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Posts Tagged ‘loan’
Needing Loan Help Could Mean a Lower Credit Score
We all know that the housing market has been struggling with all the economy problems and many people are in need of help to help pay their bills, their mortgages, and to avoid foreclosure. Many homeowners though are getting a not so good surprise when they ask for another loan. Many are finding out that their credit ratings are going down.
The Obama administration’s loan modification program can help borrowers who have made their payments on time but are close to defaulting, but this can also lower their credit score by as much as one hundred points. A lower credit score can mean big problems when trying to get a new job or another loan in these hard economic times.
Many people are angry that a program specifically designed to help home owners also comes with this nasty surprise. Many home loan counselors and borrowers both see this surprise as being very unfair. Still, there are many people that see it better than facing a foreclosure which means that a credit score can be severely low for many years impacting a good portion of many advantages.
In order to enroll in Obama’s plan, “Making Home Affordable”, people have to enter a trial period in which they make at least three payments. After this trial people though many people are seeing their credit score go even lower than it was before they applied.
People really need the program though and can face even more serious financial problems if they have to face foreclosure instead. So even though this program has its surprising downside, it is still helping so many people that have no where else to turn. Before considering this program though, it is important to know that your credit scores will drop and it is important to ask questions and get all the information that you can. “Look before You Leap” takes on a whole new meaning for many home borrowers with this program.
Views: 98How Rising Interest Rates may Affect Your Mortgage
Like most homebuyers, you’re probably trying to take advantage of this buyer’s market. There are a lot of foreclosures available, and maybe you’re waiting for just the right one, hoping to save thousands of dollars on your new home, and still cash in on the first time buyer tax credit. But waiting too long could end up costing you thousands of dollars, a lot more than you’ll save on waiting for a low enough price.
The current average home price in the Syracuse area is right around $120,000. The current interest rate average, for someone with good credit and minimal debt, is somewhere around 5.5%. Assuming that you have saved the recommended 20% for your down payment ($20,000) and that you will be taking out a 30 year loan, your monthly mortgage payment will be right around $550. During the course of your loan, you will pay a total of $205,000, with $105,000 of that going for interest alone.
If you wait a few months, the average interest rate is expected to reach 6%. Take that same loan, and see how even a half percentage point can affect the amount of interest you’ll be responsible for over the next 30 years. At 6%, your total payment climbs to $216,000. Your monthly mortgage goes up to $600. With just a half interest point more, you end up paying a little over $10,000 more for your home.
That’s not too bad; a little less than $50 a month extra. But what if it takes you a while to find a great deal on a home? Now the interest percentages are up to 7%. Your monthly payment is just over $660, and the total cost of your home is $239,500. You are now paying almost $35,000 more for the home that would have cost only $205,000 total six months ago. That’s a huge difference for most people.
I’m not advising you to rush out and buy the first home that you see. A home is an investment, and you should take the time you need to find the right one. At the same time, don’t pass up a home that you love because you think that you might be able to get a better deal later on. There’s no guarantee that you will find something similar for a better price. At the same time interest rates start rising, home prices are also starting to go up again.
If you close a home before December 1st, and you’re a first time home buyer, you also qualify for up to $8,000 back (during the 2010 tax season). That means that the difference between buying a home now, instead of waiting until some point next year, could be around $43,000, not counting any increase in sale prices. That could be a new car, or significant remodeling, to get your update and improve your new home.
No one can say exactly how quickly interest rates will rise. Usually the changes are gradual, but even a small change can equal a significant difference in what you will be paying over the length of your loan. If you find a home you like now, don’t wait for a better deal. The sooner you act, the more you can save.
Views: 41