A Message About Financing

"Financing a Home Is Easier Than You Think," so says my friend Kevin Budde, who is has been in the mortgage business money/lending area of real estate for about 40 years.

One thing that I honestly can say that is holding back the housing market is the overwhelming belief that buyers cannot get financing. The consensus seems to be that only large down payments are required along with very high credit scores. Even then the belief is that the underwriting is so stringent that most buyers don’t want to apply for fear of having their loan rejected.

What would really help and could make a difference is for agents to let their clients know that these misnomers could not be any father from the truth. The fact is, while lending is not the free-for-all it was 5 years ago, common sense has come back full swing. Meaning, down payments now are smaller on higher loan amounts than have been in place for years. The government agencies feel the worst of the home price decline is behind us, allowing more leniencies. In addition, underwriting documentation requirements have eased because the economy has stabilized and shown signs of improvement so less there is, less risk. So, let’s talk numbers.

In Orange and Los Angeles counties, borrowers are able to secure a home loan in the amount of $729,750 with only 3.5 percent down payment. That equates to buying a home for $756,250 and only needing a down payment of $26,500. The down payment can be a gift from family members as well. The credit score can be as low as 640. With a 10 percent down payment, a borrower can obtain financing for their home with a maximum loan of $875,500. With 20 percent down payment the maximum loan is $2,000,000. From there the down payments increase the higher the loan amount requested.

“Please keep in mind it is best for buyers to be preapproved with a lender before shopping for a home so any specific nuances in their case can be worked out prior to entering escrow. However, there really isn’t any reason for buyers to be fearful when applying for a home loan. If they can really afford to make the payment, have reasonable credit and can substantiate their income then it is reasonable to expect they will be approved.”  Kevin wants this message out. 

Home buyers better be ready for low inventory and lots of competition this spring!