Posts Tagged ‘credit score’

It kind of looks like the whole worlds economy is going down the tube lately.  How did this happen?  Where did we go wrong?  Who is to blame? Yada, yada, yada.  I hate to break it to you but the world economy is on the brink of collapsing because of the US housing market.  It’s true! You see for the past 5 years or so, as a result of easy money and complete disregard for credit risk, home prices have been going up at an alarming rate.  Yes alarming but nobody bothered to sound the alarm or warn anybody because we were all to busy making money, and in the case of the home owner, spending money like there was no end in site.  All a home owner had to do was refinance every two to three years with cash out to wipe out their high interest credit cards and pick up a couple of hundred dollars a month in cash flow.  I can’t imagine what people were telling themselves as they met their trusted mortgage officer for the third time in 5 years to do it again.

Here is the bottom line if you are a first time home buyer today.  Don’t ever use your home as a bank, save for a down payment, protect your credit score like you would your own new born baby, and never go over 90% loan to value on a refi.  Owning your first home is great but it’s not worth it if you are house poor as a result.  I hope the home buyers and home owners of the future learn from the home owners of the past and don’t end up building another house of cards.

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I’m sure you have heard more than enough about the pending government bailout of Wall Street and all the bad mortgage debt that they own.  If you ask me, I say Wall Street needs to go down with the ship.  It was their greed and the games they played with a thing called derivatives that had as much to do with the mortgage meltdown as anything else.  That said, how will this affect the first time home buyer?

Bottom line is it will be way tougher to get a loan than any of your friends that bought a house 12 months ago.  Lenders, what few that are left, are being more and more picky about who gets a mortgage.  12 months ago someone with a 640 credit score and a low debt ratio would have qualified for as good a rate as almost anyone else.  Today a 640 score will cost the borrower severely in terms of a higher rate, almost a full 1% higher.  This means that today, looking at just one lenders rate sheet, if you have a credit score of 740, you would get a 30 year fixed rate of 6.0%.  If your score is 740, your rate would be more like 7.0%,  which makes a big difference in payment.  These new guidelines are from Fanni Mae and Freddie Mac, who I’m sure you have heard of in the news.  These are the two government regulated organization that made a market for mortgages.  These are also the two companies that recently were taken over by our government, which means you and I are part owners, because they were about to go bankrupt because of all the bad mortgage debt they had on their books.

We are in for some difficult times in the near future but it won’t last forever and if you are a first time home buyer with a high credit score and low debt, you will always be able to buy a home.  To find homes for sale, real estate and mls listings, visit www.mlsmaps.com