New Homes & Lifestyles
Today's Mortgage Market - Ample Loans for New Home Buyers
Many otherwise sensible people talk themselves out of becoming homeowners by convincing themselves that it's just too risky. However, in the U.S., history proves that over the long-term, home ownership is a smart way to invest your money. In any market, it is certainly wiser to own than to pay rent to a landlord. In addition, homeowners get tax breaks that renters don't. Most homeowners are able to deduct mortgage interest payments from their taxable incomes. Homeowners can also earn tax-free profits. Under current tax laws, you don't have to pay capital gains taxes on the first $250,000 in profits (the first $500,000 for married couples) when you sell your primary residence. In contrast, the profitable sale of any other asset (stocks, bonds, etc.) will result in long-term or short-term capital gains taxes.
Lastly, homeowners become savers. Each time you make a mortgage payment, you're saving money because each principal payment reduces your loan balance and builds equity.
Still, one of the reasons people don't buy homes is that they are paralyzed by the concern that "it's not the right time to buy.” According to the Joint Center for Housing Studies at Harvard University, “the tidal wave of immigration and the fact that most Americans are living longer has created a greater housing demand than expected. Between 2006 and 2015, the Census Bureau predicts the addition of two million more households.” These households need to live somewhere! The need for housing is going up, not down.
Believe it or not, it’s getting easier to get financing.
Why? Because new mortgage products have become much more innovative, addressing many of the unique needs of today's consumers. This makes homeownership achievable for millions of people.
Is it more difficult to get a home loan in today's mortgage climate? Things definitely have changed. Part of the problem with our market right now is that buyers were put into loan programs they couldn’t afford—frequently adjustable rate mortgages based on “stated” rather than actual income. Then, those mortgages adjusted and the payments were more than they were able to pay with their actual income.
Almost all loans now require full documentation. The good news is, for buyers who can verify their income and are willing to purchase in the price range they can legitimately afford, there are many programs available.
New windows of opportunity exist.
The Federal Housing Administration (FHA) has raised loan limits to $346,250 in Maricopa County through the end of December. And someone wanting to purchase with zero down can still do so using an FHA loan and a down payment assistance program. There are no income limitations and you don’t have to have perfect credit. This creates a perfect opportunity for people right now who want to purchase a new home for $360,000 that once would have appraised at $400,000.
The Veteran’s Administration has also raised the income limit on VA loans, so veterans with higher incomes who once could not qualify now can. There are many opportunities for finding financing that fits, although not all lenders offer every loan type. I’ve worked with Wells Fargo for over 17 years, largely because they offer every type of available program. This allows me to find the best possible loan strategy for my customers.
Choose the best program for your individual goals.
The best way to know what the right loan program is for you is to sit down with your mortgage representative and discuss your long term and short term goals and your payment objectives. There isn’t one program that fits everyone, but there is a right program for each individual.
Over the last few years, many brokers and bankers that are no longer in business participated in poor lending practices. They did a terrible job at counseling borrowers about what they would need to do to succeed with a mortgage. Today, lenders must be better counselors. It is our job to show you the best mortgage for your circumstances and prepare you to be a successful borrower.
Purchasing a new home can allow you to get a great deal because the seller often pays for concessions. Be sure you know what your seller contributions are and what your end price will be. Buyers are sometimes surprised in the end because they have added things to the home that they wrongly assumed were included in the price. That can put them over their mortgage limits.
Also, look for a lender that can lock in your rate, which protects you in case of an interest rate change. This is especially important with new homes because if you’re looking at a six-month build time, you want to make sure you are price protected and know what your payment is going to be when you close. Be aware that not all lenders have the ability to lock in a rate without adding additional fees.
Real estate is still a great investment, and like all sound investments, it is one that matures over time. It’s a great time to buy and there are many good programs available. An experienced mortgage counselor can find the best program for you, and can show you how to be successful with your loan.
