Posts Tagged ‘Bay Area real estate’

Housing Crisis to End in 2012 as Banks Loosen Credit Standards

From DSnews.com, by Krista Franks.

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit. 

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

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Preparing to Buy: Getting Finances in Order

You’ve been pre-approved, and you’ve been shopping with your Realtor. She’s encouraging you to write an offer on that cute little house you saw today. “When do I need to have my funds available?” you wonder. Some funds need to be available right away. An earnest money deposit, or “consideration,” is part of writing a real estate purchase contract, and you are expected to put a check with the offer you write. Your agent will collect a check from you, usually up to 3% of the purchase price. If your offer is not accepted, she will return your check to you. Once your offer is accepted, she generally has three days to deposit that check into an escrow account for you. This money becomes part of your down payment.

In addition to the remainder of your down payment, you will need cash for closing costs. These costs may include escrow charges, title insurance, lenders’ fees, the transfer taxes that are collected when a property changes owners, prorated property taxes and various small fees. Both buyers and sellers have closing costs. Who pays for what depends upon the terms of the contract and the county in which the property is located. The money for closing costs is brought in with your down payment, shortly before your escrow closes and you become the new owner of the home.    

“Okay, so I need money when I write my contract, and I need my down payment and closing costs just before my escrow closes. Do I need to have any other money available during the escrow process?” I’m glad you asked! Yes, probably so. While the deposit, down payment, and closing costs are most of the money you will need to bring in to purchase your new home, you may have to pay “up front” for the appraisal the lender requires. Of course if you’re paying cash for your home, an appraisal would be optional. Also, you may wish to have inspections made on the property you are buying. Most inspectors give us the choice of paying for an inspection at the time of inspection or having the cost of the inspection billed to escrow. In the latter case, the fee is higher. Questions? I’m here to help you.

Property Inspections: How Important Are They…And Who Pays for Them?

As home prices inch their way back, I’m seeing more “regular” listings in our inventory, not just foreclosed homes and short sales.  That’s encouraging news for both sellers and buyers.  Sellers who have been holding out are putting their homes on the market now, and these regular sales are quite appealing to many buyers.  “Why is that, Lexie?” you may ask.  Much of our inventory of homes for sale in the past year has been distressed properties.  When a home is owned by a lender, they are not willing to provide inspection reports—and they want As-Is sales.  That means they are not willing to make any repairs to the home.  What you see is what you get. 

 In contrast, traditionally sold homes generally are, overall, in better condition.  Because sellers don’t want surprises that could affect their bottom line, many are willing to pay up-front for inspection reports.  Having inspections done prior to putting a home on the market makes good sense.  Buyers can go over the provided reports with their agent before they write a contract.  Buyers don’t want surprises either.  They benefit by having a better idea of what they’re bidding on and, once they have the contract, they won’t need to have the provided inspections repeated.  Having inspection reports available benefits the seller also because it not only gives them an opportunity to correct some of the items mentioned on the reports, but it also decreases the chance of the buyer backing out after winning the contract. 

 Sometimes a seller is not willing to pay to have inspection reports done.  In this case once the buyer has won the contract, he has a certain number of days to have inspections done and to review the resulting reports.  In this case of course the buyer pays for them.  “What inspections should I have done on the house I’m buying?”  That depends on the house.  Does it have a fireplace?  Does it have a pool?  Did the seller provide any inspection reports?  Each house is different.  Your agent can assist you in determining which inspections should be done, in ordering those inspections, and being at the house when inspections take place.  Are termites brunching on beams or enjoying sub-floor for supper?  Does the home have clogged arteries with corroded pipes?  Regardless of who pays for the inspections, both parties will have a clearer idea of the condition of the home being sold, resulting in greater peace of mind for all parties involved in the transaction.