Answering Important Mortgage and Lending Questions

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More and more often we are seeing reports on the news about stricter mortgage lending guidelines, lower interest rates, housing prices that continue to decline and discussions about how the real estate market is faring today. So if you are in the market to buy a home, how can you tell if it is the right time? Contact Teresa Hagood, Superior Bank Home Loans, Mortgage Lending Manager,  ofc. 256.532.2660, cell 256.227.7727, email to find out if its the right time for you. There are few key questions that repeatedly come up with existing and prospective clients considering buying so here is some clarification on those points.

How Does It Compare to Purchase Today Versus a Year Ago?

A year ago rates were about a point higher. So for instance, if a homeowner purchased a property for $200,000 at an interest rate of 4.875% but this year they were able to secure the same home at 3.875%, it would translate to a payment about $100 less on the average $200,000 purchase. What this means is that buyers have more buying power in today’s market with these low rates and it is a great time to buy.

Despite our experiencing a steady economic time we are still seeing the homes at very low purchase prices. When you combine that with the fact that there are some people who are tired of waiting or that need to sell their homes right away it is a recipe for success for buyers. We are seeing quite a bit of homes for quite a bit less – some of them up to 5% less than what we were seeing even a year ago.

How Can We Boost Our Credit Score?

Many consumers who want to get into their first home, refinance or even buy up are finding it a difficult feat especially with the overall economic outlook in the country. Lenders are practicing even more stringent guidelines and practices than what we witnessed in the 2005/2006 time frame when it seemed anyone and everyone could obtain financing. Nowadays there is a lot of emphasis placed on the homebuyers’ credit score. Where at one point they might have been able to secure financing despite having FICO scores lower than 620, now lenders refuse to entertain applications that don’t meet this minimum score requirement.

To help consumer wishing to improve their credit there is a system used by some lenders that involves inputting credit information into a simulator to yield results that show exactly what needs to be done to improve the scores to the desired level. There have been cases where in as little as one week, a credit score has improved by as much as 30 points! It is worth it to investigate this possibility if your score is less than desired or standing in the way of your buying a property.

Is Now a Good Time to Refinance?

There are people who purchased or refinanced several years ago at what seemed a great rate at the time, say about 5.5% but with today’s rates even those seem steep. The question many homeowners have on their minds is whether it is a good time to refinance. Mortgage professionals are seeing a lot of people with 30-year fixed rate mortgages who are going down to a 15-year mortgage. In many of these cases the payment per month does not change much. At this time, interest rates on 15-year mortgages are basically about in the low 3’s. One way to discern whether it is a good time to refinance or not, is to compare 30-year to a 30-year mortgage and see whether you can save at least one percentage point to as much as a point and a half. For mortgages that have an unpaid balance of at least $200,000 a refinance would make sense when the percentage drops by that much.

Alternatively, homeowners can opt to reduce their loan term from a 30-year to a 15-year term, thus shaving off a significant amount of interest from the loan as well as cutting the period in half. Consumers may see their payment go up slightly but the tradeoff is worth it.

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