DROdio Real Estate

If you are a prospective home buyer and are keeping a watchful eye on the market, it is easy to get lost in the media frenzy that the nation’s housing mess has resulted in lenders requiring a stellar credit score and at least 10 to 20 percent down payment.

The truth is that nothing-down mortgage loans did not evaporate once the subprime mortgage crisis heated up. The Federal Housing Administration (FHA) offers loans that only require a 3 percent down payment. But that is not all. Some people are using down payment assistance loans, through local banks, with FHA loans in order to bring less than 3% to the table. In some cases, even nothing.

The only thing that you really need is a decent credit score. Sorry, but your score of 500 will not get you a home loan anymore. The minimum score is now around 570 to 630. This sounds good to people who have kept up with their bills, but have not been able to save much over the past couple of years due to increased food and gas prices.

Why are FHA insured loans becoming so popular? They are becoming a hot option since they require only 3 percent down and they can be made through your local banking lenders such as Chevy Chase, Wachovia, Bank of America or Sun Trust. They are also government backed loans that serve the purpose of helping the housing market out when there is problems in the private market for loans. That’s right, FHA insures 100% of the loan, so there is no risk for the lending institution.

In addition, the borrower usually pays an insurance premium up front. This is usually 1.5% of the loan amount; however, this can be directly financed into the loan amount. There is a down payment of 2.25% plus factored in closing costs for a total of 3%.

How is this different from conventional financing? Here is the beauty. Besides the fact that with a conventional mortgage requires down payments of at least 10% and a FHA loan only requiring 2.25%, the FHA program allows the borrower to finance many of these charges, thus significantly reducing the up-front cost of buying a home. The only difference is that there are small monthly premiums that cannot be financed at are added to the regular mortgage payment. The loans have quite a history. FHA was created by Congress in 1934 to boost homeownership during the Great Depression era. The agency played a key economic role in the 1940s, by financing military housing as well as home loans for World War II veterans. Never considered a FHA loan? Well, today is probably the best time to utilize one. A FHA could be a buyer’s best option since FHA accepts low credit scores and is specifically targeted to any home buyer that does not have much in savings to offer for a down payment.

Why do FHA loans get buried in the media? They aren’t news is the reason. They have been around since the great depression, so they are not news worthy. Stimulus packages and other legislation targeted toward homeowners get the coverage because it is something fresh.

Don’t get me wrong, FHA is mentioned numerous times in news articles. It is jus usually not the lead.

Sometimes it is hard for people to understand the significance of FHA loans at this time in the market. Think of houses as winter coats, trying to be sold at the beginning of summer. There are an oversupply of coats and in order to get rid of them, they are being sold at cut rate costs so that they will sell fast.

Now, most people will pass the clearance rack of coats and go right to the summer clothes. The smart shoppers, will first go to the winter coat rack and get a $200 coat for less than $30 and hang in their closet for next year. The wise shopper knows when to take advantage of low prices.

Remember, these deals won’t last and some experts say that the market is as low as it will get. Today, in a press release, a government report said that new home sales in the U.S. rose in April. This signals that there is only a matter of time before consumer confidence rebounds and these closeout prices are a thing of the past.

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Thanks to the sub prime mortgage mess, the sagging economy has resulted in lower property prices. This offers an opportunity for first-time buyers to get a great deal on a new house.

That is the investor’s advice to people who held off buying during the past five years. If you rent a house, townhouse or condo, the advice that you might hear from a consumer protection attorney, is to not be evicted do to your landlord inability to pay the mortgage.

One of the reasons that millions of Americans decided to rent during since 2000 was to live peacefully without having to deal with high mortgage payments and worries of defaulting on the mortgage. What they may not have considered was the possibility of being collateral damage the landlord of the townhouse they rent from is foreclosed on.

That is what is happening right now. Responsible renters are finding themselves being evicted as their landlords face foreclosure. Some landlords may give a few months notice, but lots will be given a notice to vacate the premises within 10 days.

With all of the media coverage of how the hard working American homeowner is facing foreclosure and political debate stirs about how to help these people in their homes, the renter is the lost victim in the housing discussion. There is very little talk about the hard working American renters who are being booted because their landlord has a sub prime mortgage that they fell behind on.

Deciding to rent was at one time thought to be a way to hide from the housing disaster. However, experts predict that renters are going to be the next wave of consumers affected by the mistakes of the housing bubble. According to the National Association of Realtors, there is a projected 5.3% increase in average rent for 2008 (up from a 3.1% increase in 2007). Why is this happening? Due for increased foreclosures and reduced consumer confidence in buying, demand for renting has increased. Increased demand means steeper rents.

Perhaps it is finally time to come out of hiding and try buying a home. Some renters may be scared to make the effort since the days of getting a home with no money down or with unconventional loans are long gone.

You might be hearing a lot of hype about how there are great values with the rise in foreclosures paired with house prices being down. You are right to speculate that this is advertising to sell homes. Of course it is, but it is also a great opportunity for renters to buy.

Potential buyers must understand the potential risks and opportunities of purchasing a home when the market is down. The fallen prices only affect those who purchased a house during the bubble years and are now seeing there house depreciate in value. If you were patient and held off buying during the bubble, now is that time to buy since house prices are about as low as they will probably get. This is based off the fact that the American economy is resilient and will rebound once consumer confidence is regained. The summer season offers a great time since people tend to travel and spend despite what the media says about the economy.

It might be hard to persuade some potential buyers to believe that current low housing prices signify great long-term value. Buyers must remember that currently they can get houses in expensive neighborhoods that were out of their price range a few years ago.

It is true that lenders are more cautious about who they will lend to. If you have good credit, a decent down payment and can spot a market opportunity, then you can be a successful buyer. Remember, lenders still want to loan and they will continue to loan to those who are financially fit. How do you know if you are financially fit to buy? Ask yourself the following questions to see if you are ready to stop renting and instead get a piece of the American dream.

• Is it cheaper to rent than to buy? There are many websites that offer buying vs. renting calculators to help you determine whether it is worth it.
• Is your credit score 680 or higher? Get a complimentary credit score from annualcreditreport.com.
• Is your debt-to-income ratio less than 40%? Divide potential mortgage payments by monthly income. Lower your mortgage payments by increasing your down payment.
• Do you have money for closing costs, moving costs, and a substantial down payment?
• Do you have a reliable job with steady income? Is there any threat of losing your job?
• Are you familiar with the market or know someone who is and can offer advice? It is good to have someone who knows how much houses are listed for in the neighborhoods you are considering.

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