The Bigger Picture

Dec 15th, 2007 @ 8:48 AM by Alden Smith

Anyone, unless they are living in an ice cave in the Antarctic, has heard so much about the mortgage crisis and the big meltdown that it has become blasé. From what we are hearing, no one should be able to get a mortgage at this time.  This is simply not true.  The focus on the mortgage crisis has been on people who have adjustable rate mortgages, and who have less than perfect credit.  Pure and simple.  Over eager investors and speculators have done little to help this situation, either.

The Facts

Opulent homes that are priced in the stratosphere are being depreciated, along with the homes that are lower priced and homes that are considered entry level.  Because these expensive homes are probably over appreciated, they have much farther to fall than homes that are more realistic in price.  Consequently, when the average homes falls in price due to troubles in the market, the more expensive homes have much further to fall in value due to being over priced.  Obviously, the hardest hit portion of the market brings down overall depreciation.  A home that is valued at 100K will certainly not depreciate in value as a home that is priced in the millions.

The Mortgage Meltdown

All we hear on the evening news is crisis after crisis in the mortgage market.  Gloom and doom is the watchword, and we are led to believe that no one can get a mortgage these days.  Nothing could be further from the truth.  Banks look for certain parameters when considering a loan:

* Credit score
* Verified and verifiable income
* Amount of down payment
* Your assets – savings, IRA’s, stocks you own, etc.

The bottom line is this – if you are in good shape financially, have paid your bills on time, and have sufficient liquidity, the banks will be more than happy to give you a good deal on a loan.  After all, that is what they are in business for.

To sweeten the deal, interest rates are at a low presently.  Using Loan.com’s interest rate calculator, we see that as of today, the range is from 5.75 -6%.  No matter how you cut it, those are good rates. Consider this – if you have a 150K home, it will increase in value when the market bottoms out. So if you buy now, when the crisis is past, you have a home that is valued at much more.  It is the simple fact of economics.  And everyone wins…