If you are a potential Orlando home buyer, you may live near Disney World, but when you are considering buying a house, do not let your thinking drift to Fantasyland. Taking this step is a big one for anyone, but for given the recent depressing history of the Florida housing market, buyers are smart to consider the statistics. In addition, while interest rates are low, getting credit is harder than in the past.
Buying a home is seldom a mere economic step for many people who see it as nest for a new family, a sign of stability, or a source of pride. When interest rates are historically low and median home prices continue to fall, people who should wait a year or two are househunting and applying for mortgages. As exciting as it is to capture a dream ahead of schedule, acting too soon can have dire consequences. Fantasyland disappears when the mortgage is due!
At the moment, Orlando housing market is in crisis due to past circumstances which you, as a potential buyer, do not see as having anything to do with you. Foreclosurs are till rising. The falling home values that have lead to the attractive median price of $138,700 has decimated loan-to-home value rations so badly that 85% of homeowners are underwater by 140-150%. Delinquency rates among some type of mortgage loans exceed 50%. Double digit unemployment could lead to further delinquency. The recent devastating oil spill threatens the Florida economy, especially tourism and fishing, and could spill into more mortgage woes.
Given this history, lenders are much more careful than in the past. All across the country, buyers need more cash, more income, and higher credit scores to qualify. According to Paul McFadden, a loan officer with The Legacy Group in Bellevue, WA, only about 30% of loans are approved these days, as compared to 90% around 2006 or 40-50% in "normal" times.
Though technically, a credit score of 620 is good enough to qualify for a loan, borrowers with score less than 740 get higher mortgage rates. Buyers who are paid by 1099 (salespeople, small business owners, non-US citizens, contractors of all kinds) may not qualify for most loans. Lenders have to verify information on the credit application more closely than in the past, and may have to repeat the process several times before closing to make sure the buyer is creditworthy. This sets up a scenario where loans for would-be buyers can be pulled up until the last minute.
In the past, some lenders have helped buyers secure loans they really could not afford. Sometimes this worked out okay if the borrower "nearly qualified" or if a second job or careful budgeting could fill a small gap. Statistically, this did not pan out so well, as both the foreclosure numbers and the mortgage fraud numbers attest. (Florida has a sad history of mortgage fraud.) Today, it is quit unlikely that a mortgage lender will overlook blemishes on your credit record or allow you to borrow just a little more than you technically qualify for.
So, does all this mean you should put off home ownership? The answer? Yes, no, or maybe. If you have a stable job, sufficient income, a healthy downpayment, and a great credit score , why not buy now to take advantage of pircing and interest rates? However, if any of these elements do not stack up right for you, waiting may be in your best interest. You may desperately want to buy a house, or you might be smitten by one you have seen, but Orlando real estate will still be available when you are ready next year or the year after.
Some soul searching, a look at your credit report, a loan-shopping trip, and a chat with your agent should help you figure out if this is your time to buy or just a trip to Fantasyland. I'm Janice Petteway and I believe that buying Florida real estate is a great way to live out the American Dream for you and your family. My Exit Results Real Estate team can help you find the affordable home of your dreams in the Orlando and other Central Florida cities.
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