Hurdles to Buying A Home

A lot of hype out there right now about the time being right for buying a home because home prices are down and mortgage rates are near all time lows – making home ownership very affordable. But, so many people are sitting on the sidelines according to NAR as home sales are 25% less than figures from 2009.

So what has people sitting on the sidelines if NAR’s figures are accurate?

First off, the $8000 home buying tax credit that the Bush administration started and the Obama administration renewed and extended has expired (except for Vets – yes Vets can still take advantage of low VA rates and 100% financing using the tax credit until April 2011). Many real estate and mortgage experts suggest this has had an impact on the market slow down. Ok, I buy it. Next reason…

Credit Scores – Mortgage guidelines are the toughest they have been in years. It seems like every month we get a notice saying that FICO score requirements for mortgage programs go up. Currently many lenders are requiring credit scores of 640 or greater to qualify. Some predict that with this sole requirement, at least 1/3 of all possible US based home buyers cannot qualify because their scores are less than 640. Ouch for a housing market turnaround.

Income and Assets – mortgage qualifications have tightened their analysis of job history, income, and assets. Bank statements, for example, are looked at more closely than ever with even the slightest elevated deposits questioned. A shaky job history could lend itself to you getting the thumbs up or thumbs down in the case where an underwriter has some discretion about approving your mortgage. And for income, you must be able to solidly prove it with pay stubs, W-2′s and tax returns, etc. If you are self employed be prepared for an even tougher road.

Appraisals – Perhaps one of the most frustrating thing is the continued weakness in the housing market caused by foreclosures and short sales. Perfectly good homes where the owners are not in financial trouble are facing diffculty in being fairly valued because they are surrounded by now substandard foreclosure and short sale homes. Sellers can’t agree on price with buyers and home values are not matching up with sales contract prices. According to some, the business of appraising is just a mess.

And finally, the fear of the unexpected – With the economy in the state that it is in, many people have little confidence in job security or that the economy has made a turn for the better. With job security at question as well as fears that home prices are still not at the bottom it is no wonder why so many people are waiting.

One proactive thing you can do if you are looking to buy a home is to get yourself pre approved with a mortgage lender. At the very least you can take care of your credit scores and personal finance hurdles in the mean time if you also have fears about the economy and housing prices.