Since the real estate frenzy has settled down and prices are at more normal levels, it’s a great time to pick up bargains! Rates are still at historic lows, despite what the media would have you believe. There has been a lot of noise about adjustable rate mortgages, and how people are getting caught in these mortgages that all of a sudden have a substantial monthly payment increase. The hit to the sub-prime market was a direct result of lax lending guidelines for people with challenged credit, and allowed un-qualified people to get loans for which they were not capable of repayment. These loans were typically programs such as a 3/1, 5/1, etc. which are fixed for the first number of years and then adjust after that, enabling people to get into a home with a lower monthly payment at first, the idea being that they are expecting to increase their income or pay it off before it adjusts. Other programs with an even lower payment start are called Option ARMS and can adjust monthly or have a certain period at a fixed minimum payment (less than an interest-only payment) and/or accrual rate (fixed interest rate). All of these programs have distinct advantages and disadvantages and are not for everyone. One must have a plan! As there are many homes on the market these days, there is a lot of competition for able buyers, and smart sellers are offering incentives such as buying down the interest rate, paying closing costs, or of course lowering their asking price. Buyers are getting more for their money than a year ago, and with interest rates at about the same level more buying power also. 100% financing is still available, as are many, many other programs for people with good credit. For lower credit scores however there has been a significant tightening of guidelines, and some people will have to wait to buy.
