I set out early this morning with the well-meaning intention of putting together a packet that would make life easier for first-time home buyers then… BAM …it hit me that not only first timers, but nearly anyone who hasn’t purchased a home in the past 2 or 3 years is going to experience some major market shock. Just incase you’ve been in a coma, the real estate and mortgage industries have done a complete 180 since the height of our country’s financial bubble. If there were an alternate universe for the American home buyer this would be it.
I’ll make this quick… a valuable history lesson. In the early to mid 2000’s there existed, among other choices: “piggyback” loans designed to eliminate mortgage insurance by combining a first and second mortgage, often equaling 100% financing, “interest-only” payment options (pretty self explanatory), “no doc” and “stated income” loans that allowed you to bypass any proof that you even had an income at all. And then we have the real estate market itself. It was not uncommon for there to be 2, 3, 10 offers on a property that you were interested in. You may have had to submit offers on a dozen or more homes, before one was accepted. You see where I’m going with this? First-buyers were, in effect, priced out of the real estate market. This was happening in nearly every market in the country. Enter: the great recession.
In our (current) alternate universe, the theoretical possibility of owning a home is at a generational high. In some cases home prices have slipped to half, or even 1/3 of their value at the height of the bubble, and interest rates are still remarkably low. It would appear to be a veritable smorgasbord for the first-time buyer. However far fewer people now qualify for a mortgage. Credit scores are trashed, incomes have been reduced, appraisals are conservative to say the least, and as if on a bungee cord banking and federal regulations are now… dare I say… over the top.
Here are a few questions to consider that may trip you up when applying for a mortgage. I ask you these things not as discouragement, but simply so that you’ll be prepared.
– Have you ever made a rent payment late?
– Do you have unidentified cash deposits in your bank accounts?
– Is your work history continuous, in the same industry, and at least 2 years long?
– Do you have sufficient funds to close? Do you know how much you’ll need?
– How closely can you estimate your credit score? Do you even have a credit score? Are you married and if so what is your spouse’s credit score?
– Do your tax returns match your W2s or 1099s? How much of your income do you write off each year?
These are not just questions for the first time buyer, everyone, without exception must provide this information and much more. None of these are insurmountable issues but mortgage regulations change every day. In fact, times are changing dramatically and the sign of these times is CAUTION.
