Applying for a morgage - Predicting the Future

[Anonymous]

Hello all, Here is my situation. My wife and I are looking at houses. My info Equifax: 719 Experian: 694 Transunion: 724 Our combined income is 82,000. I currently have around 2000.00 in CC debt. My wifes scores are a little better than mine, but she has around 6000 in CC debt. Neither of us have any BK's or collections against us, and i'm disputing a couple of late payments (EQ has one listed EXP has 3 listed). We've been pre-approved thru our CU (Where we do all our banking and have all our bank cards thru) for 400k. I have 8k in an IRA I can withdraw for a 1st home purchase, she has ~5k in savings and I have another ~3k in savings. Given the current mortgage situation should we be thinking a 5/1 or a 7/1 or a fixed rate? Also, am I better off using my 3k for a down payment or should I pay off my CC debt to fish for a better rate? Thanks, Scottb400

[George2037]

I'm no expert but:

I think your scores are going to get you the best rate you're going to find right now (FED's meet next week, might lower rates), unless your going for a jumbo but with $82k a year I don't think your headed that way.  Arms are good for getting used to payments and building credit (which you don't need), other than that your at the mercy of the FED's on what your payment will be 1,2,10 years from now.

Depending on the price of the house and your CU restrictions (downpayment %) I would go with a fixed rate.  They are so much easier to refi later down the road if rates go even lower, but you are protected from increases.

Oh they have to use the score of the person with the highest wage......

[Anonymous]

Your scores are great and you have some reserves. If I were you I would take a Fixed Rate and if anyone wants to sell you a ARM I would run!!!!!!!!!!!

As for a down payment... Thats up to you! Just remember that the lower the loan amount, the lower the payment, and less interest paid over the life of the loan.  

[Anonymous]

I own a bunch of rental properties and have been a realtor for the past few years. My first recomendation is to wait at least another year or two to buy a house. The price to income ratio is way out of whack and prices nationwide need to drop at least 15% and even more in the bubble areas, over the next 2 years for housing to make sense. You can rent for less than the cost of ownership, and don't have to worry about whether or not you are catching a falling knife. If you must buy now for some strange reason I would go with a fixed rate. Right now rates are still near historic lows. If China decides to screw the US and sell off treasury bonds, you will see a sharp rise in long term rates. This will force prices to fall even further since that  $2000 dollars a month, at higher rates will buy less house. Just like the car business people don't look at the price of the asset, just whether or not they can pay the monthly nut. Short term rates will have again to rise sooner or later to salvage the dollar. If you buy now with an adjustable ARM you will find your monthly payment increase on an asset that has decreased in value. The best time to buy real estate is when interest rates are in the double digits. The higher the interest rates are, the cheaper homes become. Wait out the storm. The greatest Real Estate fire sale in the history of our nation will occur somewhere between the 3rd quarter of 2009 and 2nd quarter of 2010. Focus on having a 750 plus FICO score and some cash lying around, so you can buy your dream house from the bank at 60% of retail in a few years. I guarantee if you buy now, you will regret it in 2 years.

[mborgens]

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@Anonymous wrote:

I own a bunch of rental properties and have been a realtor for the past few years. My first recomendation is to wait at least another year or two to buy a house. The price to income ratio is way out of whack and prices nationwide need to drop at least 15% and even more in the bubble areas, over the next 2 years for housing to make sense. You can rent for less than the cost of ownership, and don't have to worry about whether or not you are catching a falling knife. If you must buy now for some strange reason I would go with a fixed rate. Right now rates are still near historic lows. If China decides to screw the US and sell off treasury bonds, you will see a sharp rise in long term rates. This will force prices to fall even further since that  $2000 dollars a month, at higher rates will buy less house. Just like the car business people don't look at the price of the asset, just whether or not they can pay the monthly nut. Short term rates will have again to rise sooner or later to salvage the dollar. If you buy now with an adjustable ARM you will find your monthly payment increase on an asset that has decreased in value. The best time to buy real estate is when interest rates are in the double digits. The higher the interest rates are, the cheaper homes become. Wait out the storm. The greatest Real Estate fire sale in the history of our nation will occur somewhere between the 3rd quarter of 2009 and 2nd quarter of 2010. Focus on having a 750 plus FICO score and some cash lying around, so you can buy your dream house from the bank at 60% of retail in a few years. I guarantee if you buy now, you will regret it in 2 years.

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I'm very curious about the dates of the real estate fire sale. Why not 2nd quarter 2009 or 3rd quarter 2011? I remember being a kid in San Diego in the early 70's and everyone saying the prices had to fall.

What happens to the predictions w/ the feds 1/2 point rate cut?

I agree China can kill us by selling off treasury bonds, but just as we would die, so would they die. If we can't afford to buy their poisonous crap, their booming cities would go bust. Are fates are now deeply intertwined.