Down But Not Out, Credit Is Still Available

Throughout Southwest Florida home sellers have been waiting it out. They’re waiting for buyers, waiting for prices to go up and they’re waiting for something to happen that is going to make their Bonita Springs real estate sell.

One of the most frequently asked questions I get from Bonita Springs home sellers, readers and consumers is about new buyer home loans. Is it still possible for buyers to get a loan in this market? Are banks still lending money? The answer in short is yes, banks are still lending money.

Compared to the crazy years of lenders giving a loan to anyone with a pulse and a pen in their hand this year is different for sure, but it is possible for buyers to get a loan.

After several pointed questions from a couple of readers I decided to run some numbers just so everyone understands that what gets broadcast on national news doesn’t always tell the story of local markets or hyper-local markets.

You numbers and statistics people will just love this and the rest of you may not be interested and will be reading Perez Hilton in a minute.

Just for grins I searched the closed sales in the Sunshine MLS for the last month 10-24-2008 to 11-24-2008 to see how many properties closed in Southwest Florida and how these properties were paid for. Facts are facts, right? I figured I’d go to the source and produce the data; good, bad or indifferent.

Though you’d never suspect it by listening to the gloom and doom news, I found it interesting that 493 properties across Southwest Florida (which includes Bonita Springs, Florida) sold during that period. That figure actually topped 2007’s sales figures for that same period with 404 closed sales and it topped 2006 sales figures for that same period with 426 closed sales. It should also be noted that there are even more 2008 sales during that time frame that haven’t been recorded because paperwork is sitting on a desk or in the mail, so the 2008 number will only increase by more recorded sales.

So this is the long and the short of how those properties were paid for. Cash is still king, but it’s not the only game in town. 46% of the sold properties were paid for with cash. It is not disclosed in our local MLS where the cash comes from; 1031 exchange, savings account, IRA, primary home equity line or Grandma’s mattress.

The queen to cash is the conventional loan. About 40% of the properties sold during this period were financed with conventional loans. A conventional loan is any mortgage which is not guaranteed or insured by the federal government.

Sliding into third place is the FHA mortgage. I really was surprised that only about 10% of the properties were financed with mortgages insured by the Federal Housing Administration.

I actually expected to see more FHA loans just because it offers more flexibility for borrowers, especially first time home buyers. Plus, since the end of the year is near I figured that there would be more consumers taking advantage of the First Time Buyers Tax Credit by purchasing a home and filing their taxes early to get their down payment back.

Now, for the bean counters yes, there’s a couple percent not accounted for which includes only a few transactions that were paid for with owner financing, VA Loans (Veterans Administration) and “Other”. Whatever “Other” is; trade, barter, clerical error, who knows.

So are you surprised that in spite of all of the negative reports you hear about the credit markets that homes are selling and that there are loans being written? Not just loans being written but half of the local closed sales were funded through mortgages? Just imagine how many more mortgages would have been written if seller contributions were permitted to help with closing costs or the down payment assistance programs got fired back up.

Here’s the deal. The credit markets tightened and that means that the institutions with money to loan started doing some crazy things like making sure borrowers are credit worthy, actually verify income and/or requiring borrowers to have funds to put down to reduce risk to a lender. In a nutshell, borrowers have to show history that they pay their bills, they’re not carrying excessive dept and have a decent credit score. Lenders simply quit giving money to people that likely didn’t qualify for loans to begin with.

All is not lost if you’ve got dinged up credit, you’re carrying debt or you have little money to put towards a down payment for Bonita Springs Real Estate. Get hooked up with a reputable lender and learn how to start the repair process to your credit. If you start playing by the old rules revisited you’ll be on the road to creditworthiness for more than just home ownership but for all sectors of the finance and insurance industry that use your credit score to price their products and services.