FIRST-TIME BUYERS HAVE ADVANTAGE ON COMPETITION
HOME LOANS, TIPS FOR BUYERS
December 16th, 2008
The New York Times recently published an article pointing out the advantage first-time buyers have in the current housing market. The primary reason first-time buyers are in a superior position is they do not have a home to sell in order to buy now. Most buyers have to sell their existing home before they are in a position to buy a replacement property.
Sinking home prices and interest rates also make this an opportune time to buy according to the article. Rarely do all these elements come together to create a buying environment perfect for first-time buyers. The slower market has a side benefit of greater selection of available homes and sellers willing to make repairs, credit buyer cash for closing costs, or both.
Despite the fact that home prices increase over the long run, buyers still worry that prices will continue to decline. In that case, buyers timing the market should pay down their credit cards and other loans prior to applying for a mortgage loan. The best rate and terms are only offered to buyers with credit scores above 720, according to John Ulzheimer, president of consumer education at credit.com. He also recommends prospective home buyers avoid using credit lines to borrow money, even if you pay it off in full each month, because credit scoring systems penalize those that use their credit lines frequently.
Self-employed individuals may have a difficult time securing a loan in the current credit enviornment, even with excellent credit scores and a sizeable down payment. The self-employed have a difficult time documenting their income and lenders want W-2 forms to fully account for their income.
Avoid closing credit accounts to decrease the amount of credit available. Once closed, these accounts with good history’s are not used to calculate your credit score. Maintaining zero balances on credit cards can also work against you because it does not prove you are capable of making timely payments. If you do carry a balance, keep the balance at 50% or less of the available credit limit on that account.
Conumers are entitled to free credit reports by going to www.annualcreditreport.com. I would also recommend buyers work with a local loan representative in the area they live because developing a good working relationship with a local banker has never been more important than now to navigate the ever-changing underwriting standards for home loans.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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