Nobody can say whether mortgage rates – or home prices – have bottomed, but what we can say is that based on historical data, rates are at an awesome level. As a real estate agent, I also have my hands on the pulse of the local market, and am privy to a “perceived” deal or two that crosses my email in-box on a regular basis. Lately, I’ve been seriously considering jumping in again myself– until, that is, I talked with my mortgage broker. Amazingly (to myself, anyway), I may not be able to qualify. What gives?
It seems as though the lending institutions, once giving loans out like candy, have decided to cut their risk potential and actually review candidates thoroughly. An understandable stance, given that FDIC estimates are suggesting that another 3.8 million mortgages are projected to be 60 days to 90 days past due by the end of 2009. But what about those of us who are self employed, with perfect credit, significant savings in the bank, a 20% down payment ready to go– we just don’t have the tax returns showing sufficient income to meet the new, stricter underwriting guidelines. In the past, we’d have qualified easily for a no income verification loan– paying perhaps a slightly higher interest rate in exchange, but at least we were able to own our own home and start building equity and enjoy the tax benefits of home ownership. But no more…
So in the interim, what to do? Guess the potential options for folks in this situation may be as follows….
Pay cash for home. (Doesn’t seem too prudent, given the low interest rates and loss of tax benefits). Better off leaving your cash where it can grow, like the stock market. (OK, maybe not!!!!!!!!!)
Continue to rent. (Which kinda sucks, given that in many cases you would pay less if you had a mortgage on a property due to the low interest rates and tax benefits combined).
Find a co-signer. May limit you to certain types of loans or properties that might not be the optimum.
Investigate rent-to-own (or lease-purchase). A possible alternative, but with home values still declining in some areas, one would enter into this sort of agreement with caution.
Get a real job. Ugh, return to the corporate world and get W2-ed? Next idea, please…
Find a sugar daddy or mommy. Best bet– just don’t marry ‘em.
Bottom line is, right now, it’s a tough market for buyers without A-credit and full documentation of their income. Hopefully there will come a “happy medium” as far as underwriting guidelines that will be optimum for both banks, and buyers as far as risk management. Until then… pick the “lesser of the evils” above as your alternatives!!
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March saw that house prices increased for the first time since October 2007, however some are cautioning that investors should not be expect an immediate change in the market as lenders will be increasingly more cautious going forward.