Do your credit score need to be higher to get an interest only or ARM loan? Are the downpayments higher? I have a median score of 602, income/debt ratio is fine. Looking to buy a house to stop wasting money in rent. It will not be my dream house and moving in 5-7 years will not be a problem. The housing market in my area is doing ok, dont anticipate any problems selling later.
2007-07-05 16:35:15 · 6 answers · asked by da_red12 2 in Business & Finance ➔ Renting & Real Estate
Forget buying, work on getting your credit score higher or you'll pay throught the nose on the interest rate.
Terry S.
2007-07-07 13:19:41 · answer #1 · answered by Terry S 5 · 0⤊ 0⤋
If you have a down payment 10%-20% and your income verse debt works then you should be able to find a lender to give you a loan. Interest only should be able an option, but will be a higher interest rate then the amortized loan.
To answer your question though I need to straighten it out a bit, b/c you can have both interest only (IO) and an adjustable rate mortgage (ARM) at the same time. A 5/1 ARM IO is a loan that is fixed for 5 years adjustable every year there after - with an ineterest only option for the fixed portion of the loan. There are also 5/1 ARM with a 10 year IO option. Then there are 30 year fixed with IO options -- thus not an ARM, but still IO.
Check out my website. Email me if you want more info on credit or lending. I am in CA, but might be able to help in other states.
2007-07-06 01:05:14 · answer #2 · answered by Wildfire Ranch Horse Rescue 2 · 0⤊ 0⤋
Hi Da Red, quick and simple - your credit score is not "crappy" , it could use some improvement and depending on what derogatory credit you have on your c.report, it may be easily fixed with a few dollars well spent - BEFORE you sign any final papers to get into your new home. Interest only loans do require a higher score on average, but that depends on a lot of factors including whether or not you're self employed or W-2, will this be your primary home / second home/ vacation home or investment home, and how long the tradelines on your credit report have been in existance. Like the other member advocated, you should shop around for an honest and knowledgeable mortgage broker, in my opinion - honesty is more important. As long as your broker is honesty he can get any answers for you that you need and make sure your loan is moving smoothly assuming he works at a respectable company (see better bureau of business) there will be supervisors / managers / mentors there to help them get the answers you need and make sure they don't make any lasting mistakes along the way to getting you in your new home. On that note,
My name is Richard and I am a mortgage consultant. The company I work for is Streamline Mortgage in Albany NY, we originate loans all over the coutnry however. I am more honest than I am knowledgeable, but as I said I believe thats more important in my humble opinion. Give me a call anytime during the week 10am to 8pm and I should be at my desk ready to pick up the phone. 1-800-963-2603 Extension 119, or RMendelson@ez-mtg.com. Hear from you soon I hope!
2007-07-06 01:42:29 · answer #3 · answered by Attilla M 1 · 0⤊ 0⤋
With your credit score, buying a home is not a wise idea at this time. You will pay much higher rates than someone with a strong credit score. You'd do much better by continuing to rent for a couple of years and getting your credit score up by at least 100 points.
Interest only loans are never a good idea for the neophyte homeowner. They are only appropriate for financially savvy buyers and generally even then only in rapidly appreciating markets. The fact that you even ask the question indicates that you are not sufficiently astute with finances to take that risk.
An ARM might be OK as long as you get a rate lock that lasts at least as long as you intend to live in the home. Locks are available for 5 and 7 years from most lenders. If the ARM's fixed rate is sufficiently lower than a fixed rate loan it might be worth it.
Don't fall for the sucker line that rent is wasted money! It is NOT! You need to pay for shelter and that's exactly what rent does. In some parts of the country mortgage payments are less than rent for a similar property. If that's the case in your area, buying might make sense even with your credit score. If not, put the excess into savings and work on that credit score.
As far as an investment is concerned, housing isn't all that great of a deal. While values have increased substantially in some areas of the country over the past few years, the increase over the long term is much more modest. And if you look back over the past 100 years, most housing has barely kept up with inflation. The increase in the value of my home that I've owned for 7 years has already outstripped what the sellers gained in the prior 20 years!
2007-07-05 23:52:29 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 1⤋
Hi, my suggestion to you would be to get yourself a mortgage broker/agent/associate to help you with your decision. They will take a look at you credit bureau and then they would recommend the best method for you.
Hope this helps :)
2007-07-05 23:59:14 · answer #5 · answered by financelady 1 · 0⤊ 0⤋
Your credit is crappy, and an interest only loan isn't smart for someone with marginal credit.
2007-07-05 23:38:54 · answer #6 · answered by Anonymous · 1⤊ 1⤋