Buyers, Start Your Engines!

Dear Pat,
We've been watching prices go down for the past year, and it finally looks like we can afford a home of our own. My husband says he wants to watch the Indy 500 in his own den by Memorial Day. If that means I can put his giant TV in the basement, I'm all for it. Now we just need the basement! But I've heard that mortgage financing is really hard to get these days, since the banks are afraid to lemnd. Is that why the real estate market is so slow? If we start looking, what are the odds for us?
---Want the Green Flag

Dear Flaggers,

Why do you think the real estate market is "so slow?" Have you been watching the news again on that big flatscreen, tuned in to all those reports about frozen lending at 'fraidy-cat' banks, foreclosures dragging California into the sea, Washington political posturing and government ineptitude only making things worse? Geez, no wonder it seems as if the cars are crashing the sidewalls, with no chance for you. I've heard versions of your first question many times in the past few months, and I think this is a good time to address it here. Fact is, the lender-mediated (bank-owned, short-sales) market is extremely active as would-be homeowners and investors scramble to get the "deals." Meanwhile, the traditional market (seller-owned) is heating up as inventory shrinks and prices (impacted by the competing bank-owned sales) settle at affordable levels. Nothing crazy here: this isn't a land-rush but it's obvious to everyone in my business that things are beginning to return to normal.

And that includes normal lending. Not the wacky lending of the past 10 years that has brought daily floggings via CNN into our living rooms, but a return to the safer lending standards that served us in the past: higher credit scores, conservative income ratios, even down payments (what a concept!). Big commercial banks may be afraid to lend to each other, if the pundits are to be believed, but there's plenty of mortgage money available to homebuyers, and banks aren't the least bit afraid to lend it if you meet their guidelines. Let's continue to torture the racing analogy: if you were really going to enter the race, first your car would have to qualify, right? Then you'd learn what pole position you'd have at the outset. In much the same way, you need to talk to a mortgage loan officer to see how you qualify before you go looking for houses. In fact, you need to get pre-approved, so you can snap up that perfect basement, er...house immediately when you find it.

Now here's something to get revved up about, Flaggers: your US Treasury is going to GIVE you $8000 to buy a house this year. This is not a deduction from taxable income; it's a tax credit for first-time buyers--that means that if your wages are fully withheld the Treasury is going to send you a check for $8000; or the difference, if you owe anything after withholding. There are a number of qualifying details, but it's very inclusive--and no strings attached. While I'm touting the government here, let's not leave out the recently announced $75 billion foreclosure prevention program, which helps protect home values for everyone. Or the latest trillion-dollar Fed monetary injection, designed to keep banks lending and mortgage rates low. Or the stalwart FHA, possibly the most successful government program in history, ready to help another generation of Americans with a down payment requirement of only 3.5%.

So I'd say the odds look good for your own checkered flag, Flaggers, and for us all. Good luck!