Tuesday, May 19, 2009

Housing Bubble Sparks Buyer's Advantage

Housing Bubble Sparks Buyer's Advantage

In the early 2000's acquiring a home was a simple as buying a pair of shoes. A less than perfect credit score with no money down and no closing costs was just enough to secure a loan for a brand new home with up-to-date amenities. At the time, it seemed like the newest trend in home buying was a success, however, fluctuating interest rates and a plummeting economy tanked the housing market faster than the speed of light.

As the saying goes, one man's junk is another man's treasure, and in the case of today's housing market, it's true. If you're looking to purchase your first home, or have the liquid cash to buy up a few foreclosed properties, it can all be done.

Because home values and interest rates have fallen to a record low and inventory has spiked to an all time high, the potential buyer has the advantage. In many cases, home owners are desperately needing to sell their properties knowing they can't compete with today's low values, and as result, buyers can name their price. The only disadvantage is the difficulties of securing a loan. If you have stellar credit, it is still problematic to get that loan without proof of savings, a steady job that you've maintained for at least 18 months, and a down payment of at least 3.5 percent for a Federal Housing Loan (F.H.A.) and 5 percent through a major bank. If you have switched jobs and/or ran into some financial troubles that have been reported to the credit bureaus, don't even try. Spare yourself the time and rejection to secure a job get your credit fixed. Don't worry about time running out, as the current market is predicted to last for at least another 6 years.

If you are a first-time homebuyer, you are in luck because there is an $8,000 tax credit that was extended in February 2009 to all those who qualify for a loan. Another perk is a very low, fixed interest rate in addition to the banks footing the expense of closing costs and accepting down payments as low as 3.5 percent.

Foreclosures are a tricky business because of the hit or miss element. While you might score and find a home for half or less than what's it worth, three possibilities exist. First, you could very well find yourself a foreclosed property for a good price that's been destroyed by the previous owners so badly that the cost to repair the damages trumps what it's worth. Second, you could find a diamond in the rough and acquire a foreclosure with ease, but risk the chance of seeing no return because surrounding property values have fallen too low. Third, if you're trying to flip the foreclosure, the resale of the home could take longer than you have saved to maintain it. The best thing to do is plan to rent out the property or occupy it until it appraises to the desired return and sell.

If you're in the market to buy a home, it can be easily be done at the right time. If possible, start saving a little bit at time and continue to fix or build your credit so you "look good on paper" within the next few years.