Exactly what does it take to get a real estate loan for a home in Santa Clara County (San Jose, Cupertino, Saratoga Lynbrook) these days?
To quote the Bible, right now "The meek shall inherit the earth," or to paraphrase, "the conservative buyers shall get the loans."
I constantly tell my clients that every market is good for someone; I just need to know what you want to do to best advise you on whether now is the best market for what you want to do.
RIGHT NOW the Market favors :
- pay themselves first (put money into savings before paying other bills)
- are stable in their jobs
- do their homework and analyze the facts before committing to a course of action.
Right now is one of the best opportunities for REAL Buyers and Investors to purchase homes and income property at reasonable interest rates and terms. The key is today's house buyers must be "USDA Prime Choice" loan applicants. Each buyer must be qualified in all 5 areas:
1) FICO score / credit rating (almost nothing less than 700 is acceptable right now)
2) Debt to income ratio (under 28% of TOTAL financial debt commitments going out each month)
3) Minimum down payment of 20-25% for residential property; 30-35% for investment property
4) Income level (basic rule of purchase price should not exceed 4X the amount of annual income).
5) Stable job history of at least 2 years (5 is better)
Certainly, there ARE other loan programs available at 10% & 15% down-with higher interest rates. Yes, private hard money loans available - but most are in the 10-14% interest rate range with 2 to 8 points. Ouch.
However, keep in mind MORE MILLIONNAIRES are made during the down markets because they buy when others are selling - and plan to hold for a reasonable length of time. In real estate, in Santa Clara County, the total percentage over the past 10 Years is 109% (average of over 10% per year).
Lenders almost seem to loan based on "weight of paper" -- asking for more and more documentation and details. Just expect it, provide and allow time for it to happen. One word of advice: persevere.
A colleague forwarded a great story I'll post tomorrow - it will definitely help you keep the loan process in today's market in perspective.
Remember ... Today's market belongs to the meek! (and perseverant).
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