Normally the kind of mortgage advice we give is for people who may need to get out of their mortgages. But what if you're seeing to dive into the housing market? What kind of mortgage advice do you need?
Well, it literally is a buyer's shop out there with over a million foreclosed houses alone available for sale! If you're curious to take a new job or just like the idea of owning the place where you live, this might seem like a great time to spend in a mortgage and in a roof over your head.
With that in mind, as Realtors we do have some solid mortgage advice for you.
First, don't think of any house you buy as an investment. Yes, you may get lucky, and asset values might rise enough for you to get some money out of the house after your mortgage is paid off, or even before. But if you look at your house as an speculation bank that's going to constantly pay off for you-well, those days are long gone.
It's much more likely that the asset you're seeing at will fall in value before it ever rises again.
The next thing you need to know about mortgages is that there is one kind of mortgage that you should never, ever get-even if you have to walk away from the sale. That mortgage is called an adjustable rate mortgage, or Arm.
With Arms you get a nice, low monthly payment for the first 1-7 years, depending on the terms you get. After those 1-7 years, though, the mortgage resets to reflect inflation. And it keeps resetting every year after that. Sure, if inflation goes down, you'll see a decrease in your mortgage payment. But don't count on that happening!
When you're applying for mortgages, the mortgage lenders are going to be seeing at something called a loan to value (Ltv) ratio. That's the ratio of the amount of the mortgage to the actual value of the house. For example, if you take out a 0,000 loan on a 0,000 house, you'll have an Ltv of 87%-you'll owe 87% of the house's current value on your mortgage.
Mortgage lenders are only likely to write you a mortgage if your Ltv is 80% or less-especially these days!
We know that there are some incredible-looking deals out there. asset values have dropped so low in some places that you might be able to buy at least a condo outright! But before you decree to make a mortgage commitment of any size, we want you to ask yourself these questions:
· How is this area economically? Is the economic base diverse enough that you aren't going to be as likely to have to move and then be stuck in a mortgage you don't want to pay anymore?
· asset values are likely to drop even more before things get better. And it's unlikely we'll ever see a real estate bubble like we did while the past decade and a half. In that case, would your money be best spent on a mortgage or on your financial future?
Finally, be sure to get person beside a mortgage lender-or anyone else who has a stake in your financial decisions-to give you personalized mortgage advice based on your family's definite situation. You're going to want to learn as much as you can online, of course, but there's no substitute for a suited person who can tell you how the ins and outs of mortgages can affect you personally.
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