The slumping housing market, home foreclosures, and mortgage companies who have  closed their doors were headline news for the last quarter of 2007.  As many have read the articles and wondered how this situation could happen, let's take a look...

During the housing boom of the last few years, home values were leaping into double digits - earning phenomenal appreciation.  Somewhere around 2001, we may have lost our minds.

The double-digit appreciation filled the real estate market with buyers looking for a quick profit. Buying a home for $180,000 one year, realizing 12% appreciation the first year and 6% the next (and the 6% is a modest approximation), then selling for $213,000 (after the 2 year live-in requirement to avoid capital gains taxes) equated to about a $15,000 profit.

As people realized that they could use their home appreciation (equity) to buy and sell real estate, more and more "creative" loans were developed to get people the money they needed to buy.  And why not?  There was almost 10 years of steady growth in equity to back these loans. 

These "creative" financing approaches were riskier than anything the government would get involved with and as result, government loans (like FHA and VA) were sidelined as too restrictive. 

Then came the national (though not local to Washington as yet) decline in values, coupled with variable loans taking a huge jump in monthly payments and sending some homeowners packing. Literally.

Things are changing fast as commercial lenders tighten restrictions, shining new light on zero down government loans.  Lenders are dusting off their VA and FHA manuals to take advantage of recent increases to the loan values the government allows, and hopefully new home buyers will be the result.

FHA loans have also been overhauled to better reflect the cost of homes and to make them more relevant in today's lending market.  The FHA limit is now $361,000 in Thurston County (Olympia, Lacey) and $567,000 for Pierce county (Ft. Lewis, NcChord AFB, Tacoma, Puyallup, Lakewood).  For VA it is $417,000 for both Pierce and Thurston Counties.

Loans are still available and interest rates continue to be low.  Despite the changes, homes will continue to be bought and sold in our neighborhoods.

Could you use additional information on government assistance for foreclosure? I can help.

www.TALKtoTOP.com

Riley Jackson Real Estate.