New Year's Resolutions for Home Buyers
Ilyce R. Glink
At the end of 2008, I said I wouldn't be surprised if that year went down as one of the worst ever for housing since the Great Depression.
But as we get ready to say goodbye to 2009, it's clear that this year hasn't been much better.
We've had another record year of foreclosures (3.9 million foreclosure filings, according to RealtyTrac). Housing prices fell sharply in the first half of the year, as millions of Americans lost their jobs.
The housing market is still on life support: The
Millions of Americans (about 27 percent, according to
FHA now accounts for 30 percent of all loans originated, but it has used up its insurance fund and will require higher down payments and bigger mortgage insurance premiums starting next year.
And then there are the real estate investors, swooping in to scoop up properties on the cheap. As the year ends, investors account for about 40 percent of all home sales. Some investors are finding ways of buying distressed properties and flipping them to other buyers for a profit. (Some things never change.)
Speaking of which, perhaps 4.5 million existing homes will sell this year plus another 430,000 new construction houses. That is the lowest number of newly built homes sold in any year since records have been kept -- save 1982, the year interest rates climbed above 18 percent.
If there has been a bright spot, it that mortgage interest rates touched a 50-year low twice this year. Millions of Americans (including your columnist) refinanced to take advantage of rates that were as low as 4.25 percent for a 15-year fixed-rate loan and 4.75 percent for a 30-year fixed-rate mortgage.
And the first-time home buyer tax credit seems to have propped up the housing market, for the moment.
It's hard to believe that two years ago, as we ended 2007, some were comparing that housing market to the Great Depression. We've fallen so much farther since.
The good news is that if you're looking to buy a home in 2010, mortgage interest rates will be low and home prices will be relatively cheap. You're going to need more cash for a down payment, closing costs and reserves. And you're going to need a higher credit score.
If you're planning to buy a house this coming year, here's my annual list of
As a buyer, I resolve to:
-- Get my credit and finances in shape. If you want to take advantage of today's low interest rates, you'll want to have a credit score above 760. The higher the better. If your credit score is below 620, you'll have trouble getting even an FHA loan.
-- Know how much I can afford to spend before shopping for a home. Getting preapproved before you shop for a home has never been more important. You'll need all kinds of documentation (W2, tax returns, account statements, etc.), so get it together before you visit a local lender. And, shop around. Although
-- Know my neighborhood, and be comfortable with it, before I buy a home there. Houses are great. Neighborhoods that are littered with foreclosures may be unstable for years. Spend time in the neighborhood before falling in love with a particular house.
-- Interview at least three brokers before hiring one. This is the single biggest purchase of your life. You deserve to have the best representation. Make sure you interview at least three different agents or brokers before hiring one. Ask questions about how many transaction sides they've closed, what price range they work in, who their typical customer is, and what kind of technology they use. Hiring an agent is like being in a short-term marriage. You want it to be good, supportive and productive.
-- Read and understand all documents before signing them. I know loan documents are long and boring. So what? You're committing to the next 15 to 30 years of your life (less if you refinance). Take the time and read your loan and purchase documents. Make sure you understand what they're saying. Make sure the numbers match what you were promised. And if they don't, speak up before you close -- not after.
If you're trading up, you've probably got a home to sell before you can buy. How can you sell in a slow market? How can you compete against 10 other homes for sale in your neighborhood? Will you qualify for the new home buyer tax credit after you sell? Next week, we'll continue our look back at 2009 and I'll have your home seller resolutions for the New Year.
New Year's Resolutions for Home Sellers
Ilyce R. Glink
If you tried to sell your home in 2009, you probably didn't have a lot of luck. Home sellers are seeing their properties languish on the market, in some cases for years. It is beginning to seem normal to see properties that have been listed for more than 360 days. As we look forward to the new year, the news isn't going to look a lot better for home sellers.
- The Gift of Savings
- Break Bad Shopping Habits to Avoid a Debt Hangover
- Understanding Health Reform's Real Impact on Medicare
- 10 Reasons You Shouldn't Retire
- Ready for Retirement
- Should Your Kids Pay for College Themselves
- 6 Great Financial Gifts for Children
- Gift Cards: Not Always the Easiest Holiday Present
- Getting a Mortgage in 2010: 10 Things to Know
- Careful Planning Can Save You Thousands at Tax Time
- Paying Off Your Mortgage Can Boost Cash Flow in Retirement
- Paying Off Student Loans Requires Smart Decisions
- How Long Will It Take to Recover Your Investment Losses
- The 10 Strangest Mutual Funds
- Experts Offer Advice on Investing in 2010
- Investor Protection Act Would Shake Up Financial Adviser Duties
- FHA Loan Requirements About to Get Stricter
- When Success Doesn't Impress
- Six Solid Tips When Job Interviewers Call
New Year's Resolutions for Home Buyers
(c) 2009 Real Estate Matters, Ilyce Glink