Written By: Joan Ewing
Hello Everybody - While I was thinking of a topic for this week’s blog, I could not dismiss in my mind the news reports of how many foreclosed homes are being sold at rock bottom prices. I think it is an absolute tragedy that so many people are losing their homes. And their lender could not help them save their home in the wake of all the stimulus money that has been poured into the system. Having said that and then I reflected back on the previous three years when housing prices were skyrocketing and houses were being sold for many thousands of dollars over the asking price - perhaps this is really a market adjustment at the cost of thousands of homeowners who are losing their homes.
Relating back to the news reports on buyers in the current market - could these buyers be those that were priced out of the market the previous three years. I think they may well be. Housing prices in Florida, Nevada, Arizona and California have plummeted. As an underwriter, I have seen houses in California that sold for $750,000 now under contract for $250,000. I have friends who paid $350,000 for a home in Naples, Florida, their current housing development is now 75% in foreclosure and they just got an offer for their home at $89,000. Their lender has agreed to a short-sale; but they put $100,000 down of their own money when they purchased the property. You can do the math.
The foreclosure crisis has opened up housing opportunities to many new borrowers, who could not afford to get into the bidding market of years past. I feel the market is doing a 180 - we are back to verifying employment; asking for pay stubs; asking for bank statements. Qualifying borrowers - it gives lenders a more secure feeling, a feeling of knowing their borrowers.
While there is no shortage of buyers in this market, I feel everyone is still a little shy to buy because of the job market. However, once the market opens to buyers, the choices of properties should be really good.
If you know anyone who will be looking to buy, help them along now. Suggest they get a copy of their credit report; go over the report very carefully - make sure everything is accurate. If there are any discrepancies now would be the time to notify the credit bureau and have the errors corrected. One is under enough stress when you buy a home - one does not need the added stress of an incorrect credit report.
Then - there is a very good probability that the mortgage payment is going to be higher then the current rent; and if they are not paying rent - it is especially important to start saving every month. As a non-profit housing counselor, many years ago, I would always recommended that first time buyers save the difference between their current rent and their new mortgage payment; if they were not paying rent - I would recommend they save their entire mortgage payment for at least three months before purchasing a home. How else were they able to know if they can really afford to buy or what sacrifices they might need to make. There are also the added costs of gas, electric, water, sewage and other utilities that may have been included with the rent - which are not included with the mortgage payment.
Purchasers should also be required to set up a “capital spending account” of X dollars per month - so they have the resources to repair a roof, fix a leak to keep the property in good condition.
With the new pricing of houses many more first time homebuyers will be able to purchase. However, care must be taken with these first time buyers so they understand the responsibilities of homeownership. I do not believe everyone should own a home, even though it is the “American Dream”. Purchasing a house is a huge responsibility which should not be taken lightly.
In conclusion - I want to say - Happy Homeownership to everyone who wants to own a home. Keep processing. More Later.
About The Author
Joan Ewing - As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP®, please email us at: email@example.com.