Over the last 8 years, not only was owning a home part of the American Dream... it seemed to be a privilege bestowed upon the general public at epidemic proportions.
Unfortunately for the next generation of home buyers, those days are fading fast.
The way that first time home-buyers qualify for their first home will soon be changing. Gone are the days of 100% financing and 80/20 loans... or at the very least, they are in extremely short supply.
Buyers are losing their options to refinance their adjustable rate ARM mortgages for lower conventional rate mortgages because of a decline in anticipated appreciation.
What does this mean for someone who wants to purchase their first home?
- Start saving now. Conventional mortgages require a 20% down-payment in order to avoid PMI insurance. This can save you about $100-200 a month on your mortgage payment.
- Clean up your credit. The lending industry is going through a MAJOR shakedown. Underwriting criteria is becoming more and more difficult to bypass, and squeaky clean credit is a deciding factor in the loan approval process.
- Understand the process, know what you are getting yourself into.
- Practice making your pre-approved loan payment before you commit. (use the extra money you save toward the down payment. A great way to save a lot of money fast!)
Learn the language. Talk to your parents, friend who are homeowners, or a real estate professional... learn what these mortgage terms mean:
- PMI
- escrow account
- property taxes
- conventional mortgage, VA mortgage, FHA mortgage
- Title insurance
- closing costs
- points (and what they mean)
- pre-payment penalties
- ARM or adjustable rate mortgages
- Foreclosure
- FICO scores
- rate buy-downs and lock-ins
- Knowing what you need to do to prepare for owning your first home, will eliminate any surprises that can turn your dream of owning a home into a nightmare. Many homeowners that were floating along in the real estate bubble fell hard when the bubble finally burst.
- $600 billion dollars in adjustable rate mortgages are set to adjust this year. $900 million are expected to adjust next year. Many of these homeowners have no idea how those rate adjustments will affect their mortgage payment, and many will only find out after it's too late! Read the fine print and ask questions!
- If you want to know more about what the recent changes in the real estate climate mean for you, call me to discuss your situation.
Julie Ferenzi
Chicago Suburban Real Estate
Century 21 Hometown
7821 W. Belmont Ave.
Elmwood Park, IL 60707
630-673-6233
