Tuesday, April 15, 2008

10% Down Payment! Who's Got That?

The lending industry has got the San Fernando Valley real estate market in a tail-spin. Home prices have most likely declined 20-40% since the height of the market back in mid-2006(depending on where you live). There's even talk about another 10-15% price drop. Wow!

We all know that first-time home-buyers are the driving force of the marketplace. Without them, home-owners can't sell to buy higher priced homes which eventually will cause a domino-effect reaching the million dollar+ homes.

Unfortunately, most first time home-buyers not only can't afford the average priced home here in the San Fernando Valley (even with the decline in price), getting a home-loan has become extremely difficult. Not only has 100% financing loans disappeared, if you plan to state your income, expect to shell out 10% down. Yikes!

Looking back to mid-2007, I recall selling a bank owned home with 100% financing in a great area of Panorama City. Not only was this home priced below market value (10-15%), my client was able to obtain 100% financing and also seller credits to pay for escrow and title fees ($12K).

If my client had waited an entire year to call me, she would have been subjected to a 10% down (stated income) payment and additional reserves. This is money she definitely wouldn't have had and would have prevented her from purchasing a home. Think about it...how many first time-home buyers have 50-75K in the bank to buy a 500K home?

Even though her property value might have dropped 10-15% since she purchased the home mid-2007, she purchased a bank owned home with no money down and no closing costs paid. BTW, the bank owned home in Panorama City was already priced 10-15% below market value. So I guess she is even at this point and got into her dream home with no money down!

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