies will let you roll it into the mortgage...is it going to lower the rate enough for you?
My husband and I have high debt and not so good credit and considered doing the same, but opted to rent (at a lesser expense than a house payment) for another year to pay off some debt with any extra monies we get (taxes), improve our credit, and auto-deduct monies into savings weekly to build up a larger down payment.

Answer 3

Be careful. You could be out as much as $3,000 in fees for refinancing. You said you had bad credit, then you said no credit. That's two completely different things.
You should do OK if you can get it reappraised for at least $112,000 in a year. Refinancing is a whole lot easier for less than 80% of the appraised value. Then you get to cancel mortgage insurance too.

Answer 4

I would really try to keep shopping for a better rate. 10% is really bad. Assuming that you have some kind of downpayment, you should be able to do better then that even with less then perfect credit.