The American dream of homeownership is still attainable. Buyers just have to deal with a new set of realities.
A year after the collapse of the housing market triggered the financial meltdown, lenders are demanding more money upfront, high credit scores and proof of income. Paperwork must be in perfect order. Patience and persistence are required. And don’t even bother asking about a subprime mortgage.
It’s a vastly different set of rules from earlier this decade, when home prices soared and mortgages were easy to come by.
In some ways, it’s a return to the standards that emerged as the World War II generation bought its first homes in the suburbs: Buy what you can afford. Stick to a 30-year, fixed-rate mortgage. View your home as a place to live, not as a piggy bank.
For people trying to sell their homes, the standards are different too: Be patient, and maybe even lower your asking price, because the balance of power has swung strongly to buyers.
Already, home sales and prices are rising slowly, helped by tax breaks for first-time buyers. But real-estate agents, mortgage brokers, economists and homebuyers across the country say they’ve noticed a shift in attitudes that they expect will last for years.
Business may be up, but the power has shifted to the buyer. And price is the key.
“If you’re not getting showings, you’re overpriced,” says Scott Patterson, an agent with Esslinger Wooten Maxwell Realtors in Aventura, Fla.
The record number of foreclosed homes on the market gives buyers even more leverage.
“They can afford to wait,” says David Baran, a broker with Prudential Preferred Properties in Chicago.
Jim Sahnger, a mortgage broker in Jupiter, Fla., still chuckles over one borrower three years ago who landed a mortgage with no down payment despite two foreclosures and a bankruptcy in his past.
Now, lenders pore over bank statements, tax returns and job histories. The average mortgage application today starts three times thicker than what it was at the beginning of the housing boom and often gets thicker as the process drags on.
Sometimes all the extra documentation still isn’t enough.
Sahnger recently had a customer with a good job and a 20 percent down payment who couldn’t get a mortgage because the lender said there were too many delinquent mortgages in the neighborhood.
“Now, they want to know everything about the buyer,” he says. “It’s a true and full underwriting process on every particular loan.”
