Wednesday, October 8, 2008

Can Anybody Get a Loan?

The state of today's economic crisis has people scared, confused, cautious, and certainly frustrated. When I tell people what I do for a living, they either respond with laughter or pity. In a sense, they are both saying the same thing, "Wow, are people really still buying real estate?" or "Can anybody get a loan these days?" The answer to both questions is "Actually, yes!"

Now please let me rephrase. Not just anybody can get a loan. The days of simply "fogging up a mirror" in order to qualify are long gone, and isn't that for the better? There are some basics that you must have in order to qualify:

  1. Down Payment
  2. Good Credit

For the most part, for a jumbo loan, which the majority of San Francisco loans are, you need a minimum of 10% down. I say for the most part, because there are also FHA loans which only require 3% if you qualify. We are currently representing buyers who are in contract for a house in the Sunnyside district (right next to Glen Park) for just under $600,000. They are using an FHA loan and have put 5% down. Many people are under the impression that FHA loans have more guidelines and conditions than a regular loan. The only difference that we have seen so far is that they required a second appraisal.

Another client of ours has just checked in with his credit union, who is offering 5% down on conforming loans. Our advice is always to check with your credit union first, if you are a member of one. They have always offered the lowest rates, and although they do indeed have more conditions to meet, it can be worth it in the end. There was a story on the news the other night that put credit unions and small local banks above the larger banks in terms of safety. Credit unions and local banks tend to be more conservative in their lending practices, and therefore are not facing the trouble that some of the larger banks are in.

You do also need to have good credit. If your FICO score is 700 or above you are fine. Below that, you will need to shop around a bit and see what the various lenders are offering. Do not assume you won't qualify, and make sure you talk to more than one lender as they all offer different loan programs. I have seen advertisements from banks offering very low fees in order to bring people through the door.

Of course, we don't know what will happen tomorrow. It seems that there is huge news every day, and it always seems worse than the day before. Today, there was "the rate cut heard around the world" where the fed cute the rate by half a percentage along with Canada, England, Sweden, and Switzerland. Unfortunately, in spite of their efforts, stocks and oil both fell sharply.

For today, here are the facts:

  • Yes, there is still financing available
  • Interest rates are relatively low
  • You can get a loan for as low as 3%, and definitely with 10% down payment
  • Yes, people are still buying and selling houses

Check in tomorrow and see if it is still true!

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