Seattle is fortunate: Forbes Magazine predicted we would have a strong, early recovery from the recession, and it looks like Forbes was right. The magazine also forecast the recovery would be sustained for a number of years due in part to our strong jobs market.
As we begin 2012, all the economic indicators are pointing in the right direction, especially in Seattle.
Interest rates are at a record low, and home prices are inching upward. Double-digit appreciation is forecast for Seattle by the end of the year. The signs have never been clearer: 2012 is the year to buy a home.
If you’re planning to invest in real estate, you’ll need the help of a Realtor and mortgage loan officer. I recommend talking to family and friends to find an experienced Realtor. Someone you know already knows a real estate agent that has proven his/her worth.
Once you’ve engaged a Realtor, you’ll need to get approved for a mortgage. Readers most frequently ask, “Is this a good time to buy?” “Do you think interest rates will go lower?” and “Can I get a mortgage if my credit isn’t perfect?” For answers to these and other mortgage questions, I’ve turned to Daniel Cote of The Legacy Group.
He has more than three decades in the lending industry, and in this month’s column, he will tackle the most frequently asked questions of borrowers.
Do you think this is a good time to buy?
Daniel Cote: When has a Realtor or mortgage banker ever responded “no” to this question? My response is a qualified “yes,” based upon market forces at work since the global credit meltdown in 2007.
The ensuing economic uncertainty caused many potential homebuyers to take a “wait-and-see” attitude. As buyers held back, a massive supply of foreclosed and short-sale homes hit the market, driving prices down to affordable levels.
In an extreme effort to stimulate a real estate recovery, our federal government reduced interest rates to levels not experienced since the 1950s.
I am a firm believer that all good things must come to an end eventually. The law of supply-and-demand will impact local real estate in 2012. Potential first-time buyers are entering the market after a five-year hiatus. Their landlord and/or parents have been increasing the rent, and it has become cheaper to own in many areas of the Puget Sound.
As housing demand absorbs the supply of affordable properties, values at the $200,000 price point will stabilize this year and begin to climb slowly in 2013.
In summary, I can honestly say this is the best market for a first-time buyer that I have seen in my 33-year career.
Do you think interest rates will go lower?
D.C.: This is a question that I defer to the experts…those who forecast weather on the evening news. Meteorologists and economists seem to be cut of the same cloth in terms of their level of accuracy.
That said, Freddie Mac economists are predicting an increase from the current 30-year, fixed rate of 4.0 to 4.5 percent by the end of this year. They also predict we will hit a nose-bleed 5.4 percent in 2013. These rates are incredibly low by all standards.
However, this is where it is appropriate to advise prospective buyers that rates move up much faster than they move down. It is also worth noting that the typical mortgage rate was above 8.0 percent as recently as 2000.
If history is any indication of what we can expect from the future, I fully expect to see 8.0 percent as the prevailing level for 2014 and beyond as our economy recovers and rebounds.
Can I get a mortgage if my credit is not perfect?
D.C.: We are all aware of the media attention devoted to restrictive mortgage underwriting in the face of the subprime debacle. This holds true if we are comparing today’s loan underwriting to the “fast-and-easy” philosophy that put buyers into homes they never could afford prior to 2008.
Reason and logic prevail in 2012. Most first-time buyers are using FHA-insured mortgages to purchase homes with a 3.5-percent down payment. Other buyers are taking advantage of zero-down VA mortgages or USDA loans. Others are using the Washington State Bond House Key program to borrow some or all of their down-payment funds.
On the credit side of the equation, 850 is a perfect score — I have never seen a perfect score in my life. The acceptable score “floor” for most lenders is 640.
As a former FHA underwriter, I will say there are more opportunities today to receive a mortgage approval than before “nonsense” lending replaced “common-sense” lending.
RAY AKERS has been a licensed Realtor for more than 20 years. Send your questions to email@example.com or call (206) 722-4444. To reach Daniel Cote, call (425) 232-9180 or e-mail firstname.lastname@example.org.