Here’s the good news; more and more people are calling mortgage lenders to check on home loans. Here’s the bad news; the price of getting into the housing market is higher because those in the real estate industry are tightening the requirements. Now I say that’s the bad news, but in actuality I believe it to be good news as well. However, if you think you can purchase a home with the low interest rates and almost zero down payment of yesterday, you are in for a rude awakening.
It used to be that nobody thought about purchasing real estate without putting at least 10 percent down. Well, with the housing market being what it was over the past eight years or so, nobody could afford to put 10 percent down. You see homes were unrealistically priced, so mortgage lenders had to come up with more creative financing to get home buyers those loans. Of course we see the folly of their ways now, especially with all those homes in your neighborhood going into foreclosure. So the fact that it is more difficult to get a home loan now might not be too bad. And don’t forget that there are still deals out there for first-time buyers that don’t require as much as other loans do.
Here’s what experts in the housing market like Rich Wordman, president of the Florida Association of Mortgage Brokers, are saying, “these days, home buyers are having to make down payments of approx 5%, in order to get a deal from a mortgage lender.” Ok, but like I said, before the previous housing boom, most people were paying 10%, so that’s still cheaper than it was before. The days of a no-down payment loan may be over, but that never should have taken place in the real estate market to begin with, and it is precisely why we are in the mess we are in now.
Now, if you are looking to get into a more expensive housing market, mortgage lenders may require as much as 20% down, but if you can’t afford that, you probably shouldn’t be buying a more expensive home. However, if you are a first-time buyer of real estate, Freddie Mac and Fannie Mae specialize in offering deals that can help you get into that home. Granted, we are seeing a lot of rhetoric about whether or not these two mortgage lenders are healthy enough to survive the current conditions in the housing market, but it is highly unlikely they won’t, since they are government run companies. That means the government would be impacted financially if they fail, and we all know how much the government likes their money.
One problem I do see as being valid is the fact that rent can be extremely expensive, which means it’s that much more difficult to try and save enough money to put 10% on a piece of real estate. But again, that’s where you need to decide whether or not it is more economical to get into the housing market or continue renting until the real estate industry re-stabilizes.
Another issue people are complaining about is the fact that interest rates are higher. Ok, let’s take a look at that; when interest rates were around the ridiculously low 2%, home prices were up to equally ridiculous amounts on the opposite end of the spectrum. I mean you couldn’t find a condo in Los Angeles for under $500,000. No wonder people needed to get into those volatile no-down mortgage loans, and no wonder mortgage lenders had to offer them. With interest rates going up, homes prices are going down to a more reasonable level. Besides, if you look at the history of the housing market, interest rates are still relatively low.
Here’s the bottom line; the housing market is readjusting itself so there will be some volatility. That being said, the way things were in the real estate industry didn’t do anybody any good when you look at how many people are losing their homes now and how many mortgage lenders are in trouble. The housing market always goes in cycles, and we are now looking at what is called a buyer’s market. So, if you are looking for someplace to lay your hate for a while, buying a new home right now could be a good thing. If, however, you are looking to make a quick buck, sorry those days are over…at least for now.