The Housing Market You’ve Been Saving For

There are even some hints the present combination of historically low rates and more reasonably priced homes are beginning to slip away in some markets. For example, the National Association of Realtors’ housing affordability index, while still high, has dropped nearly six percentage points in the past few quarters as existing home prices in many areas have reversed course and begun to rise again.

So why aren’t more families in the homebuying market? While job worries may have some potential buyers holding back, others are sitting on the sidelines because they are unsure about the new rules of the road for getting a conventional conforming mortgage. They are actually straightforward and not so difficult for families who have:

• A stable income;

• A good credit history;

• A common-sense down payment. Generally, about five percent of the purchase price for a conventional, conforming mortgage. (Fortunately, there are down payment assistance programs for qualified borrowers.)

• Documentation — responsible lenders today will want documentation verifying your income (like W-2 forms, tax returns), employment, credit history, and assets — such as bank statements — to verify savings.

Under the new rules of the road, the lender must also obtain an impartial third-party appraisal that complies with tough new rules to verify that the value of the house you want will support the mortgage you need to finance it.

Anyone still unsure about the new rules should ask a reputable lender to pre-qualify them for a mortgage. Think of a pre-qualification letter almost like a driver’s permit for the new rules of the homebuying road. A mortgage pre-qualification letter can:

• Confirm you can qualify for a mortgage;

• Tell you how much you can expect to borrow;

• Make you a stronger home shopper since sellers won’t have to worry about whether you can qualify for a mortgage.

During the pre-qualification process the lender will review your credit, financial, and employment information. There may be an application fee. Although mortgage pre-qualifications are usually only good for a limited time they are still worth getting. The reason: even though you will need to apply for a mortgage once you find a house to buy, your pre-qualification letter helps clear the way by telling home sellers you’re road-tested for the most affordable mortgage market in 50 years.

Like a rare astronomical event, America is experiencing a conjunction between very affordable home prices and historically low mortgage rates that hasn’t been seen for half a century. Since nobody knows how long this will last, today’s market is a rare buying opportunity for working families with stable incomes and good credit.