1/29/09

Golden opportunity for home buyers

by Kevin Hassan

It seems every day we are inundated with news stories that could deter anyone from buying a home right now. But, even though the local housing market has changed dramatically in the past year, it has also created an environment that makes it a great time to buy for many people. A recent New York Times article called this "a golden age for first-time home buyers," and here are some of the reasons why.

There's money to lend

In many ways, buying a home has gone "back to basics" in recent months, which means the unrestrained lending of the last few years has been replaced by more traditional standards. Generally speaking, you're going to need a decent credit score, be able to prove your income, and have a down payment. With these things in place, there are some great options for home loans.

There are two loan programs that accept a low down payment. One is the FHA program, which only requires 3.5 percent down (effective January 1, 2009). FHA loans have other advantages as well, such as allowing a lower minimum credit score than many other loan programs. And, if you're a veteran, you have another great choice with VA loans. In fact, these loans are available with no down payment for many borrowers.

Additionally, there are still down payment assistance programs available for qualified buyers. Your lender will be able to help you determine if you qualify and what programs are available in your area.

If you can make a larger down payment of from five to ten percent, then a "conforming" loan (from Fannie Mae or Freddie Mac) gives you even more alternatives.

It's a buyer's market

Interest rates on fixed-rate mortgages continue to be historically low right now, which is great news both for homebuyers and those who want to refinance to a lower rate. Plus, there are some great deals out there on brand new homes. And, unlike in recent years, there is a large enough inventory of homes that buyers have many choices and, in some situations, room to negotiate.

It is also a more favorable time for renters to consider buying. On average, the cost of rent has increased over the past year, making it much more attractive for first-time homebuyers to move forward on a home purchase. An FHA loan is a perfect option for a first-time homebuyer.

Not all ARMs are bad

Adjustable Rate Mortgages (ARMs) have gotten a bad reputation in the past couple of years, but in some cases they are a great choice for homebuyers, in particular when you don't intend to stay in the home for the long term. The interest rate for an ARM is fixed for a certain period of time, typically three or five years. After the initial rate expires, the rate will be adjusted (typically annually) based on the terms of the loan.

Every ARM is different. If you think you will sell your home within three years, you might want to consider a five-year ARM to give yourself wiggle room. Also, be sure you understand the terms of the loan and will be able to handle the change in payment when the rate begins adjusting.

It's a great time to buy

What's most important is that you work with a lender you can trust to do the right thing for you. A responsible lender will work with you to determine what you can afford as a monthly mortgage payment, rather than trying to fit you into a loan that is above your means.

We are in uncertain economic times and the idea of making a purchase as significant as a house or condominium can be daunting, but if you are ready, there are some very good reasons to get into the market now. Prices and interest rates are good, and there are a variety of lending programs and loans designed to suit your needs.

Kevin Hassan is the Loan Manager for the Marysville branch of HomeStreet Bank, located at 1238 State Avenue. Contact Kevin at (360) 651-2777, ext. 301, or visit www.homestreetbank.com/khassan.

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