The decision to purchase a home is one of the most important decisions that a person can make. There are a number of financial reasons to own a home as well as pride of ownership and the stability of an increase in ones net worth. With interest rates looking like they will be ratcheting up over the next 12 months and the expiration of the $8000 tax credit for 1^st time home buyers, now is the time to buy if you can. The selection of homes has never been better and prices have fallen about as low as they are likely to.  Inventories are falling and prices are going up across the nation right now.

When you go in to apply for a home loan chances are that you will be looking at an FHA loan. In the past the FHA mortgage only amounted for about 3% of the home loans issued.  Today that figure has risen to about 25%.  In short these FHA government-insured loans are almost the only game in town.  If you haven’t yet been able to save the minimum 10% down that a conventional loan requires then FHA is probably the way to go.  You may qualify for an FHA loan with as little as 3.5% down.  That is a lot more palatable for many first time home buyers who haven’t had the time to save the 10% to 20% that is ideal.

Historically FHA loans have been only for low-income borrowers.  That is not true today.  There is really not the cap on the amount of income you have in order to qualify for the loan that there was before.  The overriding factor to qualify for a loan today is simply ones ability to make the payments.  In areas where real estate is relatively cheap like our area the cap may be around $272,000; where as in high priced areas like California and New York the cap may be closer to $730,000.  For first time home buyers the $272,000 would be more than adequate in our area.  $100,000 to $175,000 will get you pretty nice living quarters in our area.

Whether you are a buyer or a seller you need to expect a tough appraisal with FHA.  The home will need to have a clean bill of health for the FHA approved appraiser in order to get the loan.  Sellers will need to plan on fixing any major issues in order for the deal to close. That being said, standards have relaxed some from only a few short years ago when even minor things had to be fixed.  Mostly the requirements today have to do with major items like leaky roofs, major wiring problems, cracked foundations, septic systems,  and the like.   For sellers I would recommend that you take a good look at major items and repair them before the inspector is called in.  For the buyer, this is just good peace of mind to know that the inspector is looking out for your best interest in the transaction.

The FHA loan, while being easier to qualify for, is also a bit more expensive than a conventional loan.  That is assuming that the conventional loan has 20% down thus avoiding the PMI (Private Mortgage Insurance) insurance. With an FHA loan there is a 1.75% upfront fee (points) plus a .5% annual insurance premium.  This insurance will remain in effect for about 5 years or until the loan balance hits 78% of the sale price or the homes appraised value.  Still that is not a bad deal given that you can get the $8000 tax credit that will offset most or all of these costs if you are a first time home buyer.  Occasionally a motivated seller will agree to help with some of these closing fees too. FHA rules allow the seller to pay up to 6% of the home price toward such closing costs and fees.  For these reasons the FHA loan is still a good idea.

FHA loans have had a bad reputation in the past for being hard to get and having mountains of paper work to fill out.  This made closings harder to do and take more time.  Now thanks to looser repair requirements and automatic underwriting systems the process has become much shorter and easier and the closing times are only a few days longer than conventional loans.  You will still need to have written documentation of income including pay stubs and past tax returns.  But there are really no such things as stated income for conventional loans any more either.  You will probably need the same paperwork for either type loan today.

I hope that this helps a little with your understanding of the FHA government-insured loans that are so common in today’s home financing arena.  Other government loans like IHA (Idaho Housing Administration) and RD (Rural Development through the UDA) work very much the same way even though each has its own set of rules.

Once again if you are at all thinking about buying a home in the near future now is the time to do so.  Talk with a Realtor® today and let him/her help you through the process.  They will be happy to recommend a lender that can help you get into you new home.

Paul Bowen

President of Upper Valley Association of Realtors

This is a question that I often here.  It seems that almost everyone that knows that I am a Realtor® asks this question when ever we have a conversation. I am sometimes surprised that a particular individual has an interest in the market.  Perhaps they are just wondering about my well being too; but many people are genuinely interested in the market.  Either they have been waiting on the side lines and are wondering if now would be a good time to get into the real estate market as a buyer or they are considering selling a property and are wondering if there are any buyers out there.

As everyone knows, real estate has been in quite a “funk” as of late.  After all the whole economy is down regardless of what business you are in.  Real estate is no different.  However there are signs that a bottom is near.  Last month nation wide sales of existing homes and new construction were up for the first time in a long time. Also the average price of a home was up slightly as well.  That all sounds good and well but who knows for sure?  The stock market has also been showing signs of a steady upward climb.  Perhaps the worst is behind us there will be nothing but blue sky for here on out.  I wouldn’t bet on that either.  Markets, real estate or stock, do not go straight up.  I am sure that there will be short term corrections along the way.  This may also be a false bottom and things could go down even farther.  Know one can predict an absolute bottom and I won’t attempt to do so here.

I do think that now is a good time to own real estate.  Opportunities exist right now that haven’t been seen for quit some time.  Interest rates are still quite low by historic standards even though they are higher than they were at the lowest point a few months ago.  The lowest I heard of was around 4.57% for a fixed 30 year loan and rates today are around 5.5% depending on your credit score and other factors.  That’s not bad.  Home prices are also down quite a bit from the high we saw a couple of years ago.  That looks like a good time to buy to me.  Real estate can also be a good hedge against the inflation that appears to be coming some where down the line when the effects of massive federal budget deficits start to kick in.  We’ve printed a lot of money and a devalued dollar could make for much higher inflation in the future.

How about our local real estate market?  As I have mentioned before in these articles, “real estate is local.”  Even here in Madison County the real estate market is different than it is in say Bonneville County only a shot drive away.  On average there are approximately 17 homes sold in Madison County in any given month.  The numbers range from a high of 40 to a low of just 6 over the past three years or so.  In fact the numbers for the last three months in Madison County were 6, 9, & 13 respectively.  Here again the trend appears to be in an upward direction.  I certainly hope so any way.  Activity is picking up and people’s attitudes seem to be a little more optimistic as well.

Whether you have been looking to buy or sell I believe that now is a good time to make a move.  Only time will tell for sure and by all means do your home work before investing  in or selling a piece of property.  Real estate looks good to me for the foreseeable future.  Talk with a real estate professional today about you options.  I am certain that he/she would be more than willing to spend some time with you to help you explore your options.

Paul Bowen