OK, Folks, Let’s Do A Reality Check
by Jim McCann, Mortgage Division Director
Being in the mortgage industry for 30 years, I’ve seen good and bad markets come and go. But I can’t recall a time where there was as much interest in how the mortgage markets work, and what this all means for folks just looking to buy their first home, or make a move. I’m afraid that perhaps the “good news”, or at least the reality of the situation for individuals may not be getting effectively communicated in the midst of all the dramatic industry news.
So, I’d like to offer a “reality check” for some information, or shall I say misinformation that you might have heard...
If you have heard ‘the credit markets are frozen and people cannot borrow money’... is that accurate?
Mortgage money is available and affordable for people that qualify. The fundamentals for buying a home are similar to what they were ten years ago. Owner occupied FHA loans require a down payment of 3% and owner occupied conventional loans require a down payment of 5%. Jumbo mortgages (loan amounts above $417,000) typically require a larger down-payment.
If you have heard ‘only people with “perfect credit” can get a home loan’... is that accurate?
Mortgage money is priced according to risk. For a FHA loan, credit scores should be in the 600’s. For a conventional loan, credit scores should be 680 or better. Mortgage money is available for people with lesser credit scores, but the rates are typically higher.
An experienced mortgage advisor can give you guidance on your qualifications and tips on improving your credit score, if that is necessary.
If you have heard ‘property values have dropped significantly’... is that accurate?
In some parts of the country, yes, there have been significant declines in property values, but typically not in Middle Tennessee. Although there are several homes on the market, the Standard and Poors Case Schiller index has indicated home prices for existing homes in our area have held their value, declining an average of 2% in the past year. There are isolated areas of Middle Tennessee where builders have reduced prices of new homes and there have been some condominium projects where the developers have reduced prices. For the most part, owners of existing homes have declined to sell, rather than reduce prices.
In short, the markets across the country with deep declines in value make the news. But that’s not necessarily true for our market area.
So, the reality is: this IS a good time to buy!
Yes, now is a great time to buy. For most conventional and FHA borrowers who qualify, interest rates have been holding in the 6.5% (or less) range and there are plenty of homes from which to choose. Owning a home can still be one of the best investments you make in your lifetime.
In closing, I’d like to offer these simple tips:
1. If owning a home is your dream, make saving for a down payment a financial priority.
2. Check your credit score, and work to improve your score as much as possible – it can save you thousands of dollars in interest when you do buy.
3. Get educated about mortgage terms and how the loan process works. Educated buyers make smart choices.
4. Buying a home is one of the biggest financial decisions you will ever make. Work with a reputable, experienced mortgage loan officer at a company that you know and trust.
Posted by sdaniel on 10/06 at 07:14 AM
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