Mortgages taking a dip?

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According to recent news reports, the availability of home mortgages continues to decline. This, unfortunately, leads to the increase of home foreclosures.

The Washington area has historically been relatively immune to some of the real estate woes that other markets experience from time to time. However, our increased foreclosure rates this time around are easy to understand, says Brian Bonnet, mortgage loan officer with Signature Mortgage Services in Old Town Alexandria. While our local economy is still very strong, many people simply took advantage of lax underwriting standards and acquired property with loans they could not afford. If you owe more on your property than it is currently worth, and you must sell as a result of job transfer, divorce or some other issue, short sale or foreclosure may be your only options.

In many areas of the country, many lenders have been forced to tighten up on the amount of money available for home financing. Because developers are facing steep increases in loan defaults, lenders are finding themselves moving with caution. This leads to declining home prices and a surplus of unsold homes which means that there are more properties competing for a limited pool of buyers.

Bonnet says, The sales rate for residential real estate has continued to slow, but it had to. The break neck pace and the rate of appreciation we saw up until the middle of 2005 were not sustainable. Relative to that market, one might conclude that we have a slow or depressed real estate market. The truth is our market is by all normal measurements a good real estate market. Certainly, some sellers are in difficult positions depending on when they purchased, but properly priced houses in good locations that show well still get contracts. Bonnet also points out that the market is simply moving back to the days when most mortgage programs required purchasers to maintain positive credit histories and have some level of savings that they can put toward the real estate transaction.

Many home builders are finding themselves in situations where big promotions are the only way to move unsold inventory quickly. Even in less-affected regions, such as the suburbs around Washington, D.C., developers are resorting to auctions to sell new houses, townhouses and condominiums.

In October, 30 two and three bedroom condominiums in Alexandria were auctioned off in an hour for average prices of $300,000 to $350,000. This resulted in a discount of around 10 percent from pre-auction prices. Some builders lose money through these types of auctions, but they see the bigger benefit in cashing out.

The pros of buying a home right now
Carey Meushaw, a mortgage lender with Signature Mortgage Services says that people shouldnt be afraid to buy right now. Theres a tremendous amount of inventory available to potential buyers. With such great supply, sellers are being forced to reduce sales prices and entertain less attractive offers in order to sell their homes, he notes. Sellers are offering subsidies to help pay for part or all of buyers closing costs, saving buyers tens of thousands of dollars. And the rates are still strong. For one point, a buyer can obtain a 30-year fixed loan for 5.750 percent.

Even with these special offers, savings and good credit ratings are still important when buying a home. Many prospective home purchasers have gotten used to the idea that they need little or no money to purchase a home. While some of those programs are still available through Signature Mortgage, and elsewhere in the industry, the fact still remains that the pool of qualified purchasers has shrunk, adds Bonnet.

The good news is, We still operate in a market with an unemployment rate around 2 percent. The majority of our population is well-educated and well-paid. The future is bright for real estate in Northern Virginia and interest rates are still very low, says Bonnet.

According to data provided by Signature Mortgage Services, rates on 30-year fixed mortgages have averaged below 7 percent over 71 of the past 444 months, while conforming interest rates are in the low 6 percent. One interesting loan program is the Jumbo Veterans loan which allows a low down payment with no mortgage insurance and a very favorable interest rate. Given the number of active and former military folks in our area, it is a program which could be widely utilized, advises Bonnet.

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