Ed's Blog

In recent weeks, one question has been posed to me repeatedly, and I mean repeatedly! And I totally understand why given the rocky road that the mortgage and housing industries have found themselves traveling lately.

The question is: “What is the state of the market?”

There is no simple answer to this question because currently the market is in such a state of flux. There is a lot of anxiety, volatility, and uncertainty on the part of lenders and Wall Street investors who buy loans. This has led to the credit crunch you've been reading and hearing about. In general, lenders have tightened up their underwriting guidelines and taken many creative loan programs off the table. Gone for now are the days of loans with no money down, no income documentation, and less than stellar credit.

But not all is doom and gloom out there. We have several buyers closing loans as I'm witting this. So, let me give you the 411 on what's happening. I'm going to break this down into a few entries so I can address one market segment at a time.

Today we'll talk about effects on buyers, especially first time home buyers.

Here's a snap shot of the market:

1. Things have changed.

Buyers, and especially first time home buyers must understand that mortgage guidelines have changed dramatically in recent weeks and that they continue to change daily. So, if you're in the market to buy a home, you may find yourself facing obstacles that your friends who bought their first home even a few months ago did not face.

2. Lenders are still making loans!

Just because it’s harder to get a loan, that doesn't mean that first time home buyers (or any home buyers) need to give up on dreams of home ownership. There are still many great loans available at near historic low interest rates.

3. There are some great deals to be had!

There are more houses for sale now than there have been for the past 10 years. First time home buyers have a vast selection of homes to choose from. Combined with declining prices in many areas, this makes for a great buyers market- as long as you're prepared to act fast. So, what does a first time home buyer need to do to get prepared?

Here are some things you can do:

1. Make sure your credit is good.

Really good would be even better! Check with one of us for a thorough credit analysis. For example, credit dings can often be removed from your report when you're working with a broker who's been thoroughly trained on the ins and outs of credit reporting. We can recommend steps you can take to improve your credit, thereby improving your chances of being approved for a loan.

2. Be prepared with a down payment.

Expect to pony up at least 5% of the home sale price for a down payment. More likely though, you'll need to have 10% down. And if you want a stated income loan, plan on making at least a 20% down payment.

3. Be realistic.

If you know your credit is not good, don't get your hopes set on a home priced where you’ll need a loan of more than $417,000. Anything over that amount falls into the category of “jumbo loan”. Most lenders are shying away from offering jumbo loans to any buyer with less than stellar credit.

4. Be informed.

Remember that the only thing reliable pertaining to the state of the market today is that it’s constantly changing. So if you’re contemplating a home purchase, be sure to keep up to date on the market. Feel free to contact us by email or by telephone at 415-406-2330 for updates.

In the meantime, stand by for our next installment, where we'll talk about home sellers.