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More Americans are renting, either by choice or due to unforeseen financial difficulties. Mortgage defaults caused by high unemployment have started a stampede of former homeowners to rent homes. The National Association of Realtors reported that the number of first time home buyers entering the housing market is declining, while the number of investors picking up rental properties is rising. The numbers suggest that tightened lending standards are pricing all but the wealthy out of the mortgage scene.
Many states are overwhelmed by foreclosures and high unemployment, such as in Florida, Arizona, Nevada and California. Because of stricter bank lending practices, even highly qualified home buyers face severe brow beating on their income, savings, existing debt and credit history before they can get a mortgage.
Falling mortgage rates & home prices
Low mortgage rates are great if you can qualify for them. Most borrower's today can't qualify for a mortgage because they either have no equity left in their home, can't sell their home, or don't have the required credit or down payment. The key problem is that the high unemployment rate, tight credit criteria and large amount of homeowners underwater on their mortgage are all keeping demand low regardless of the price of credit. Interest rates used to be a big driver in terms of people getting into the real estate market and thinking that now is the time to buy. Today's consumers have become more concerned with what's going on in the economy and what's going on with the real estate market, people are more focused on still-falling home prices.
Where are the deals?
With foreclosures and short sales still making up one third of this housing market, the outlook for price increases, or even price stabilization remains bleak. An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the recession.
Markets such as Las Vegas, Phoenix, Miami and Florida are filled with short sales and foreclosures. Properties are often damaged and require thousands of dollars (or more) in deferred maintenance, rebuilding or renovating. To find them, you'll have to hire an agent who knows what he is doing, has connections with the foreclosure and real estate owned (REO) inventory. Look for property where the seller has a large amount of equity and has to sell, but is confronted with a neighborhood full of short sales and foreclosures. In all likelihood, the seller will have to price the home which is in better shape to compete with the short sales and foreclosures.
Mortgage approval
Many analysts say that things will only improve for borrowers with small down payments when the unemployment falls substantially. Families who have experienced a recent period of unemployment or a decline in their earnings also have a hard time meeting the strict underwriting rules now being followed. You'll have the best chance of getting approved, with the least amount of hassle and the lowest possible interest rate, if you have at least an average credit score. If you have below-average credit, you should probably pursue an FHA or VA loan.
Home buying tips
Every situation is unique and every homebuyer will have a different set of circumstances. It is important for those buying a first home to factor in the additional costs of the mortgage loan when deciding how much they can afford to pay. Things like closing costs and the high price of private mortgage insurance can drive up costs and eat into funds that would otherwise be available for closing. In some cases sellers may be willing to pay some of the closing costs, and some lenders will be able to negotiate those closing costs downward. The key is to ask those questions before the closing date arrives, and to be prepared to search for a better deal if necessary.
First time home buyers should be on the lookout for any hidden fees. These fees can add up to thousands of dollars on closing day, so be sure to scour your paperwork for any such fees. If you are unsure about the legitimacy of any charge be sure to ask for a valid explanation. An experienced real estate attorney can provide valuable insight into which fees are reasonable and which are out of bounds.
And of course home buyers should not lose sight of the home itself in the quest for a mortgage. Any defects should be pointed out to the seller well before the closing is to take place. The costs of every needed repair should be carefully negotiated prior to the purchase, and buyers should always follow up to make sure that all requested repairs have been made. A home is a major purchase, and it is important to make sure that everything has been taken care of before moving in.
Courtesy of: Home Mortgage Calculator |
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