For those who've been considering purchasing Orange County real estate, now is the time to buy. A combination of property values going up and interest rates staying low make this an exciting market for buyers. With jumbo loan rates as low as 3.12% and conventional loans at just 3.75%, both on a 30-year term with a fixed rate, real estate experts agree that it’s time to buy. There is a sense of urgency, however, since these rates will not last forever. While some cynics have voiced concern over another potential housing bubble, the mortgage industry’s stringent lending standards and real estate market trajectories indicate otherwise. Here are my top five reasons why buying now can help you win big.
People Must be Able to Afford Their Home
Lenders now require homebuyers to meet certain eligibility requirements for both income and cash reserves. This means that potential buyers must make enough money and have enough cash in their bank account to qualify for a mortgage. In fact, federal guidelines state that people can only spend 43% of their after-tax earnings on a mortgage. These parameters will help prevent an influx of subprime home loans like the ones that contributed to the 2008 housing crisis.
Loans Require Sizable Down Payments
In most cases, lenders require 20% down, which is a sizable amount of money anywhere in Orange County. Not only does that leave homeowners with massive skin in the game and discourage them from walking away from their home, it also provides a great buffer on the off chance that housing market values temporarily dip a bit.
Borrowers Must Have Reserves in the Bank
Another lending standard preventing a housing crash is borrowers must show that they have six months of mortgage and living expenses in the bank. The actual amount varies depending on the lender and loan type, of course, but the reserves must be liquid, so they can be accessed easily in the event of a financial emergency.
Homeowners Must Have a Solid Job and a Solid Employment History
Potential homebuyers now face additional scrutiny when it comes to their employment history. They must have at least two years of continuous employment and the documentation to prove it. This is quite a change from the lax lending standards of the mid-2000s.
Foreclosures are Practically Non-Existent
The fact that the number of foreclosures and short sales continues to dwindle is a positive sign for all homeowners. Due to new federal rules, banks must work with homeowners as much as possible to avoid foreclosures. Since most people who were given loans that they couldn’t afford in the mid-2000s have already walked away, those foreclosed homes have already been sold to homeowners who can afford them. Minimal foreclosures also help keep neighborhood home values up.
Now is the perfect time to invest in the Orange County real estate market – before interest rates and housing prices begin to rise. If you've had your eye on a home and you’re ready to sit down with a real estate agent, I’m here to help you make a savvy move.