News and Commentary

Economic Doom And Gloom Versus The Value Of Your Home

By Cameron C. Martel

Something strange happened, and if you were born before the mid-1980s you likely know all-to-well what it was: a recession.

This recession has been so widely hyped up for many reasons, the least of which include the folding of several major American banks and the bankruptcy of an entire country (you did what you could, Iceland).  However, more than anything, this recession has been so widely pumped-up simply because it was the first major recession that an entire generation of people had ever experienced.  For those born in the 1980s and beyond, a recession was something they had never had the pleasure of experiencing.  Until now, that is.

Not only that, but the Internet and the world’s ability to send and receive information in a tenth of a second makes it easier than ever before to transmit news.  Of course, doom and gloom sells nearly as good as sex, and that’s what’s been all over TV and the Internet.

Economic Recession Myths: You Can Still Buy a Home, Dummy!

One thing that seems to be circulated more than anything is the myth that the recession, with all of its economic hardship and financial disparity, has made it impossible for your average Joe to purchase a home or obtain a mortgage.  To be blunt: if you believe that, you are wrong.

In fact, now is the time for a qualified buyer to snatch up great deals!  The only people who are going to be taken for a ride when purchasing a home are the people who aren’t qualified to do so (hey, isn’t that how we got into this mess in the first place?).  Are you a qualified buyer?  If you meet the following criteria, then you may very well be:

1. You have a down payment – You don’t need to have 25% of the purchase value as a down payment, but having as little as 5% can take you from under-qualified to prime lending material.  Do you due diligence and spend some time saving money before you start shopping.
2. You have decent credit – This one isn’t as important as you think.  Yes, good credit is still an obvious requirement for purchasing a home, but you can also play with this value a little.  Paying down your current debt is always a great way to improve your credit, but don’t discount the value that your down payment can play.  Someone with a FICO score of 650 (the North American average) may not obtain a mortgage with a 5% down payment on a $450,000 home, but they may be able to obtain that same mortgage with a 15% down payment- or if they assume the mortgage of the current homeowner.  Food for thought.
3. You maintain a consistent lifestyle – No lender is going to give you money if you are very ad-hoc with your spending and credit.  If a lender runs your credit bureau (which they will) and sees that you’ve tried to obtain a mortgage as well as $75,000 worth of other credit they are likely going to see you as a greater risk than if you had no other credit applications in the last year or two.

You Don’t Need Great Cards to Build a Great House

The people living under a house of cards are the people that won’t be obtaining mortgages.  All this talk of a “new economy” is really just the lending market going back to basics: people with good credit, savings, and a down payment are the people who are going to enjoy prime mortgage rates and lending opportunities.

Be smart, clean up your credit, and save some money for a while.  Sure, it may mean living in your apartment for another couple of years, but it could be the difference between a mortgage at a competitive interest rate and no mortgage at all.

Do you think the recession has axed your chances at obtaining a mortgage? Think again. Buying your dream-home is still a very real possibility, despite the recession.