Home Mortgages and Home Purchases - Get a Grip
There has been a lot of discussion since the “mortgage meltdown” that mortgages are impossible to get, not affordable if you can get one, that generally if you are a first time buyer you are out of luck. I was a banker for over 20 years before I became a Real Estate Agent, including originating mortgages for my clients, so I have watched all of these developments over the last few years with my own unique perspective. I am not without judgment about what was happening in mortgage lending then and now, and in real estate purchasing as well. Here is some of my moralizing on what is real and imagined, what is reasonable and what is not.
The Mortgage Pendulum was Wildly Swinging over the Past 5 Years - As a banker ( until 2004 ) mortgages were cumbersome, paper work intensive, slow and unwieldy to get. When I got in to Real Estate, I started noticing that seemingly anyone with a thready pulse could qualify for a mortgage. The pendulum swung a little far back toward the the first scenario, but I believe it is settling to a place where it should be. It shouldn’t be a full time job to try to get one, but basic concepts like making the income to qualify for your payments, having paid back money lent to you in the past, and putting aside some money to pay for down payment and/or closing costs have been recognized again as crucial steps toward someone lending you money to help buy a house. Too often the attitude of buyers over the last few years has been ” I’ve decided I want a house, and I want the bank ( mortgage company, etc ) to buy me one”.
Mortgages Are Available - I have been working with a lot of first time buyers, and they can get mortgages. FNMA ( the government-guaranteed program ) can accept loans for a lot of house with as little as 3.5% of the purchase price brought to the table. This means lenders can originate these loans. If you are concerned you can not get a loan approval, speak to a lender before you start your house search, find out how much you can qualify for, and if there are steps you need to take now to get you ready to buy in the next 6-12 months. If you have been doing the right things already, such as working steadily, saving money and paying your bills on time, you should not run in to obstacles to getting a home loan.
Rates are Still Fantastic - Fogey Alert - when I got in to banking, the Prime Rate was 21.5%. Mortgage rates were over 15%. Through the 1990s, if I could get my clients a mortgage rate under 10% they were ecstatic. So don’t tweak if rates went from 5.25% to 5.5% while you are shopping. Don’t think rates are horrible if they go back over 6%. These are great rates. By all means, shop around so you don’t end up with the only lender over 6% if everyone else is at 5.5%. But if a 1/4 to 1/2 percent change in the rates is going to make or break your home purchase, I personally think you are trying to buy too much house. Trying to time the bottom of the rate market while you are home shopping is like trying to determine the right minute to sell your stock. An exercise in futility. And if buying your house is going to be a tight squeeze on your budget, get a fixed rate. A variable rate can make sense for many buyers, but you should know what your realistic plans are to know if this is right for you. Talk to your mortgage person, or me, to get a firm handle on your options.
Recent news reports indicate that the drop in home prices is bottoming out in many markets. Combine that with a first-time home buyers tax credit, great rates, available mortgages and a big supply of houses on the market, and you have an excellent time to purchase a new home. Just be realistic about what you can afford, and what you really need in your first house ( there will probably be others - after all, are you still driving your first car? ) .
Recent Comments