What is the future for the mortgage industry? What can I do if I want to purchase a home now? Should I wait for this thing to settle down? Not ever...
What is the future for the mortgage industry?
What can I do if I want to purchase a home now?
Should I wait for this thing to settle down?
Not everyone will fit in the FHA (Federal Housing Administration) box. There are creative financing options available for those who are in challenging loan situations. Those borrowers that don’t fit the traditional FHA box will have to have more “skin in the game”, (down payment) than ever before.
Credit scores are playing a significant role in getting approvals today. If you are self-employed or a borrower with difficulty proving your income, you will need to save money in order to show significant cash reserves and down payment money.
Some of those working in the “grey” or cash market will have to start reporting their true income to the IRS if they want to participate in home ownership, or be prepared to have at least 20% of the purchase price as a down payment. Real estate investors will need to look to “hard money lenders” and not “conventional lenders” to finance properties for rehabbing or to flip. Folks this is called common sense underwriting principals. Lenders are going to require verification of income and assets of the borrower, meaning “No Doc” and “Stated Income” loans will be harder to come by. The lender is going to require the borrower to prove their ability, willingness and predilection to repay the loan is not unusual. It’s the normal way that things have been done.
If you want to purchase a home now, the most important thing you can do today is contact a loan officer and talk to them about your credit situation. Let them advise you about positioning your credit for approval. Good credit and credit scores are key to getting loan approval. A professional loan officer will know how to advise you. If the loan officer you are speaking with seems unsure about what you should do, you need to speak to another loan officer. Be prepared to follow their advice about what to do with your credit. Some things you may have thought about credit may be incorrect so be prepared to listen and follow their advice.
The second most important thing you can do is start saving some money. I don’t care if it’s $10.00 a month. You will need to show some pattern of savings. This is extremely important not because you will have to have the money for closing costs, although that may be necessary, but the underwriters like to see that you have the ability to save for a “rainy day”.
Thirdly, you need to adjust your wants to your budget. In other words if your wants are for an 8000 square foot mansion but you really can only afford to pay for a 2500 square foot rambler, then adjust your wants. Remember that you don’t have to have the mansion today. Buy the rambler, build some equity, save more money, increase your income and eventually you will have the mansion. The bible says “hope deferred makes the heart sick”, meaning if you have expectations and they are not realized right away, it creates frustration. So don’t frustrate yourself with unrealistic desires. There’s nothing wrong with having goals and dreams, but be in the reality of now. Start where you are and build to where you want to go. You are not going to win the lottery so get over it. Patience and consistent work will get you there. The Chinese proverb says “the journey of a thousand miles begins with one step”. So make that first step and make it today.
Is this the right time to buy a home? Well the bottom line is there is not a better time than RIGHT NOW! This is a “BUYERS MARKET”.
Here are the facts:
There is a large amount of housing inventory on the market and more inventory is coming
Buyers are not rushing to the home sales market
Economics 101 – Supply and Demand means the buyer has the ability to negotiate a better price.
If the buyer doesn’t get the terms he/she wants they can go right next door and negotiate with someone else for a better deal. This doesn’t mean that the seller is going to give away their product for free. Buyers shouldn’t be over confident. Sellers can still refuse to sell if they are not going to be compensated for their product; however, the seller is more willing to negotiate because they know there is an abundant supply of what they are selling.
In maybe more practical terms a buyers market means that sellers are more willing to offer the buyer assistance with closing costs, and down payment in order to induce the buyer to purchase their home. One mistake I see is the buyer negotiating the sales price of the home rather than negotiating the closing costs. I suggest that you reverse that thinking unless you just have so much money you don’t need any of the sellers’ money. Remember when you purchase the home below market that eventually hurts you, not the seller.
Why, Mike? Well I guess you will have to come back next week and I’ll tell you why then.
