Buying a Home in Today’s Market

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The financial crisis that the country is currently facing has significantly affected the housing market and home loan process. Although it is still possible to buy a home and secure a loan, the climate change in the financial world has presented a few more challenges to the potential homebuyer. Understanding these challenges and changes will increase the chances of going from potential homebuyer to happy homeowner. A Chilly Credit Climate The ongoing financial crisis caused in part by the subprime mortgage default rates and the bursting of the housing bubble has unquestionably affected the current housing market. Although the national averages on a 30-year fixed rate mortgage for 2008 have been around 6 percent (between 5.77 percent and 6.52 percent), a credit freeze has all but put an end to the issuance of loans to those with poor credit, one of the chief factors at play in the mortgage meltdown. “You don’t see no-document loans—those have dried up,” says Pat Vredevoogd-Combs of Coldwell Banker AJS Schmidt in Grand Rapids, Mich., and former president of the National Association of Realtors (NAR). Potential homebuyers might expect a slightly lengthier loan process, and the list of required documents will be longer than it may have been a couple years ago. A partial list of the documents that will be required in the loan process includes: • A financial statement • A letter from an employer • Pay stubs from 4 to 6 months back • If renting, a letter from landlord with history of payment “A potential homebuyer would be wise to get their free credit report,” says Combs. “It’s also a good idea to get pre-approval from a lender because this will always get the attention of the homeseller.” It is hard to stay unaffected by the oftentimes pessimistic spin placed on the crisis by the media. A person thinking about buying a home may hear “credit freeze” and instantly write off any chances of getting a home loan. “There are stories circulating that people with excellent credit are getting turned down,” says Iverson Moore, current President of NAR. “This is not true. There is plenty going on out there. If your records are good and your debt ratios are good, you can still get a loan.” Overstocked Housing Market The rise in unemployment and foreclosures and the decline in home loans have resulted in an increased number of homes for sale. This “high inventory” can be an enticement for homebuyers and a challenge for homesellers. Industry professionals like Combs insist that this presents an ideal situation for the buyer. “It’s the perfect time to get off the fence,” Combs says. “There are a lot more choices in the market now, where before there weren’t as many.” The number of homes for sale has helped to drive home prices down, an added incentive for the would-be buyer. Inventory may be high, but the trend toward an increasing rate of homes on the market is slowing, according to Gill Woods, real estate broker for Century 21. “Fewer people are putting homes on the market, and those that are already on the market by owners who need to sell are selling,” he says. “There are still more homes on the market than usual, but the choices are diminishing.” A recent report on Southern California home sales, for instance, indicated a 65 percent increase in home sales in September compared to a year ago. Selling First While today’s market might make for a good time to buy, it can be a difficult time for homeowners to sell. “We are getting a lot of people coming in saying, ‘we want to buy a home, but we have to sell ours first,’” says Combs. Selling the home in today’s market can be the greatest challenge facing potential homebuyers, but industry experts like Combs insist that it does not have to be impossible. “Sellers need to pay attention to the marketplace and price their homes right,” Combs adds. Moore takes it a little further, stating, “Folks need to be more realistic when it comes to what the home sells for. Everyone’s prices are down.” Once a realistic price has been set, a homeowner still faces the challenge of making the home stand out in a market saturated with homes for sale. Finding a realtor with experience, who knows the market and who will assist in the selling process, is a good first step for the motivated seller. “A good realtor will

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