Too scared to get a mortgage? You're not alone

Posted by  on Jun 14, 2012

Yes, it is the perfect time to buy in the opinion of many experts, but many would-be homeowners just can't make themselves. It's not that they don't have the facts, it's more that they are paralyzed by fear despite knowing that:

  • Mortgage rates can't get much lower and could in fact move a lot higher.
  • House prices have come down by as much as 60 percent in some markets.
  • In many Metropolitan Statistical Areas (MSAs), home prices have moved up slightly, signalling that the real estate market will soon hit or has hit its bottom.
  • They will have a wide choice of homes at all price points.

House hunters (and yes, these people had been actively looking) cited several reasons for their reluctance to move on a home purchase.

  • Fear of job loss
  • Foreclosure fatigue -- tired of looking at picked-over homes that needed lots of work
  • Fear of missing out on a better deal if prices go lower

When should you worry about getting a mortgage?

If you have good reason to believe that your job is in jeopardy, it would be silly to buy a new home unless your monthly payment wouldn't be any higher than what you currently pay. Pencil out a contingency plan -- could you afford the home while unemployed if you took in a roommate or two?

Not sure about your job security? If you have a decent relationship with your boss, ask. Tell him or her that you are thinking about buying a house and ask if you can count on your job. Some on the folks polled in an MSN Money survey reported on December 2nd did just that and got the good news that their jobs were safe. For those who may lose their jobs, however, now is not the time to buy a home that costs more than what you are paying now.

Getting a mortgage now: reasons not to wait

If you are in a position to buy, waiting for prices to head lower may hurt you down the road. For one thing, even if home prices drop a bit more, that could very well be offset with higher mortgage rates. For example, a 300,000 loan at a 4.25 percent interest rate carries a payment of $1,476. If the home's price drops, and you only need a $275,000 loan, your payment would be $1,353. But if mortgage rates increase to 5.25 percent, the payment on a $275,000 mortgage increases to $1,519.

In that case. waiting for the house price to drop further could cost you more, so getting a mortgage quote today could save you money.


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