Recent statistics indicate that the inventory of Homes across the country has increased to a two year supply. In other words, based on today's sales trends, it would take two years to sell all of the Homes that are currently available. This is illustrated by the increasing number of inventive programs being offered to assist you with your home purchase.
If you're looking to buy, this means you have a tremendous amount of negotiating power with home sellers.
Home prices have cool down a bit. While this may alarm you from an investment perspective, it shouldn't. Homes are still appreciating at a rate of nearly 5% annually. If you purchase a home and put 5% down, you'll obtain almost a 100% return on your cash investment within the first year!
No Money Down
Just ten years ago, the ability to buy a Home with little or no money down was primarily limited to either first time Homebuyers through FHA or veterans through VA financing.
If a seller is willing to contribute money to cover your Closing Costs and Prepaid items, such as Homeowners Insurance and Tax Escrows, you could even buy a Home with no money up front at all.
PMI Not Required
Private Mortgage Insurance used to be a requirement for any mortgage where the buyer put less than 20% down. While PMI is still a requirement with FHA loans, PMI can be avoided in conventional loans through the use of piggyback loans or second mortgages. These loans can be in the form of either a Home Equity Line of Credit or a Closed-end, traditional Second Mortgage with terms that extend up to fifteen or twenty years.
Lower Mortgage Payments
If you're a Buyer who's seeking creative ways to lighten your monthly loan payment, have no fear. In 2005, lenders introduced fixed rate Real Estate Loans with a 40-year repayment schedule. Recently here in California we have even introduced a 50-Year repayment plan!
For credit-savvy Buyers who want to minimize their monthly payments, an Option ARM could be just the ticket.
Option ARMs are adjustable rate loans that offer the borrower one of three or four payment options each month.
The first option is to make a payment that is less than the interest due. This is also referred to as negative amortization. The second option is to make an interest-only payment. The third and fourth options pay off the loan in fifteen or thirty years, respectively.
Interest Only loans are also available as fixed rate programs. While you may not be paying down principle on your loan, you can apply the difference towards other Investments or the reduction of other higher Interest Rate and Non-tax Deductible Debt.
When an ARM is not an ARM
It used to be that an ARM (Adjustable Rate Mortgage) would adjust each year, providing little stability when it came to a homeowner's monthly payments. Today, there are different types of ARMs that allow for extended periods where the payments will be fixed.
These fixed periods lock the Interest rate before the loan first adjusts, providing greater stability for the borrower. You can now have a loan that's locked for two, three, five, seven, or even ten years before you'll see the first payment and rate adjustment. The benefit of a loan like this is that it typically offers an interest rate that is lower than a fixed rate would be. However, in today's financial markets, some ARM rates can actually be higher than fixed rates.
Documentation Not Required
The days of having to provide detailed records of your financial history are back. Now you are required to furnish two years worth of income taxes and W-2s, along with bank statements for the past three months and pay stubs for the last 30 days. So start getting it together.
