Purchasing a Home and Getting a Loan in Today's Market
Although inventory in Stowe declined by 15% in 2011, this is still considered a buyer's market, but people are buying as evidenced by the 23% increase in sales volume this past year. For those buyers thinking about starting their search understanding the mortgage process is paramount to reaching the goal of homeownership.
Today's lending environment has changed dramatically from before the economic downturn. Financial institutions became extremely cautious following the downturn as reflected in their lending standards.
"Mortgage rates are near historic levels. Even though lenders have tightened up lending guidelines, with the right preparation and expectations, it is possible to take advantage of the current low rates," according to Mark Stanton, CMP, of Primary Residential Mortgage, Inc. located in Stowe. For a buyer taking advantage of these rates this means often being able to afford more at a lower monthly payment.
As a buyer searches out a realtor they should also be contacting a bank, mortgage broker or other financial institution to help determine what they can afford. Key to navigating the lending process is having a strong team with good communication.
When preparing to purchase a home, here are a few items buyers should prepare:
- Check your credit score and status. Make sure to check with each of the three major credit bureaus - Equifax, Experian and TransUnion. Your lender can help with this.
- Prepare your documents; pull together recent pay stubs, portfolio, bank, credit card, and loan statements.
- Employment verification; have your HR department prepare an employment letter stating history and salary. Prepare them to verify this information again as you get close to closing.
- Figure out your down payment. To take advantage of the best rates many lenders require a 20% down payment of the purchase price. Know how much you have to put down and where it's coming from.
- Two Years Tax Returns. If you are a salaried employee this helps to verify your income. If you are self employed or receive a 1099, this will establish and verify your income.
In a recent CNN Money article, Greg McBride, senior financial analyst for Bankrate.com, even expects that lenders will ease up on borrowing requirements -- marginally -- in 2012. "Instead of requiring a 740 credit score for the best rates, lenders will dip their toes into 720 waters," he said. Knowing your score ahead of time will help you and your team best determine the right loan and property.
Vermont has the lowest foreclosure rate in the country and that is a result of local lenders and mortgage brokers helping Vermonters find the right product. "There are still great programs out there to help borrowers with little or no down payment." says Jeff Teplitz, Residential Mortgage Loan Consultant with EverBank, located in Stowe. "FHA requires a 3.5% down payment, Rural Development and VA allow for no down payment. All three programs allow the seller to contribute up to 6% of the purchase price towards closing costs. If you have 5% to put down, Fannie Mae and Freddie Mac are still offering very competitive products as well."
The forecast for rates in 2012 is that they will remain historically low, this coupled with continued affordability should help the national and local markets continue to stabilize. Locally our market is viewed as a stable market and is attractive to lenders. For buyers, Stowe continues to be a sound place to invest in real estate.
McKee Macdonald is a broker with the Smith Macdonald Group, part of Coldwell Banker Carlson Real Estate of Stowe. Comment on this article at stowereporter.com, or email letters to firstname.lastname@example.org .
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