Buying a new home in 2011

Millions are beginning to see the American Dream of homeownership as something not as economically feasible or worthwhile to pursue as it once was. A growing number of Americans are determining renting is all they will ever be able to achieve. Existing homeowners, looking to get out from under the weight of crippling mortgage debt, are looking to downgrade their existing homes. These homeowners will find greater challenges in this market.

The strength of the housing market is quite dependent on small regional differences and area markets can vary greatly. Certain housing markets in areas of California, Florida and Arizona have seen tremendous drops in home values during the Bubble Burst, while other markets throughout the US never were subject to such swings, remaining quite steady through the initial real estate downturn. 

While last quarter 2010 economic numbers have helped boost the existing housing sales in the greater Baltimore/Washington DC area, sales are still down from last year. Fortunately, the stabilization, or leveling off, of many area housing markets has economists predicting the light at the end of the tunnel. The months leading into the spring of 2011 are looking like a good time to buy. Mortgage interest rates are still near their record lows, and this combined with the current reasonable housing prices has created an ideal Buyer’s Market.

While mortgage financing may have become challenging for some homebuyers, the last few years have opened considerable opportunities for FHA and VA loans. These options allow down payments of as little as 3.5%, offer help toward seller closing costs of up to 6% of the purchase price, and give hope to those of us with credit scores as low as 600.

The standard conforming loan limit is $417,000. For those looking to purchase homes which require a loan size above this limit, HUD has expanded loan size eligibility. Depending on statutory county limitations, refinances and purchases up to $729,750 may be eligible to receive today’s low rates.

Your grandfather always advised you to buy low, sell high. For those who have sat on the sidelines and rented for the last few years, or are first time homebuyers, the perfect storm has arrived. 

So what happens to those with an existing home when the mortgage is more than the house is worth? Well – options still remain. Renting out the home or refinancing into lower fixed rate mortgage through the Making Home Affordable Program are options more homeowners seek every day. Mortgage companies continue to work with customers to modify existing loans and keep Americans in their homes when financially feasible. The most risky options, such as letting your home foreclose, can have many long term ramifications and will create an inability to qualify for your next home, car, or even credit card.

Everyone’s housing situation remains unique and no one should be taking more than a casual look at the home buying search without a comprehensive evaluation completed by a licensed, qualified mortgage consultant or realtor. Only someone with experience can give you the information you need that is customized to your own unique needs.

Home value websites such as Zillow, Cyberhomes, and Homesdatabase are meant to be a guide and not indicative of a likely sales price. Be cautious in allowing them to affect your offering, or asking prices. Furthermore, county tax assessments are not indicative of true value. These are really nothing more than the basis for how the county assesses property values for taxation.

A key bottom line that is often overlooked is the change in your budget once you’re in that new home. As with any major purchase it is vital to plan realistically, and consult experts accordingly to see if buying a home is not only possible, but the right idea for you.