What Rich Homebuyers Like Mariah Don't Need to Know

ADVERTISEMENT

Mariah Carey reportedly has snapped up a $5 million retreat on a chic island in the Bahamas. The butterfly-obsessed, style-metamorphosizing pop singer bought an ocean-side compound on exclusive Windermere Island, sources told the celebrity real estate blog The Real Estalker.

The artist formerly known as Mimi, one of the most successful performers in pop music history, shouldn’t have any trouble paying for the 4,000-square-foot pad. Her new single “Touch My Body” just made its radio debut and an album, titled “E=MC2”, a reference to Einstein’s Theory of Relativity, is due out in April. The house purchase was supposedly a gift to herself to celebrate the album.

Looking to buy your own home, but lack Mariah’s pile of platinum records? First-time homebuyers don’t need Einstein’s brain to navigate this tricky time in the real estate market, but they should keep their eyes open about how the subprime mortgage crisis has changed the game.

On one hand, experts say, it a great time for many new buyers to take the real estate plunge. Interest rates are lower than Mariah in her unseemly-breakdown-on-“TRL” days, but the market is as wide open as her five-octave vocal range.

“It’s a buyer’s market because there are so many REOs (real-estate owned properties) and foreclosures happening. That means you have the opportunity to lowball on offers,” says Gabe del Rio, the vice-president of lending and home ownership at the San Diego nonprofit Community HousingWorks.

But on the other hand, first-time buyers should expect more scrutiny than Mariah’s red carpet wardrobe choices get on E! Lenders who lost billions on risky loans to people without strong financial track records are demanding extensive proof of an applicant’s assets and credit history.

So-called “liars loans” or “no-doc” mortgages where lenders simply accepted an applicant’s word are a thing of the past, says Cathy Pareto, a financial advisor in Coral Gables, Fla. (Editors note: They really did that! Even though these loans would result in a higher interest rate and a larger required down-payment, loans were given out on one’s word of assets held and past/current job history. Crazy.) “They got pretty lax with it, but now the banks are really starting to crack down,” she says.

Expect to be asked for two or three years of tax returns and several months of bank statements and pay stubs. Also, prepare to be quizzed about your credit history. Before the credit crunch, some lenders extended loans to people with credit scores in the low 600s, but many now want to see scores over 700. About 42% of Americans have scores less than 700.

One way to look at it, says Indianapolis mortgage broker Keith Bergfeld, is that the subprime mess swept away shady deals and predatory lending practices that catered to people who really could not afford homes and left only “plain vanilla” mortgages aimed at those with strong credit and reliable incomes.

“There are a few pockets where underwriters are requiring large down payments, but for the vast majority of the country, people with good credit and stable finances can still get 100% financing,” Bergfeld said.

If you don’t have Mariah’s staff of lawyers, managers and agents to guide you through the process, a homebuying class is key, says del Rio.

“When I explain things to people who are losing their homes, they always tell me that they wish they would’ve understood this before they bought their house. Everyone regrets not being informed,” he said.

With so many houses on the market, home seekers can afford time to take classes, do research or fix problems in their credit history. “The way the market is now your dream house will still be available in a few months,” Pareto said. Or, in Mariah’s case, your dream island house.

 

 

Show Comments

Back to Top