Buying or selling a home? Have you done it before? Well, it’s a whole new world…
Buying? Today, lenders are going to ask you for more money up front (20% of the purchase price or even more), higher credit scores (720?) and proof of your income. Remember what we called “liar loans” where you didn’t have to prove that you had a job or even an income? Those days are gone.
No more “sub-prime” loans where people who should never have qualified in the first place got loans on homes they could never afford. In 2005, one in every five mortgages was considered sub-prime. This year, it’s less than 1 percent.
Another category of risky loans, Alt-A mortgages, which required little or no documentation of the borrower’s finances. They’re down to $3 billion this year from $400 billion in 2005.
Easy to get mortgages? Gone.
Now lenders pour over bank statements, tax returns and job histories. The average mortgage application today starts three times thicker than what it was at the start of the housing boom. And be prepared to wait months to get a loan finalized. Want that $8000 tax credit that expires December 1? I hope you’ve already started the process.
My suggestion? Buy only what you can afford, get a 30-year fixed-rate mortgage and protect your home. If you’re like most people, it’s the most significant investment you’ll make.
Selling? New rules for you, too. Most important? Be patient and expect that you’ll have to lower your asking price. With all the foreclosed properties available today, you’ll have a lot of competition for the few buyers who can qualify. And, thanks to all the newscasts, people expect to find great deals from banks as well as from individual sellers.
Today, price is the key. If your house isn’t selling, you’re asking too much.
Buying or selling?
It’s not uncommon now for closings to take 60 days or more. Everyone’s backed up: appraisers, underwriters, processors. They’ve all had to become more strict or, some would say, more accurate. They don’t want to be caught making a mistake or being the reason a loan goes bad. They have far more accountability than they have in the recent past. Actually, this new process is what it always should have been, more safe and accurate.
Times, values and regulations will change, they always do. When and how? Who knows. But, whenever you decide to buy or sell, know your market.