|
Based
upon media reports, the United States is facing the most
serious economic crisis since the savings and loan
debacle of the 1980s and perhaps the worst housing
crisis since the Great Depression.
A U.S. Conference of Mayors’ report estimates 1.4
million homeowners will face foreclosures in 2008 and
will walk away from houses worth $316 billion. Some of
the nation’s largest mortgage lenders find themselves in
financial turmoil as well.
For the past several years, we’ve enjoyed low interest
rates, rapidly escalating values in some regions of the
country, and some lenders and homebuyers gambled on home
values continuing to soar. In the current crisis, with
more stringent loan standards, fewer people are able to
purchase homes at current market values.
Many of the 5,000 independent community bankers across
the nation in more than 18,000 locations will review
home mortgage documents of current homeowners, provide
information for those in the market for their first
house and help those looking to purchase new homes or
refinance existing mortgages.
There are several steps you can take to protect your
home. Educate yourself on your credit score. In a report
from John Ulzheimer, head of Credit.com Education
Services based in Atlanta, individuals with credit
scores between 700 and 850 are considered the best
credit risks and will receive the lowest interest rates.
Consumers who have scores between 620 and 699 will
usually get a loan, but not the best interest rate.
Those with credit scores below 500 usually fall into the
subprime category and often fall victim to “predatory”
home loans. These loans could involve misleading sales
tactics from lenders with little regard whether the
borrower can actually repay the loan.
Be sure you understand the difference between an
adjustable rate mortgage (ARM) and a fixed interest
rate. With an ARM, your interest rate will fall or climb
based on current interest rates.
 |
While you may have a very low interest rate for a
certain period of time, when interest rates soar, so
will your mortgage payment. A fixed interest rate, on
the other hand, will last over the life of your loan
without any unexpected payment increase down the road.
According to James P.
Gaines, a research economist with the Real Estate Center
at Texas A&M University, 65 percent of occupied homes in
the United States have a mortgage. Of those mortgages,
75 percent have fixed interest rates and 86 percent of
those mortgages are considered “prime”, the interest
rate available to homebuyers with the best credit.
However, of the estimated 14 percent of mortgages that
are considered subprime, more than half of those are
ARMs.
Have a full
understanding of your mortgage payment before you sign
the papers. In order to qualify you for a loan, some
lenders might exclude the taxes and insurance premiums
to give you a lower monthly payment. While that may
appear less expensive, keep in mind that it is a lot
more palatable to stretch your insurance and tax
payments over a 12-month period and roll them into your
monthly mortgage than it is to try to find the money to
pay in full when the tax man cometh and your homeowners
insurance policy is due.
We would all be
well-served to remember that the primary purpose of a
home is for shelter — not for investment. However,
history has shown that over the long-term, home
ownership is a cornerstone of sound financial planning.
If you have any
questions concerning your home mortgage, visit your
local community banker and talk to a common sense lender
who will help find a mortgage that is right for you.
CONSUMER TIPS is provided as a public
service by the Missouri Independent Bankers Association
AND
Community Bank of the Ozarks
P.O. Box 43
Sunrise Beach, MO 65079
(573) 374-5245
1-800-927-4314
www.cbobanker.com
|
