by Sean Hess (www.SeanHess.com), broker and manager for St. Augustine Team Realty (www.StAugustineTeamRealty.com)
The asset-less, the credit-less, the income-less are now out in the market clamoring to be let in again.
But the days of the no-income, no-asset, no documentation loan are dead…because the result was massive foreclosures.
Enjoy the post!
by Sean Hess, broker and manager, St. Augustine Team Realty (www.StAugustineTeamRealty.com)
Quite a provacative headline, isn’t it? But it’s true.
First-time buyer, middle-time buyer, last-time buyer, it doesn’t matter: there is no right to buy a home.
To buy a home in St. Augustine or anywhere else you have to have “credentials,” and by credentials I mean you have to have cash, credit, income, assets, and/or combination of all four.
In the boom market buyers would walk through the doors without any credentials and walk out the doors with a home…and you see where that got us.
So now we’re back to credentials.
If you’re a first time buyer (or any buyer) and you don’t have enough cash to buy a property outright, the next easiest way is to go for an FHA loan. FHA loans only require 3.5% down, though you may have to put more down if your closing costs exceed that amount (common in properties under $100,000).
You will also need a verifiable source of income, or tax records that show your sources of income going back at least 24 months. It’s also a good idea to have assets…a rule of thumb is to have at least two years worth of house payments in the bank in case you ever lose your source of income for an extended period. People pooh-poohed this during the boom years but it turned out to be really good advice.
Lastly you’ll need good credit.
In the past credit was a measure of a person’s willingness to pay (whereas income is a person’s ability to pay).
Nowadays credit is a bit more muddled. The economy’s meltdown in 2008 left economic carnage in a way we haven’t seen in 80 years. Credit now is as much a historic record of economic turmoil as it is a person’s willingness to pay. So the person with a manageable house payment who lost his job and turned to credit cards to survive is lumped in the same group with the so-called investor who gave false information on loan documents then defaulted. Where do you draw the line? And no one’s bothering to draw the line yet.
Next week we’ll go through the buying process step by step to see how this all works together.