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What Is a Good Credit Score in 2009
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What is a good credit score and how do I get one? These are going to be common questions among home buyers in 2009, and with good reason. The definition of "good credit score" has changed over the last couple of years, as a result of the housing crisis that spread through our economy as a whole.
It's hard to put an exact number on this without first defining what a good credit score is. For example, is is the score at which you can qualify for a mortgage loan? Or is it the score that allows you to get the best interest rate on that loan? These are two different levels, so you can see why it's hard to define it precisely. The Definition of Good Credit Has Risen One thing we can say with certainty, however, is that the definition of what's considered to be a good credit score has gone up over the last few years. For example, consider the following:
I was recently watching a financial expert on television, and she was explaining what it takes to get the best rates on a mortgage loan these days. Back in 2006, a borrower would need a credit score of 620 or above to qualify for the best interest rates. But in May of 2008, just two years later, that same buyer would need a score above 750 to get those same rates.
Given the current state of the economy, lenders are simply refusing to loan money to people with bad credit. It's too much of a risk for them, given what has happened over the last few months. So here's one thing we should all be able to agree on. While the definition of good credit will vary depending on who you ask, the vast majority of consumers in this country can benefit from improving their credit scores as much as possible.
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Mortgage Interest Rate Predictions for 2009
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What the Experts Say
U.S. News
The interest rate predictions offered in this article on the U.S. News website are less optimistic than my own. Quoting the 2009 mortgage predictions given by HSH, the article predicts that rates on 30-year fixed mortgages will exceed 6% by the end of the year.
New York Times
This article on the New York Times website quotes the interest rate predictions given by the economic forecasting guru from the Mortgage Bankers Association. She said they expect to rates of 5% or slightly higher through most of 2009.
Business Week
This article by Business Week quotes sources from Freddie Mac, who predict that mortgage rates will remain relatively flat throughout 2009. They expect to see a hovering between 5% and 5.25% for most of the year. It's worth noting that Freddie Mac has a lot of influence over the rates being offered by mortgage lenders, because they buy loans from those lenders. Not Everyone Gets the Best Rates Keep in mind that these rate predictions pertain to best-case scenarios. Just because a lender offers a rate of 5.25% on a 30-year mortgage doesn't mean you'll qualify for it. In order to qualify for the best deals on a home loan, you'll need to meet the lender's definition of a "well qualified borrower." This means having a credit score of about 720 or higher, having a favorable debt-to-income ratio, etc.
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Montreal Real Estate Board's advice on buying a home: - With mortgage interest rates at an historic low, it's a very good year to consider buying. Buyers will have more negotiating power this year than in years past. Supply is up and prices are stabilized, not inflated. - Negotiate your mortgage BEFORE you start shopping for a home. This will get you looking in a price range you know you can afford and will give you negotiating power when it comes time to make an offer. - If you're a first-time home buyer, you can use up to $25,000 of RSPs toward your down payment. - Despite all the good news for prospective buyers this year, don't buy for the sake of buying. Make sure the purchase make sense for you and your life and meets your needs. The low interest rates and special programs should just be the bonus. - Do your research and know what homes are selling for in the areas you're looking. That will arm you with better negotiating power.
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Selling Your Home in 2009
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Montreal Real Estate Board's advice on selling your home:
- Don't be afraid to sell this year. The real estate market in certain areas is shifting to a buyers market, but even still, sellers should be able to get fair market value for their homes this year.
- Manage your expectations. It's going to take longer to sell your home this year- average will be around 65-77 days.
- This is not the year to flip a home or try to turn a profit. Prices are expected to drop by 1% this year. Homes for the most part will sell for fair market value.
- Don't overprice your home. It won't sell. And you'll burn your listing-- that means, if your home stays on the market for too long, prospective buyers will start to become suspicious about your property. They might assume there's something wrong with your home if it's been on the market too long.
- Get your home evaluated by multiple agents before you decide on an asking price. And know what equivalent homes in your area are selling for.
- You shouldn't need to renovate too much before selling but make sure you get your place homestaged. Professional homestagers re-decorate and re-arrange furniture to maximize the space and esthetics in each room.
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Real Estate News
