As the housing market continues to slowly gain traction this year, it becomes ever more important for buyers to move back into the market and remove the slack from the glut of houses on the market. In order for this to happen mortgage companies are going to need to work with lendees to find a happy middle ground. While taking out loans has become more difficult and the standards applied are now more stringent, getting home loans is not impossible. It can be done with some planning and foresight if you are the potential buyer.
If you are planning on buying or building your own home then you need to plan ahead. First thing to do is make sure you can take several months, up to a year to build up a nice down payment in savings. It should be at least five percent of the purchase price, but 10% is a better number. The days of zero down and zero closing are gone. Factor in closing cost also. They tend to run around $5,000 for a typical home. Establishing how much you can actually afford to spend on your new residence is also a key factor in the decision. If you can only afford a $1200 a month note then you should be looking for a home around $150,000 depending on interest rates.
Interest rates are currently at historic lows and locking a fixed rate mortgage is a great idea. ARMS may have a lower initial rate, but as rates move back up over the next several years, you will pay a lot more in interest as time moves forward. Not a great idea for your home loan note, especially if you are planning on staying in the home more than 5 years.
If you already own a portion of your home because you have lived there for several years, or built up equity then a reviews rex agreement may be a great option. These type of loans are at no interest and essentially you “sell” a portion of your house to the buyer who then waits for the house to sell before they collect their money and any additional percentage, which is usually based on the home appreciating. This can be a great option for someone who needs cash quickly for another reason, but doesn’t want to take a conventional interest baring loan.
The important thing to consider is that you don’t rush into a decision and purchase a home own a whim obligating yourself to large long term debt payment.