So, it's really a great market for first-time buyers?
Yes, it is. As long as you stay realistic about how fast prices will appreciate. Mortgage rates are low and prices are as affordable as they were in 1971.
It hasn't been this good since the early 1970s in terms of affordbily--that is, home prices compared with incomes. And mortgage interest rates are at historic lows.
Janet is here, too, with a question on behalf of my son and his new wife. They're prospective first-time buyers, but they're wondering if their student-loan payments will be held against them when they're shopping for a mortgage.
Well, it looks like we have a few first-time buyers joining us today. Let's get started with our first question.
And we have a comment from a real estate broker too, in regards to what Mark was saying about the current market.
The total amount of student debt doesn't count, but the monthly payment amount does factor in when lenders consider how much of a monthly payment you will qualify for.
While Pat provides more detail on the student debt question, let me say that I don't envy our real estate agents.
Hi, Dave, Yes, I've heard that from the many agents with whom I've spoken. It's still an issue--even 5 years after the onset of the real estate bust. That's why sellers need to hire an agent who will persevere in telling them the truth, whether sellers like it or not.
People got used to soaring home prices until six or so years ago, and it is difficult to face reality, for all of us.
Speaking of real estate agents, Adam has a question about how to choose one.
But the good news is, it looks as if prices are finally near bottom.
One way for sellers to get used to reality: Visit houses in your neighborhood that are for sale. Check out what condition and amenities they're offering compared with your house.
Also, Dave, feel free to weigh in on how to choose an agent.
You definitely want a go-getter, and someone you feel affinity for.
Mark, sure. How to choose an agent: You can surely ask for referrals from friends and family. But I also like to go to Realtor.com and www.crs.com and use their "find an agent" tools. You can look at agent's credentials, including areas of specialization. Look for someone who is working full-time, not part-time, and who is still ENTHUSIASTIC about the business.
Just to go back to student loans for a minute, that's actually encouraging, Pat. So if young people work out a
loan payment that's manageable, they can probably plan to buy a house.
Dave and Mark, you both make good points. I think I would ask for references from other recent sellers--and call them to check.
In theory yes, but lenders will consider how all your debt payments stack up against your income. They'll also consider your credit score. And they'll want you to provide lots of documentation of your resources. Lots of hoops to jump through.
lenders are very cautious these days. They expect total debt payments not to exceed 36% of income (monthly)
Thanks for the guideline, Mark.
And the whole payment for housing shouldn't exceed 28% of income.
Right, Mark. And monthly housing costs not to exceed 28%.
That didn't always happen in the past, which is one reason for the bubble.
A good baseline for our readers to keep in mind.
Dave, I'm not sure I understand your comment?
Mark, In the past everyone--borrowers and lenders--expected home prices to keep rising, making the risk of loose lending requirements okay. Not anymore.
So right. It's gone the other way, to some extent.
While we're on the topic of lending requirements, do you have any tips for first-time buyers when it comes to preparing to buy a home?
Buyers need to have all their ducks in a row. And be pre-approved for a mortgage.
How good does your credit score have to be?
Janet, you don't have to have a pristine credit record. Lenders like to see 740 for the best rate, but if it's lower, you can still get a loan.
Janet, to snag the best interest rates on a mortgage, you need a credit score of 740 or more. You can get in with less, but you'll have to pay a higher rate.
There have been so many articles out there about how the younger generation's move-back-home lifestyle is "killing" the housing market.
There are so many reasons, and that's probably one of them.
Dave, Good point. I like looking at the Web sites of local multiple-listing services or real estate brokerages for the latest information and leads to selling agents.
Another thing that's killing the housing market is the number of foreclosures.
K, as the economy improves and young people feel they can afford to move out, that will change.
Bye, Dave. Let me hit foreclsoures first.
But foreclosures are also good news for first-time buyers because it has lowered prices.
Yes, the rate of foreclosures coming to market has been hastening, mostly ones that were held up by the foreclosure-processing moratoriums.
Let's move on to our next question from Vince.
Now that the moratoriums have ended, foreclosures are coming to market again. They tend to depress home prices.