Is it a good Idea to buy a home right now?

Question

With all the subprime mess going on right now, how will this affect my chances of getting into a house with no down. My credit score is 680 but I'm a little weary on how lenders will treat me with all that is happening right now in the mortgage arena.

Answer 1

do yourself a favor...wait a year, opt out of any credit offers, no new credit, no late payments! one year, by that time, you will have the credit rating and be able to name your price.

Answer 2

Your credit score will qualify you to purchase a home. The problem with the subprime industry is the way they qualified their customers as well as the type of loans they sold. The most notorious loan is the Option ARM. This is a loan that sub-prime lenders feasted upon and what is, as well as, has brought them down.

An Option ARM (or negative adjustable) is a loan where payments are calculated at 1.00%. For example, a loan for $500,000 would have a payment of $1608.20 per month. While the lenders don't use this montly payment to qualify their borrowers, they certainly make it appear affordable to their borrowers. The real payment is actually $3242.99 per month. The Option ARM is a loan where you start off with very low payments which are based on 1.00% (or very close to that rate). At the end of the 3rd month, your rate becomes fully indexed (i.e. the real rate which is index plus margin). For today's market that translates to roughly 7.00%. So, if your payment is based on 1.00% and your real rate is 7.00%, then where do you think that extra charge goes? To you principal balance. In other words, your balance (using the loan amount above) increases by $1307.80 per month! This would be fine if the market continues to appreciate and rates remain low, but they won't. In the contract of these Option ARMS, there's a clause that prevents the balance from becoming too high. Usually, the maximum is 115.00% of the original balance. If the borrower continues to make minimum payments, the balance will reach its maximum limit in 3 to 4 years. At that time, the borrowers are forced to pay the fully amortized payment. Again with this scenario, the borrower will be forced to pay $4006.82 per month. This is why you see so many foreclosures now (and will continue).

All is not dismal! Rates are still historically low and there are other types of loans that make it affordable. If you can't afford conventional fixed rates, there are loans where you pay interest only for up to 10 years. There's no recast period (i.e. your payment more than doubling), so no danger. The period is 10 years as opposed to 3 to 4 years. Certainly within the forth coming 10 years, the market will change again by that time, will will have already have a home as well as building equity.

So, stay away from the Option ARM and opt for the Interest Only loans.

Answer 3

Yes it is a good time. Get your credit report first and see if there are any little things that are wrong first. I got mine and since I had not opened any new credit lines in a couple of years the report showed that I made half of what I make now.

Yes with the subprime thing you could pay a bit more now but........ people are defaulting on their loans right and left. People who are desperate to sell their house now are dropping their asking price. So if you get a house that is worth more and you pay a higher rate now, later you may end up ahead once the market evens out. At that point you will be able to refinance at a better rate.

And here's the thing. If you are renting right now that money is just gone and gone. Even if you have to pay a bit more now eventually you will have established a track record to qualify for a better rate later and will have invested the money in your house.

Answer 4

Find a good, reputable mortgage lender. Mostly likely one that does not advertise and is referral only.

Also, if you're a member of Costco or some other wholesaler see if they have a mortgage program. I bought my condo through the Costco program. Basically, you fill out the form and a real estate agent and mortgage lender contacts. The real estate agents are looked at for about a year before Costco lets them into its program. So not anyone can join. Also, Costco uses Lending Tree and a few mortgage lenders may call you. We had a great experience.

But if you can buy do it. If you're worried about the subprime junk, like I said search for a reputable lender. Good luck.

Answer 5

I'm not sure the subprime mess will hinder you buying a home right now. You have a decent credit score so I would at least talk to a mortgage company to see how they would treat your loan. I would only buy at this time if you are going to hold on to the home for some time. Not sure it's the right time to try and "flip" one.

Answer 6

680 is a good respectable credit score. Honestly as long as you aren't in debt up to your eyeballs than getting a 100% finance loan should be no problem. The sub-prime mess is because of people with 400-500 credit scores getting 100% financing and then defaulting. Your credit is good enough to qualify you for a decent rate and 100% financing. If you would like me to help you out with your loan e-mail me and I will offer you any help I can.

Answer 7

There are deals out in the market, your problem is the no money down issue. The no money down is a main reason for the collapse of the sub prime market, since the places being foreclosed on have a note worth more then the house thus the collapse of the market

Hence talk to a mortgage person but it may be very hard to get a no money down note in today's market

Answer 8

Call a mortgage broker (listed in the yellow pages). Tell them your score and ask about your chances of not having to go to a sub-prime lender.

If you don't have a copy of your credit report you need to get one (they are free on line) and see if there are any errors that need correcting in order to raise your FICO score.

My personal opinion is that you don't have much of a chance, though, with nothing down.

You are probably better off saving a down payment rather than risking foreclosure and complete loss of credit.

Answer 9

I think it is a great time for bargain hunters and first time home buyers. You did make a good point though, for someone looking to do a no down payment mortgage, you may see some higher rates due to foreclosures being on the rise. If you work anything to be able to put down a sizeable down payment, you will be ahead in the long run.

Answer 10

Take your time. I think it will be another year of many mortgage defaults, and that means more houses up for sale, which will drive the prices down even further. My personal opinion is that this is the start of a further decline, so you will be able to get an even better deal later this year. No rush. The housing market is not going up anytime soon.

Answer 11

I think it depends on where you live. Where I live is a better time to buy than sell. When the prices sky rocketed, buyers were getting interest only loans and are now coming to the time where their mortgage is going to go through the roof. If they really need to sell, they are going to lose a lot of money due to the drop in prices. For homeowners who have owned for a while, they are going to have to have a competitive price for buyers to buy.