Low FHA Loan Rates and Bottomed-Out Housing Prices: Is Now the Right Time to Buy?

By Barbara Marquand
Mortgage Credit Problems Columnist

Three-quarters of renters think owning a home makes more sense than renting, according to Fannie Mae's recent national housing survey.

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But more than half, 54%, believe their credit history is too poor to qualify for a mortgage, and 47% say they would be unable to afford buying and maintaining a home.

Does that sound like you? Determining whether you can afford to buy is tricky, especially if you have less than perfect credit. Here are five key things to consider:

1. Poor Credit Mortgage Rates and Housing Prices

With today's low mortgage rates and housing prices, the difference between monthly rents and mortgage payments is the lowest in almost two decades, and in some markets the gap is less than $100, according to a national study by Marcus & Millichap Real Estate Investment Services. Further tipping the balance in favor of buying, home ownership can be a good long-term investment and provides tax advantages.

2. In Need of Credit Repair?

Get copies of your credit reports from AnnualCreditReport.com, and find out your credit score to see where you stand. The higher your score, the better your chances of getting the best mortgage rates. You can enter your information on this page to get informal quotes. If you can't qualify for even a bad credit mortgage now, work hard to pay down debt, get overdue accounts current and pay bills on time to improve your credit.

3. Your Savings

You'll need at least 3.5% of the purchase price for a down payment plus a few thousand dollars for closing costs if you get an FHA loan. Government loans like FHA, VA, and USDA have the lowest down payment requirements.

4. Your Budget

Factor in more than just the monthly mortgage payment to determine whether you can afford to buy. You'll also pay for all the utilities, homeowner or condo association fees and upkeep. Financial experts advise to set aside 1% to 3% of the purchase price each year after you buy the home to save for major repairs. Can you afford the extra savings?

5. Staying Power

Stick to renting if you plan to move away in a couple of years. In most cases you need to stay for at least a few years for appreciation to make up for the costs of moving and selling.

Don't despair if now isn't the right time to buy a home. Save money, repair your credit, and your time will come.


http://www.qconline.com/ / http://www.sfgate.com/ / http://www.fanniemae.com/

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