mortgage

Housing improves, but investors have edge

Jeffrey MichaelThe nation's housing market was gravely ill for many years. But today, the patient finally is feeling a little better.

As home values and mortgage rates begin to rise and appraisals come in higher, more buyers are qualifying for mortgages.

Such improving lending conditions are helping boost demand for homes, says Jeffrey Michael, director of the Business Forecasting Center at the University of the Pacific's Eberhardt School of Business in Stockton, Calif.

However, investors continue to have an edge over other borrowers, Michael says. In fact, some homeowners may be willing to sell to an investor even if it means accepting a lower price.

Buyers who cannot pay cash for a home need to make sure they have a solid down payment if they want to land the home of their dreams, he adds.

Michael offers more insights into today's housing market in the following interview.

During the housing boom, it was said that anyone who could "fog a mirror" could get a mortgage loan. In recent years, however, it has become much more difficult to get financing. How has this tightening of the purse strings impacted the housing market?

Tighter credit requirements have depressed housing demand as fewer buyers qualify for financing. It has created opportunities for investors due to lower prices, and cash investors can very easily out-compete traditional buyers using mortgage financing.

Since mortgage applications are more likely to be rejected and take longer to process, sellers have a strong incentive to sell to investors, even if their offers are lower.

Over the past year, has it gotten any easier to obtain a loan? Or are lenders continuing to be extremely cautious?

Yes, lenders remain very cautious. Increasing property values and higher appraisals are helping more potential buyers qualify for mortgages. Low appraisals have resulted in many mortgage applications being rejected in recent years, but this problem is decreasing as the market improves.

In addition, increasing home equity has allowed some move-up buyers to get back into the market and have sufficient equity to serve as a down payment for a more expensive home.

What can people do to improve their chances of getting a loan?

Saving for a down payment is more important than in the past. This can be very specific to individual cases. It is best to talk to a lender to be pre-qualified for a mortgage, and the lender can discuss any weaknesses in the application and steps that can be taken to improve their chances.

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