Interest Rate and Credit Score

[Sanchez]

Worst case scenario for the US "average" home price ...which is declining. I think it was $390K in 2022. So sure ...makes sense. That is a good amount over the life of the loan, but the alternative for everyone could be significantly worse. I think it's fair for the times we're in -the market will adjust and people can refinance down the road.

As I understand the OP, this was started as a discussion item. Several people quickly jumped on her to insist that the information she provided was false. It is certainly appropriate to discuss how much, how little or whether people will be impacted at all. So now the discussion is turning towards whether this fiat is fair - which is where it should have been all along. Unfortunately, too many people here want to protect their political turf.

 

[mom2rtk]

You don’t have to believe anything. I posted the actual schedules. You can do the math. High scores are up .125% unless you have a LTV under 75%. Then there is zero impact.

I get that. But not everyone can afford to put down 25%. And if you can’t afford that then maybe $40 really is a big deal.

 

[mom2rtk]

This is exactly why the adjustment was necessary. First of all, the $40 quoted in the article is WORST case scenario and no one is sure how many it will actually impact in the end. Like you, millions of others, who bought or refinanced at the all-time low rates have no skin in the game ...you'd be foolish to assume a new mortgage under the current condition. It isn't good for the overall economy if the housing market slumps due to lack of activity ...in fact, it's especially not good for you if you're a homeowner as the likelihood of your investment going down increases. So.... in order to keep things moving they recognize it will take buyers that either don't have a perfect credit rate or young people coming up that don't have established credit history. To protect everyone, including all us other content homeowners, this is the way they've decided to go forward for now. There's more to it than meets the eye....

Whether a bunch of people already got a good rate has no bearing on whether this is a fair and reasonable policy going forward. None of us knows when some sort of life event will push us to make a big change that includes financing a different home. And many of us have children who are just entering the home market and will be affected.

 

[GAN]

As I understand the OP, this was started as a discussion item. Several people quickly jumped on her to insist that the information she provided was false. It is certainly appropriate to discuss how much, how little or whether people will be impacted at all. So now the discussion is turning towards whether this fiat is fair - which is where it should have been all along. Unfortunately, too many people here want to protect their political turf.

Sometimes we're all shortsighted ...we're in this together. Maybe some are too young to remember the Trillions spent to revive the banking and housing industry 10-15 years ago ...we did PAY for that(well it's mostly debt now). So in my mind it's fair if it helps prevent that from happening again ..although different circumstances.

 

[RamblingMad]

I get that. But not everyone can afford to put down 25%. And if you can’t afford that then maybe $40 really is a big deal.

You still have to do the math. And since this is a fee charged by FM to the lender, you have no idea how this is flowing through.

Where do you get the $40 a month from? Can you show me the math to get there?

 

[GAN]

Whether a bunch of people already got a good rate, has no bearing on whether this is a fair and reasonable policy going forward. None of us knows when some sort of life event will push us to make a big change that includes financing a different home. And many of us have children who are just entering the home market and will be affected.

I have children as well ready to buy ..but they're either going to wait or pay. It wasn't fair for me either when I had a 6%+ mortgage and PMI on my first home. But here I am....

 

[Traveling on cc points]

Worst case scenario for the US "average" home price ...which is declining. I think it was $390K in 2022. So sure ...makes sense. That is a good amount over the life of the loan, but the alternative for everyone could be significantly worse. I think it's fair for the times we're in -the market will adjust and people can refinance down the road.

I suppose it’s a catch 22. Lower the interest rates too much and house prices go through the roof, raise them too high and people can’t even afford a starter home.

I am not well versed enough on the subject to know what the correct solution is but I still don’t feel that charging people who scrimped & saved more for a down payment and used their credit responsibly should have to foot the bill for those who didn’t/couldn’t.

You certainly don’t have to agree with me. Everyone is entitled to their own opinion.

 

[RamblingMad]

I have children as well ready to buy ..but they're either going to wait or pay. It wasn't fair for me either when I had a 6%+ mortgage and PMI on my first home. But here I am....

Builders haven’t built enough homes plus rates are high versus pre pandemic. And builders are building apartments instead of single family homes by me. Rent is also high.

It’s a mess. Best option is probably for kids to live at home and ride this out. Next best is to rent.

Housing inventory is also dropping by me.

 

[Party.Of.4-NY>>>FL]

There's more to it than meets the eye....

No, there’s less.

 

[RamblingMad]

I suppose it’s a catch 22. Lower the interest rates too much and house prices go through the roof, raise them too high and people can’t even afford a starter home.

I am not well versed enough on the subject to know what the correct solution is but I still don’t feel that charging people who scrimped & saved more for a down payment and used their credit responsibly should have to foot the bill for those who didn’t/couldn’t.

You certainly don’t have to agree with me. Everyone is entitled to their own opinion.

It’s essentially the poor credit or starter home bashing.

If you’re rich or already have a lot of equity, these changes have zero impact on you. If you’re buying your first home or have less than great credit, you’re screwed despite this change. Poor credit is unlikely to find a lender anyway. Starter home is unlikely to find a home to buy due to builders not keeping up, so their down payment will have less of an impact on equity. And high rates hurt everyone that’s buying that needs to finance.

Blame really lies with the builders. There are not enough starter homes. But let’s bash someone else.

 

[Ms.Minnie]

Yes would definitely be ideal, however if this was implemented an entire segment of the financial economy would be scaled back too much (accounts, auditors, irs employees). The complexity creates jobs. It will never happen.

This may be true, but I think the real reason it will never happen is that too many people would lose all their cushy loopholes. Can't have that happening. Why do you think Rupert Murdock pays less in taxes then his secretary? It's all legal but that doesn't make it right. A flat tax would or should eliminate the loopholes.

Editing to say the person named above should have been Warren Buffett as noted by another poster. Sorry for using the wrong name but what's the difference which rich person we use, they all have Legal loopholes to help them reduce their tax burden.

For those saying how high the mortgage rates are I have to remind you all of how high they got in the 80s. They were close to 20%, now that's crazy and talk about killing the market, that would be a market killer. The problem is that we have just gone through a period of historical low mortgage rates, and they are now adjusting themselves to a more normal lever. I hope the rates do go down again, it's good for all of us and keeps those working in the mortgage and housing markets employed.

 

[GreatLakes]

That is great! Congrats to him!
I 100% think that there should be a required class in public high school that teach about credit scores and how much it really takes to live on your own. Some parents either can’t or don’t prepare their kids on this topic.

We had this in either 6th or 7th grade through Junior Achievement. We had classes on how credit scores work, how credit cards work including the actual cost of paying only minimums, and a class on filing taxes. We also had an economics elective in high school that went over some of these things but it was an elective.

 

[GAN]

I suppose it’s a catch 22. Lower the interest rates too much and house prices go through the roof, raise them too high and people can’t even afford a starter home.

I am not well versed enough on the subject to know what the correct solution is but I still don’t feel that charging people who scrimped & saved more for a down payment and used their credit responsibly should have to foot the bill for those who didn’t/couldn’t.

You certainly don’t have to agree with me. Everyone is entitled to their own opinion.

I agree -I don't like it, but what I like and what may be necessary are two totally different things.

 

[Ms.Minnie]

It’s essentially the poor credit or starter home bashing.

If you’re rich or already have a lot of equity, these changes have zero impact on you. If you’re buying your first home or have less than great credit, you’re screwed despite this change. Poor credit is unlikely to find a lender anyway. Starter home is unlikely to find a home to buy due to builders not keeping up, so their down payment will have less of an impact on equity. And high rates hurt everyone that’s buying that needs to finance.

Blame really lies with the builders. There are not enough starter homes. But let’s bash someone else.

I will agree that it would be nice if there were more affordable homes that didn't need a ton of work which only ends up costing the buyer more money. Those who don't have the skills or knowhow to do the work themselves are kind of screwed.

On the other hand, I can't agree with you about people with bad credit being bashed. There are always going to be exceptions to that group who through no fault of their own may have fallen victim to credit problems due to circumstances beyond their control. The best thing they can do is contact their creditors, explain their hardship and try to work out a payment schedule that will work for all. On the other hand, there are people out there who just don't give a d_m and just don't pay their bills as they should. They find other ways to spend their money that doesn't include the financial obligations they have committed to. I don't want to have to pay for them.

 

[Ms.Minnie]

We had this in either 6th or 7th grade through Junior Achievement. We had classes on how credit scores work, how credit cards work including the actual cost of paying only minimums, and a class on filing taxes. We also had an economics elective in high school that went over some of these things but it was an elective.

Should be mandatory.

 

[Mackenzie Click-Mickelson]

Builders haven’t built enough homes plus rates are high versus pre pandemic. And builders are building apartments instead of single family homes by me.

In my area average was listed as 14 months to build a new home, back in 2014 when we built our house it was 7 months on my side of the state line and 6 months on the other side of the state line. It's def. a crunch for new homes for this reason combined with existing homes people are staying here in the metro in their homes rather than moving out of the metro or transitioning to other housing (such as older moving into senior facilities as an example).

It is true that builders are building apartments also in my area but it's also true they are building homes as well. The apartments seem to be going up faster than the homes presently but really the crux of the problem for both new apartments and new homes is the price point. Providing apartments for people to rent as opposed to entering the housing market under homeownership doesn't really pan out when those apartments are also quite high in style which translates to rent as well. Basically no one is able to get ahead in the end.

The interest rates being high at least as explained by real estate experts in my area have had not as huge of an effect people spoke about would happen. Sure having a high interest rate is a big problem but it's just really an added on compounding effect to an existing housing market issue in my area. Before the pandemic my area was listed as having about a 2 month supply that tightened to about 1 month supply or less during that 2020 time period when people were scrambling to buy homes en masse it seemed like. I'm not sure what it is now but probably just as bad.

I've got 3 homes being built across the street from me. The one mostly finished dropped in price a tad and is now $750K, the one next to it $803K and the one next to that one $792K. Those price points used to be the highest of our neighborhood (in fact like the very highest). We're in what is considered the lowest tier of the neighborhood...

 

[JaxDad]

Why do you think Rupert Murdock pays less in taxes than his secretary?

Did you mean Warren Buffett? He has talked about paying a lower tax rate than his secretary.

 

[Traveling on cc points]

We had this in either 6th or 7th grade through Junior Achievement. We had classes on how credit scores work, how credit cards work including the actual cost of paying only minimums, and a class on filing taxes. We also had an economics elective in high school that went over some of these things but it was an elective.

That is great to hear that some states are doing it!
I lived in Connecticut when my daughter was in middle & high school and they didn’t have it in the public schools. My daughter went to a private school where they did have it as an elective. One of their big projects was that every student was given a different career with a different salary and they had to write up a budget with all their bills and fun money. It was pretty eye opening for a lot of kids to see on paper what their parents have to pay for.

 

[Ms.Minnie]

Did you mean Warren Buffett? He has talked about paying a lower tax rate than his secretary.

Yes, I guess that's who I should have named but what's the difference? One rich man for another rich man...they all use the LEGAL loopholes in our tax system to their benefit. Who wouldn't ? Nobody wants to pay more in taxes than they have too.

 

[RamblingMad]

Yes, I guess that's who I should have named but what's the difference? One rich man for another rich man...they all use the LEGAL loopholes in our tax system to their benefit. Who wouldn't ? Nobody wants to pay more in taxes than they have too.

Taxes are lower on dividends than ordinary income. That’s the tax code.