With the melt down of the mortgage industry at the moment, people thinking about getting their first home might be worried. It’s true that mortgage lenders are carrying bad loans on their books, enough so as to go bankrupt. The bad loans are coming from foreclosed homes. With the real estate market tanking, people who bought homes at high values are finding they can’t sell the place at even lower prices than they paid. It’s also true that several investment funds that bought some of these bad loans have closed their doors while they try to determine what the value of what they bought. Some of these funds bought the interest payments when the loan had a history of payment. Other funds bought the part of the loan that was paid, but again with the drop in values of both the dollar and of real estate, just what they bought is in question. The banks have acted recently by piping money into the market to prevent banks and investment funds from tanking. The banks have also made it more difficult to get a mortgage.
Does this mean buyers should put their plans on hold? Not necessarily. Buyers should decide whether they want a fixed rate mortgages or a variable rate mortgage. A variable rate mortgage might not be the best choice because refinancing such a loan might run into valuation problems. Everyone ought to compare mortgage rates before they choose. Buyers that are looking to buy a property that they intend to rent should look for loans priced for this market.
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