Unless you’ve been hiding in a closet for the past four years you know that property
values have fallen sharply. Add to that the fact that mortgage interest rates are as
low as they’ve been, well, ever. So does this combination of affordable pricing and
inexpensive financing mean it’s time for you to buy a home?
Here’s my take on the subject, which you may or may not agree with. I believe that
too many people are focusing only on the interest rates and I believe that’s a bad idea.
Remember, when you borrow $250,000 to finance a home…you still owe someone
$250,000. Just because the interest is inexpensive doesn’t mean that you should go out
and get into a lot of debt on a questionable investment that might still be losing value.
That brings me to my next point. What if the value of the house you buy today goes
down 10% next year? Nobody knows if we’re at a bottom of the market just yet.
According to mortgage sources, 28% of homeowners are underwater on their home
loans, which means no one of them can sell their house without some sort of unwanted
help such as a short sale or otherwise coming up with the difference in cash.
Having said this, if you really want a house then buy a house. But if you’re going to buy
a house do it for the right reasons. Buy a house you don’t want to rent, you love the
house, you love the neighborhood, or because the school district is good.
Don’t buy a house just because the rates are low. That’s like drinking yourself into a
coma because the drinks are free. Just because you can do it doesn’t mean you should
do it. Consider the low interest rate a bonus. And finally, in order to get those 3-4%
rates, you have to have killer credit scores and in many cases a 20% down payment so
you might not even be able to qualify.
“The Credit Guru”, Longtime FICO Insider & Credit Industry Authority President Of The Ulzheimer Group, LLC
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group, the Director of Credit Education at DisputeSuite.com, Credit Expert at CreditSesame.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 150 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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