If buying a house in 2012 is one of your New Year’s resolutions you may be making one of the best decisions of your life. Prices are reasonable, interest rates are low and the inventory of available homes will grow as the year progresses.
Yes, the selection of homes will be the best it has ever been because Fannie Mae and Freddie Mac will release several hundred thousand homes to the market this year. They have been reluctant to flood the market with their inventory because of the possibility that it could lead to further price deterioration.
To add to this many lenders have delayed moving forward with the foreclosure process because some judges have nullified foreclosure sales because of missing links in the foreclosure legal chain. Some delinquent homeowners have been able to live in their home for as much as 1.5 to 2 years because of this hesitation. Some sales of homes that lenders have bought back at a foreclosure have been delayed because of the lenders inability to be able to convey “free and merchantable” title to the buyers.
Many lenders were caught in the “robo signing” disaster that has all but paralyzed the once fluid foreclosure process. “Robo signing” occurred when certain individuals responsible for certifying the proper implementation of the foreclosure process by lenders systematically okayed hundreds if not thousands of cases a day, a virtual impossibility for a single person to do.
What does all this mean to someone considering purchasing a home? How will these factors make it easier to purchase a home?
The obvious market factors of low interest rates and good inventory might be considered good enough to motivate buyers. But I would argue that an increase of homes on the market, a larger inventory will stimulate many buyers to act in the future. Reasonably priced homes, priced aggressively to sell will begin to change buyer’s mentalities. We are beginning to see homes in the mid $100,000’s attracting the attention of multiple buyers, to the extent that some homes are seeing several offers being made at the same time.
As to the question of how these factors will make it easier to purchase a home, the answer really lies with getting prequalified for a mortgage. For some the ease of the process will not be there because of income or credit issues. But many others will find that there are mortgage programs available that can put you in a new home with very little of your money.
The Rural Development Program, (RD) will provide 100% financing and it will allow the seller of the property to pay some, if not all of the closing costs. It is an income-restricted program based on family size and the limit starts at $94,000 and moves up from there.
If you are a veteran, the VA Loan Program provides the same benefits as the RD program and can be slightly more lenient when it comes to credit requirements. All you need for proof of eligibility is a copy of your VA eligibility Certificate that can be easily accessed on line with information from your DD214.
If you are not eligible for either of these programs, because income is too high or you are not a veteran, the FHA 203(b) program is available. It does require a down payment of 3.5% of the purchase price that must come from the borrower’s funds, and the seller with certain limitations may pay the closing costs.
None of these programs require you to be a first time homebuyer. You are eligible for the RD program as long as you do not own any other real estate at the time you are closing on the home you are purchasing. This means that you could be eligible for the program if you have a contract of sale on your existing home that is not a short sale and you will not be receiving more that 20% of the purchase price of the home you are buying as net proceeds from the sale of the existing home. You must go to closing on the house you are selling before you settle on the house you are buying and the same day is just fine.
The FHA and VA program will allow you to own other property under certain circumstances.
Family members who wish to help someone purchase a home can assist in several ways. The most common yet most difficult way is to co-sign the mortgage with them. This is not allowed under the RD or VA program but can be done with the FHA program. The occupant borrower is required to have acceptable credit and must have a significant percentage of the income necessary to qualify. There are many strings attached to FHA co-signed loans. Suffice to say that it can be done but there are many hoops to jump through.
The way for a family member to assist that is acceptable by all mortgage programs, including conventional, is a monetary gift. Properly documented and transferred from donor to recipient gifts are the most widely used of all mortgage programs for first time buyers.
The donor must affirm via a Gift Letter or Gift Affidavit that they are giving the funds to the named recipient and no repayment is expected or implied. This is especially beneficial to those buyers who are not eligible for the RD or VA programs and must use the FHA program. Or, for those buyers using the RD or VA program and the seller has not agreed to pay closing costs.
So, as you can see for these reasons the real estate market in 2012 will be a “Perfect Storm” of factors coming together to make for a very bright and sunny future for those who want to buy a home. Great rates, reasonable prices and an inventory of homes that will be changing daily will make for some great opportunities.
The above article was written by Tolbert Rowe, a Mortgage Loan Officer on Maryland’s Eastern shore.
If you are planning to buy a home in 2012, please contact me today. I can help you find just the right place and you will discover that you can actually own a home for what you are paying in rent. Or even better, possibly less that what you are paying in rent.
Call me at my office (888) 479-4750, my cell (410)924-1660 or send me an email,