Buyers take advantage of low home prices

10.28.08
By Lewis Green

In an uncertain financial climate such as the present, it can be difficult to know how to behave with your money.

As Wall Street investors wonder if they should or shouldn't buy stocks, many average would-be homeowners are asking the same question about property. Do falling house prices present a good opportunity to purchase a home?

New figures from the Commerce Department reveal that some people seem to think the answer is yes. Sales of new houses rose by 2.7 percent in September, beating analysts' expectations.

Meanwhile, the median sales price fell to the lowest point in four years. Homebuyers paid around $218,400 for a new house that month, reflecting a 9.1 percent decline from the previous year.

Sounds promising, right? Well, it depends. In order to buy a house, of course, most people will need a mortgage - and this financial product has become increasingly difficult to obtain.

In fact, the September data reflect sales that were made before some of the most recent serious economic events - such as the failure of Lehman Brothers investment bank - took place. Recently, many lenders tightened their mortgage criteria.

This means you should be prepared to prove you are credit-worthy. When you apply for a home loan, lenders will check your FICO score. In the past, they were looking for people who rated at least 700, but now many look for scores of at least 720.

With that in mind, prospective homebuyers should be as meticulous as possible with their credit behavior, paying bills on time and seeking advice on how to boost their score if needed.

Consumer advocate John Ulzheimer told USA Today that people should be aware that lenders are applying "higher and higher" standards when assessing mortgage seekers.

"Don't give them any reason to think you're more risky than you really are," he warned.

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Homebuyers are seeking mortgages to snap up bargains