What does the current ‘mortgage crisis’ mean to you? – Part 2
Written by Susanne on February 13th, 2008
Part 2: Yes, Virginia, there is good news in today’s real estate market!
(See my explanation of the current crisis in lending in “Part 1: Let’s get the bad news out of the way.”)
While it’s easy to get caught up in the current panic, there may be a silver lining in all the doom and gloom.
Let’s hear it for buyers
According to Steve Hargreaves of CNN Money (http://money.cnn.com/), the crisis in the subprime mortgage market may actually be good news for the average American buyer. If you have good credit, a low debt-to-income ratio, a healthy down-payment and verifiable income, you should encounter little difficulty qualifying for a mortgage with the current very low rates.
And compared to the last decade, the market is moving much more slowly, giving buyers time to compare price and amenities. Many deals can be made on reasonable terms.
If you are buying a home, first and foremost get pre-approved. You’ll be more attractive to sellers, and consequently they may be more inclined to deal with you on the purchase price or allowances.
Although underwriting standards are tightening, interest rates on conforming fixed-rates (loans of $417,000 or less) to borrowers with good credit are still hovering in the 5-6% range. Unfortunately, borrowers with less-than-stellar credit – if they are able to find financing at all – are paying higher rates and fees, reducing their buying power.
Those paying more to borrow include not only first-time home buyers who can’t scrape together a down payment, but also families looking to trade up to a home requiring a jumbo mortgage that exceeds the $417,000 conforming loan amount.
Hang in there, sellers!
For those of you hoping to move up, you may have heard that now is not the right time because you’ll have to sell for less than asking price. However, what you may lose in asking price you could gain in purchase price of your next home!
If you want or need to sell at this time, once again pre-approval is key. Dealing only with pre-approved buyers will become your best defense against tighter lending standards.
There are many sellers competing for these optimal buyers, however, so your property needs to be as appealing as possible. Now is not the time to skimp on repairs or discount the value of great curb appeal!
Proper home pricing is also essential, and the assistance of a real estate agent is an invaluable tool.
The housing market has always been cyclical, with varying degrees of peaks and valleys. Some are calling this time around the worst housing market downturn in recent history, while others are drawing parallels to the tech bubble and to the housing slumps in the 80’s and 90’s. It’s no wonder many are feeling concerned about the current situation.
The good news is, you don’t have to be! The Credit Union will continue to meet your home financing needs in the immediate future as well as many years to come.
No matter which direction the mortgage industry takes…the Credit Union is still here for you, our valued members!
