The rules have changed a bit, but it’s still a perfect time to purchase a home.
If you have good credit and a good job history and can put money down for a house, it’s a great time to buy, say experts in real estate and finance. In fact, the sooner the better, because it may soon turn into a seller’s market for housing.
And mortgage rates could be climbing as well. Mortgage buyer Freddie Mac recently announced that the average rate on 30-year loans had jumped to the 4 percent level for the first time in three months.
According to attorney Kevin Nelson of Tiffany & Bosco, whose practice focuses on mortgage and real estate, homebuyers can get very attractive packages if they have the solid down payments and credit. “Homeowners can also refinance if they have substantial value in their homes. But lenders are still very cautious about permitting homeowners to have lines of credit,” Nelson says. “And they probably still will be until the financial problems in Europe and unrest in the Middle East calm down.”
Both larger banks and mortgage companies say business is very good. “In the past 10 years, we have never done as many loans per month as we are doing right now,” says Tim Disbrow, regional sales manager for Wells Fargo Bank. “We are the No. 1 lender by a longshot for all mortgages across the state, including Fannie and Freddie and FHA.”
Although some in the lending industry say big banks are moving very slowly in making home loans and can’t keep up with the volume, Disbrow disputed that. “Consumers who go to banks for mortgages are just being asked to document their savings, job history and salaries, something that they weren’t asked to do in the boom years,” he says.
The same rules apply with all lenders now, he says, whether they are banks or mortgage companies. Customers everywhere have to meet the same requirements based on Fannie and Freddie guidelines.
For conventional conforming mortgages of $417,000 or less that are insured by Fannie Mae and Freddie Mac, down payments must be 5 percent or more. Down payments for FHA loans are 3.5 percent. Jumbo loans also seem to be widely available, but lenders generally do not sell them to Fannie Mae and Freddie.
“The big difference between us and mortgage companies is that customers may have to pay other loan originators more in fees,” Disbrow says.
Foreigners are helping fuel the rising demand for homes in the Phoenix area, but plenty of Americans are buying as well. Canada, New Zealand and Australia are well represented. Many foreign buyers pay cash, but some mortgage companies offer loan programs for them. Buyers are often investors attracted to the housing market by low home prices and the potential for high rents.
Eric Bowlby, president of AmeriFirst Financial in Mesa, estimated that about 40 percent of the homebuyers in Maricopa County are cash buyers, while 60 percent get mortgages.
Surprisingly, even those who lost their homes in a foreclosure or short sale can finance homes with mortgages, but they must put down fairly substantial down payments. They can even get an FHA-insured loan from three to five years after losing their previous home.
But to get a Fannie Mae-backed mortgage or one from Freddie Mac, someone who had a foreclosure has to wait from five to seven years. However, if a buyer can verify that some hardship led him or her to walk away from their property – like the loss of a job or an illness – they may get relief from the time requirements.
According to Bowlby, even if someone was upside down in their mortgage and walked away, AmeriFirst has a hard money hedge fund that will finance mortgages almost immediately for those who have the income to qualify and make a 25 percent down payment.
“Even those who are one day out of foreclosure or bankruptcy may be able to qualify,” he says, “but the interest rate is 12 percent.
The rate may be high, he says, but it’s still cheaper to buy than to rent because of the homeowner’s tax deduction and the current increases in rental rates.
Recently, Wells Fargo announced that it is bringing a new pilot program to Phoenix in an effort to help stabilize housing markets.
The Neighborhood LIFT program, already available in Atlanta and Los Angeles, is designed to help communities attract qualified prospective homebuyers to neighborhoods that are struggling with high inventories of unsold homes.
In Phoenix, the bank has a five-year goal of making $3 billion in such loans. Prospective homebuyers can qualify for down payment assistance grants of up to $15,000, covering home and renovation financing and will also participate in home buyer seminars and tours of properties for sale. There are limits on the amount of income families can have and limits on the size of loans.