Financing Factors for Prospective Home Buyers

As the big debate on the state of the housing market continues consumer confidence is still struggling. National and regional statistics seem to offer conflicting views on whether prices have stabilized and low inventory is adding additional challenges to those searching for the perfect home. Amongst all of these erratic factors there is one thing that everyone does seem to agree on….rates are extremely low and are certain to only increase as our hopeful recovery continues.

Buyers who are sitting on the fence should definitely be aware of a few factors that could affect their financing should they continue to wait out the market.

First of all, for those looking to move up with less cash to put down you should be thinking about the impending decrease of conforming loan limits. Currently Montgomery County residents have the luxury of a $729,750 conforming loan limit, but this is due to expire September 30, 2011. Prospective buyers in need of this product will have to settle on their new home by this date.

Secondly, for those trying to time the interest rate market to hit bottom (since rates are fluctuating nearly daily) you will need to have the investment intuition of Warren Buffet. To simplify, homebuyers need to realize that the rates they see advertised at “all time lows” are generally days old following a stock market crash and before a buyout begins. Don’t wait for stability in rates to find your perfect home because rates change constantly. It is much better to line up your financing and let your lender evaluate when to lock your rate.

Another advantage that home buyers have in our current lending market is that there are a number of different products and regulations. Coming off of years of “vanilla only” lending we are finally starting to see some differences in what the banks and investors will find desirable. Don’t get overly confident, there are still no miracle products and things are very conservative (as they should be), but there is hope for consumers with little money down and those with less than perfect credit. In my recent conversations with various lenders I am hearing of several grants that require nearly nothing from a first time home buyer, and also mortgages available for those who have needed to short sell their home within the last 2 years. Understanding that every case is unique and buyers must still be well qualified with good debt to income ratios, I am only pointing out that the lending market is not really as tight as most people believe.

With housing affordability still near peak performance and rates and prices low the current buying market really is extremely desirable for those in need of a new home. Yes, the economy is still struggling and certain parts of the country are still in decline, but I do truly believe that many potential home buyers who opt not to move forward will look back on this time with regret. Especially when they are facing the probability of 6% interest rates in the near future.