Mortgage Professionals Debate the State of Real Estate Lending
For today's real estate lending discussion I was lucky enough to get a panel of experts from the real estate lending community to answer 5 questions about mortgages, home loans, and the lending industry. I posed the same questions to each panelist in the roundtable and none of the panelist have yet read the other's answers.
Our panelists include:
Michelle Wilson of Alpine Mortgage. You can find her on the web at WilsonHomeFinancing.com
Darel Ansley of Peoples Bank in Wenatchee Washington. He blogs on Active Rain and has been a guest contributor here.
I hope that these questions serve as a starting point which might continue in the comments section that follows.
I divided this post into two parts since there was so much great info here. I will post part II in a few days.
1.2008 was a rough year. What is the silver lining for 2009?
Michelle: I think everyone can agree the silver lining for 2009 will be buying low at historically low rates. Also, first-time buyers from April 2008-July 2009 can take advantage of the $7500 interest free tax credit for renovations, debt consolidation or any other uses.
Darel: I am still uncomfortable with heavy involvement of the Federal Government in the financial markets. However; one benefit of all their actions is lower mortgage interest rates. Things can change, but currently the FED plans to buy up Mortgage Backed Securities for the first half of the year in an effort to lower mortgage rates and get people buying homes again. This is working so far, and combined with recently lower home prices, homes are more affordable than in recent years. Fortunately, subprime is gone, so this program is limited to people who can actually afford to make their payments.
William: The end of banks failing. Dare I say the worst is behind us.
Rhonda: Many unscrupulous loan originators are out of the business due to licensing requirements, less business and fewer programs. Consumers should have better odds of working with a mortgage professional than they did just a few years ago.
Tom: The silver lining for 2009 is that it's not 2008. Seriously, we've made it through 2008 and we've cleaned out a fair amount of the problems that have been happening. Seriously, I think if we did had lending requirement in place from 2002 to 2007 that we have in place now, we'd be sitting in pretty good shape right now. Is there some what of a pendulum that has swung a bit too far? I think that potentially is true, but time will tell. The other silver lining for 2009 is that in some markets there will be signs of a bottom and a slow and gradual recovery. What areas? Not Michigan (where I'm from) but places like San Diego and a few others.
David: Historically row rates. All homeowners with some equity in their homes should look into refinancing in 2009.
2.What kinds of home buyers will have the best opportunities in 2009?
Michelle: First-time homebuyers with down payments will be able to capitalize on low rates and have more likely have leverage over sellers regarding price negotiations.
Darel: Really anyone who plans to buy and hold. Prices are low and financing is cheap, so now is a great time to buy a primary residence, second home or an investment. I am of the opinion that the people who make the most money tend to move in the opposite direction of the masses. So while people and banks are unloading homes cheaply, I think wise people are picking them up. This is the time to dust off the creative financing and zero-down books and find a Realtor who has a good track record of negotiating (Geordie).
William: Given FHA has increased its loan limits for King county from the esoteric limits, First time homebuyers will have the best opportunities. King County 2009 FHA loan Limit $506,000 for more info on New Loan Limits and New Guidelines for 2009 visit http://www.myequitypro.com/?p=642
Rhonda: Home buyers who are able to go "full doc" for their mortgage will have the most opportunities going forward. This just means being able to document your employment (college may sometimes count) for two years, show proof of your income for the past two years and document your assets/down payment. FHA offers minimum down at 3.5% which a home buyers immediate family may contribute towards as a gift or a loan and sellers can pay for the closing costs.
Tom: The buyers with the best opportunities in 2009 will be those who are either first time home buyers with secure jobs and a down payment or those who are financially well off enough that they can have the cash to buy a new house without having sold their old one (or they sold their old one). The "contingent" buyers are the ones who are going to continue to struggle in 2009.
David: If you don't need to move in the next 7 years, you will find great mortgage rates, incredible selection and almost no competition. I also think that we will start to see a return of investors in many large markets. Some of the deals on bank-owned properties will just be too irresistible for a gambler.
3.Who shouldn't buy a house in 2009?
Michelle: I don’t think people with little or no savings should buy a house. A few years ago, when the market was surging and banks were lending to everyone and anyone who signed on the dotted line, buyers didn’t need a down payment or reserves to qualify for financing. I think everyone should have at least 6-12 months of mortgage payments in reserves before considering a purchase (in this tight economy). Job security just isn’t as secure as it once was.
Darel: Property-flippers should stay out of the market. Not because the good deals aren't there, but because the market is not very liquid, and it might be a while before they get their money out.
William: Those who can will those who can't qualify wont. With new guidelines individuals don't have the option they previously had, that is the breathing on the mirror test.
Rhonda: Someone who is uncertain about their employment should maybe consider not buying at this time until our economy turns around.
Tom: The buyers who shouldn't buy a house in 2009 are those who aren't confident they are going to stay in the same place for the next 7 to 10 years. How did I come up with that time frame? I think there's a good chance (on a national level) that we could see another 10% in price reductions. I also believe we're going to see what's called a "bathtub" recovery. That means that when we do hit bottom, we're going to bounce along that bottom for a while before we start seeing house prices resume their upward trend. If you figure a 10% drop and 6% brokerage fees and then a 3 year "muddle through" that means that in order to break even, you'd need 4 years of 4% appreciation to break even after 7 years. The time frame that buyers need to look at is substantially longer than it was a few years ago.
David: Homes in most markets are still losing value. People who aren't 100% certain that they'll stay in their homes for 5 or more years will not be buyers; they will continue to rent for the foreseeable future.
Like what you read here?
We'd also love your comments.