By now, nearly five years after the real estate market meltdown began, you'd think virtually no housing consumer has been unaffected. To start, more than 5 million homes have been foreclosed and repossessed by lenders; 10 million homeowners are underwater (owing more on their homes than the homes are worth); and untold millions who want to offload their homes either can't or are trying -- and struggling -- to sell.
And while nearly everyone who pays for the place they live in has experienced some impact from the real estate recession, it looks like one thing remains insulated from damage: our belief in the value of homeownership.
Surprisingly, the people who you would expect were the most emotionally and financially scarred by the foreclosure crisis -- homeowners who have lost their homes -- still cling tightly to their belief in the value of homeownership, according to the results of a Yahoo! Real Estate study that polled 1,500 housing consumers, including more than 400 foreclosed homeowners.
Only 43 percent of the respondents who had actually lost their homes said their belief in homeownership had suffered as a result.
Further, there was not much difference in the share of respondents who had personally experienced foreclosure who still believe that homes are good investments (64 percent) compared with those who had no personal experience with foreclosure who hold the same belief (76 percent).
The results underscore how resilient the dream of homeownership truly is. Survey respondents who had lost their personal homes to foreclosure were as likely to say they plan to buy a home in the future as respondents who hadn't experienced the financial and emotional trauma of losing a home to foreclosure.
Foreclosed homeowners have experienced firsthand the advantages of homeownership -- especially the tax, lifestyle and psychological advantages -- and they miss them, the survey shows.
You might wonder what would possess a foreclosed homeowner -- after going through the months or years of stress while missing mortgage payments (and/or trying to get the bank to modify their loans), the breathless anxiety of having to move or being evicted, and the years of credit and financial rehab after the foreclosure -- to ever want to buy or own another home again?
As I see it, several phenomena might be at play in keeping their desire to be homeowners alive. It's entirely possible that this group had a stronger-than-average belief in homeownership before they even bought the homes they lost in the first place.
This might have made them more likely to take a subprime loan or buy a more expensive home than they could sustainably afford, making them more susceptible to foreclosure than others.
If you loved living in and owning your own home, decorating and customizing it at will, and knowing that a big chunk of your monthly housing costs (i.e., your mortgage interest and property taxes) are tax deductible, it can be tough to take what feels like a personal financial step backward from owning to renting a home -- no matter what the financial pundits might say about renting vs. owning.
From a psychological perspective, there's even an argument that the fact that these people have lost their homes might be making them want homes even more than they would have had they never been homeowners to begin with.
And lest you think buyers and renters have gotten a free pass from foreclosure crisis effects, millions of would-be buyers who are desperate to strike while the home-value iron is hot are finding themselves stymied, unable to qualify for today's tight mortgage guidelines.
Even renters now have much more competition, in the form of foreclosed homeowners, which has driven rents up -- way up, in some markets. And 72 percent of surveyed home buyers and sellers said the housing crisis has affected their housing plans.
Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.
By Tara-Nicholle Nelson
Tuesday, January 3, 2012
Six must-haves for mortgage approval
Interest rates are hovering around historical lows, and low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender's strict underwriting are all too common.
Some buyers are turned down for illogical reasons. For instance, if you have investments -- even if they're performing well -- an underwriter might deny the mortgage because your portfolio doesn't fall into the underwriter's risk assessment model.
One couple was turned down because the husband had worked at his current job for less than a year -- even though he was making more money at the new job than he was before.
These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.
Generally, it's more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.
You could run into underwriting problems if you're self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won't lend to buyers who have more than three or four residential properties.
If you're buying a new home before selling your current home, you'll need to have 30 percent equity in your current home. This needs to be verified by the lender's appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month's rent to verify rental income if needed to qualify.
HOUSE HUNTING TIP: As soon as you're serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don't make your selection based on interest rates alone. A good track record counts for a lot.
Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you're not turned down at the last minute, it's worth it.
Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you'll need to do to satisfy the underwriter.
Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won't be included as livable square feet.
If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.
There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.
THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.
Dian Hymer is a real estate broker with more than 30 years' experience and is a nationally syndicated real estate columnist and author.
By Dian Hymer
Some buyers are turned down for illogical reasons. For instance, if you have investments -- even if they're performing well -- an underwriter might deny the mortgage because your portfolio doesn't fall into the underwriter's risk assessment model.
One couple was turned down because the husband had worked at his current job for less than a year -- even though he was making more money at the new job than he was before.
These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.
Generally, it's more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.
You could run into underwriting problems if you're self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won't lend to buyers who have more than three or four residential properties.
If you're buying a new home before selling your current home, you'll need to have 30 percent equity in your current home. This needs to be verified by the lender's appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month's rent to verify rental income if needed to qualify.
HOUSE HUNTING TIP: As soon as you're serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don't make your selection based on interest rates alone. A good track record counts for a lot.
Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you're not turned down at the last minute, it's worth it.
Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you'll need to do to satisfy the underwriter.
Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won't be included as livable square feet.
If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.
There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.
THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.
Dian Hymer is a real estate broker with more than 30 years' experience and is a nationally syndicated real estate columnist and author.
By Dian Hymer
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