Jan 30, 2008

Getting a Mortgage Isn't What It Used to Be

All this talk of foreclosures, interest rates, trouble in the mortgage industry--what does it mean if you're a first time buyer?

Here's the picture a few years ago: the market was hot. Buyers, without a single penny down, financed 100% of their purchases, with historically low interest rates. Some didn't have the income to support a fixed-rate payment, so they either used stated income loans (sometimes called liar loans, because income information was often fabricated) or creative adjustable rate mortgages (interest only, frequent adjustment periods, option ARMs, or some combination of these) to lower monthly payments, increasing the overall amount they could borrow.

The picture today: According to an article at CNNMoney.com, you can probably forget 100% financing. Plan to put at least 5% down--10% if you're in a falling market. If you need a jumbo loan (more than $417,000), you'll also find that it costs a little more. And if you have a low credit score, you'll probably have to pay an additional, upfront mortgage fee.

But the good news? Interest rates have stayed pretty low, and prices in most places have come down while inventory has come up. It's a buyer's market--a savvy, solvent buyer's market, that is.

Alayna Schroeder