Here’s a snapshot of today’s housing market nationwide.
Home prices in 133 of 150 major metropolitan areas rose sharply in the first quarter of 2013, experiencing their biggest gains in many years. The national median price for an existing single family home is now $176,600 – up 11.3 percent from one year ago. The gains were enough to push two million previously underwater homeowners into positive equity. Akron, San Francisco and Reno all posted gains of at least 32 percent over the first quarter of 2012. Phoenix continues to outperform many markets, posting a 30.1 percent year-over-year gain.
Condos are hot
Easier money for the best applicants
Mortgages are a little easier to get these days, provided your credit score is high enough. Many banks recently eased lending standards for low-risk mortgages. Most banks said they weren’t willing to ease standards for borrowers with average or low credit scores, though, and subprime mortgage standards remain tight.
Some banks now offer mortgages with a loan-to-value ratio greater than 80 percent (meaning the borrower can pay less than the traditional 20 percent down payment). Bank of America makes loans for up to 95 percent of the appraised value. Wells Fargo and U.S. Bank offer first mortgages for 80 percent of the appraised value and piggyback loans for another 10 percent to qualified borrowers who put 10 percent down. Some banks, like Navy Federal, offer 100 percent financing to certain customers, but charge higher interest rates on those loans. In nearly all cases, the greater the percentage of value financed, the higher the borrower’s credit score must be.
Money is out there. The hard part is getting the home.
Sellers choose the lender
Some sellers have taken to choosing the buyer’s lender. They find a lender willing to finance the sale and include contract language stating that potential buyers must at least get preapproval from the preferred lender (ultimately, the buyer is not obligated to finance through the preferred lender). This is particularly useful in condo sales where the lender has to approve a building that may not be warrantable (eligible for backing by Fannie Mae). Fannie Mae will not back a loan for a unit in a building in which one entity owns more than 10% of the units, or fewer than 70 percent of the units are owner-occupied. Fannie Mae also puts limits on the amount of commercial space in the building, and requires the building to maintain a minimum cash reserve. Since some lenders will not issue a loan in an unwarrantable building, having a mortgage lender in place can save everyone the time and frustration of a deal falling through.
Some sellers are not entertaining any contingencies – including financing. A mortgage contingency allows the buyers to back out if they can’t get financing. In highly competitive markets, sellers are giving extreme preference to all-cash buyers – sending other hopefuls away in search of another home to bid on. Don’t sign a contract without a mortgage contingency unless you’re prepared to pay cash in the event your financing falls through. Otherwise, you could lose your entire down payment.
No matter how you slice it, it’s still a seller’s market.