In 2008, one of the hardest things for buyers to wrap their brains around is the need to have cash saved up to purchase a house.
Buyers, especially first time buyers, have been so throughly conditioned by the easy credit of the boom years that the concept of a bank balance is antithetical to the purchase decision.
Telling it straight:
- 5-10% of the purchase price of the house is required to finance a house.
- Credit scores need to be in the 700s to qualify for the widest array of mortgage programs.
- Mortgage insurance is required unless 20% or more on the total amount of the mortgage is paid in cash, at closing.
Like the song says, "Yesterday is gone."
- Fannie Mae, the guarantor of most mortgages, has red tagged all of Northern Virginia as a declining market, requiring additional 5% down payments.
- Equity lines throughout Northern Virginia are being frozen as prices have declined below the credit amount.
- Banks need the money themselves as mortgage holders stopped paying and they don't have the money to pay their depositors/investors.
- Government sponsored FHA will offer up to a 97% loan. Mortgage insurance is a part of this type of financing package. Interest rates may be higher.
- VA loans also have more lenient terms. These loans are for folks who have military service.
- It may be possible to assume a loan or get seller financing (seller acts as a bank, lending the buyer the money to buy their house on more favorable terms than available from a bank) on a case-by-case basis.
- Cash is a requirement to purchase a house despite what your friend was able to do last year.
- Buyers need to get their financing in order prior to deciding which house they want to buy.
- Financing options will probably not go back to what was available in 2005. That party is over.
