Two Important Considerations When You Are Buying a Home.

There are a lot of things to care about when you are buying a home, the most important being “How much is this house actually going to cost me each month?” That, of course, depends on the financing you obtain, and the interest rate that goes with it.

First off, let’s face it, the days of no money down to buy a house are long gone. Like the plague, they have departed the U.S. financial system, and are unlikely to ever return. In today’s real estate market it is doubtful that you will find any lending institution that is going to accept less than a 20% down payment without requiring you to also take out Private Mortgage Insurance (PMI). PMI adds a considerable amount of money to your monthly mortgage payment, so be careful. Take, for example, a $500,000 property. Your best bet is to make a $100,000 down payment and borrow $400,000 from a lender.

Here is where the second consideration comes into play. When it comes to establishing the fixed interest rate on your loan, you may find you have considerable wiggle room if your personal credit rating (commonly referred to as your FICO Credit Score), is 700 or higher.

The Score is based on five considerations:

• Your payment history

• The amounts you currently owe

• The length of your credit history

• Your latest credit allowance

• The types of credit you used

The first two items carry the most weight, and comprise 65% of your Credit Score.

On November 1, 2008, in the state of Arizona, if you were to take out a 30 Yr Fixed Rate Mortgage totaling $400,000, you would have had the following options:

Your monthly payment would range from a high of $3,296 to a low of $2,417, a difference of $879 per month or $10,548 a year. That’s not exactly peanuts. Again, it all depends on your FICO Credit Score. Scores can range from a pristine 760-850 (Excellent) to a dismal 300-499 (Poor). Regarding the latter, let me tender a word of advice. Anything less than a 500 rating will result in the Lending Officer merely offering you a consoling smile and a good-luck handshake.

Credit scores are on the rise. Two years ago borrowers with a score of 650 qualified for the most competitive interest rates. Today, you need at least 750-760 for the best deals. It used to be that if you kept your credit-card balance below 35% of your credit line, you qualified for a high Credit Score. Now 20% is the maximum allowed for a top score.

Nevertheless, as daunting as the road ahead appears, don’t be discouraged. Beside the power of positive credit, there is one other added incentive I haven’t mentioned. And that is, right now, the average price of an unsold Sedona home is anywhere from 25% to 35% below its original listing price. If you decide to delay your red rock destiny in the hope that prices will descend even lower, you are probably tempting fate more than you should. Remember, a “bottom” is never recognizable until you can look down at it from a new height on the other side.

For more information about your Credit Score, I suggest you contact Pam Bayles at National Bank of America or Donna Wiseman at M&I Bank, both in Sedona. Pam’s number is 928-204-3044. Donna’s number is 928-203-4481.

And if you would like my help in realizing your Sedona dream, feel free to contact me. I am at your service!

lee@leecongdon.com or 928-300-5050. Have a great day!

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