If you are buying, what do you want to see? Large inventory, right? Low prices, right? Well, that is what we have now… a large selection of homes to choose from, at prices that are 10 to 30+% lower than the peak of a few years ago. This is clearly a good buyer’s market! But as with any high-ticket item, and a house is the ultimate high ticket item for the vast majority of us, a purchase can be done only with financing, so we need to look at this third factor.
Last summer, the mortgage industry suffered a major upheaval, and the financial tsunami hit the real estate industry as well. Almost two seasons later, the mortgage industry is still experiencing serious problems, but the government has provided some hope with its continuing efforts to ameliorate the situation. There is a hint of return to some level of normalcy: at the end of January, 2008, the Mortgage Bankers Association reported mortgage loan applications have been trending upwards. Yes, loans are still being made, albeit not with the same loose underwriting standards that contributed to the current mortgage mess. And, mortgage rates are still attractively low.
So can a buyer get good financing? The answer is still yes, as long as the buyer can meet the underwriting standards, which are of course now more sensible, as they should be. Now, there is something I need to point out for first time homebuyers. There are several homebuying program opportunities from the state, the cities and non-profit agencies that make home buying quite irresistibly affordable!
The California Housing Finance Agency (Cal HFA) offers below-market interest rate loan programs as well as down payment assistance programs. Now what about the cities? Well, Fremont provides up to $40,000, with payments deferred for 45 years, or until resale or refinance! Hayward has $20,000, Newark $60,000, Oakland $75,000. There are other cities, not just in the East Bay, that offer assistance programs. Help can also come from non-profit agencies which use federal funding to provide three-to-one match to the down payment funds a buyer has, and this match is a forgivable loan!
Indeed, with the phethora of assistance programs, and the current favorable mix of high inventory and low prices, it is a crime for a renter to not at least explore the possibility of buying a home! It is possible that the monthly home payments (mortgage, taxes and insurance) will not be significantly higher than rent, and once you factor in the tax savings arising from home ownership, and you should of course consult your tax advisor, the gap may even be smaller.
