Interest Rate Predictions
On the front page of CNBC this article appears. Mortgage Rates jumped from 4.91% to 5.32% in just one week! Looks like we really need to keep an eye on interest rate predictions. The 10 year treasury yield uptrending has DEFINITELY pushed mortgage rates MUCH higher. WOW!
Mortgage Rates Forecast Getting More Clear?
Over the last few weeks, many people have been attempting to forecast mortgage rates. Prior to last week most mavens leaned to the side of the fence that said mortgage rates would head lower. Well, after getting a bounce, the mortgage rates forecast looks to be getting a little more clear. If sure seems with treasury yields heading higher that mortgage rates will follow. It will be interesting to see what President Obama and Ben Bernanke have to say about this though.
For those of you who have to opportunity to lock in at extremely low Wells Fargo mortgage rates, consider yourself very lucky because you never know when that chance may come again.
Is Now the Time to Rent Instead of Buying a Home?
Many housing markets have seen home prices drop more than 50% in the last three years. Most home owners who bought a house in the early 2000’s have lost money on their investment. While all home purchases are not an investment, many buyers expect to see the value of their home appreciate rather than depreciate. To make matters even worse, those that did buy homes during this period have been paying interest on an investment that has been losing money. Is now the time to rent instead of buy a home?
Before this question can be answered, you must first look at your credit situation. If you have bad credit and are underwater in your current home, now is a time to rent instead of buy. Many home owners who are moving to different areas are finding this to be the only option as they cannot sell their previous home. By renting an apartment or home, you have the opportunity to save money and not be saddled with any interest or debt. It is a great way to pay off any other debt that you currently have.
Some living conditions are not ideal, but the economy is not ideal either. Renting a home offers some great discounts in today’s housing markets. Some homes that were once worth over $250,000 are being rented for $1,000 a month. How is this possible? The owner of the home is trying to make ANY money possible as they are unable to sell. It is better to make $1,000 a month than $0 a month.
On the other hand, now would be considered a GREAT time to buy a home if you have good credit. For all the reasons outlined above, houses are being sold well below their value. If you have been smart with your money and have a substantial down payment saved up, you can get an amazing deal. To make it even more alluring to purchase a house, the government is doing everything they can to lower mortgage interest rates.
Ultimately, you need to be honest with yourself and analyze your current financial situation. If you have been responsible with your money and have some money saved, now is a great time to buy. If you have been lenient with your spending and your credit score is not about 720 renting might be the best option for you.
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Buying a House with Bad Credit
It is very easy to deny the fact that financial problems are a way of life in America right now. We do not want to think about finances and definitely do not want to deal with them when the economy is not going well. Luckily, Americans are finally being honest with themselves and realizing that they do, in fact, have bad credit. Having bad credit can make it difficult when buying a house or refinancing a mortgage.
Mortgage lenders are analyzing credit scores much more closely in the current economic environment due to the Subprime Crisis. Lenders realize how important it is to provide funding only for those who will pay it back. With this knowledge, improving your credit score may be the biggest financial move you make in the next decade, other than buying a house of course.
Americans are currently carrying an average of $8,000 in debt and this number is rising. It is predicted that the number could rise drastically as Americans are resorting to buying on credit during the economic crisis we are currently in. To get those historically low mortgage rates that are being advertised your credit score must be 720 or higher. If your score is above this level, you will qualify for the best loan programs and the lowest rates, all things being considered. This will make buying a house much more affordable and easy.
If you are below the 720 level, the mortgage interest rate you receive will be a bit inflated. Expect a rate about .15% to .2% higher if you are in the 700 range. If average mortgage rates are 5.5%, you are likely to get an offer around 5.7%. While this may not seem like a big difference, it can end up being about $100 more a month on a $200,000 mortgage loan.
As your credit score decreases, your mortgage interest rate increases. Remember, lenders have to worry about risky borrowers defaulting as they have made bad financial decisions in the past. If your credit score is in the 620 range, expect to pay around 2% more in interest on your mortgage. This is a HUGE difference when it comes to the monthly payment. You could end up paying over $300 more a month and a total of $100,000 more in interest for a $200,000, 30 year mortgage loan.
As you can see from the graphic above, a bad credit score can greatly affect your mortgage interest rate when buying a house.
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