I hope you are doing well, and I hope you are ready for an exciting and busy extended weekend! If you were living in Boise today, the high would be 38 degrees and the low a mere 25 degrees.
For the past couple of weeks, I have been writing about the fears of a first-time buyer. I am sure there are more than what I have touched on. I feel the last main fear is the fear of a bubble. I know about this bubble as I lived it and did not believe it was there back in 2008, but it was, and when it burst, it wasn’t pleasant. The funny part is that I don’t see a bubble now, and what happened 14 years ago likely won’t happen again! So here’s what you need to explain to your buyers about the last crash and how this crazy market is not the same:
Interest rates averaged 6.08% in 2008. If you purchased a $400,000.00 property with 5% down, you would have a payment of $2925.00, and that property would rent for $2000.00. If you buy the same property today for $600,000.00 with 5% down, you would have a payment of $3285.00, and that property would likely rent at $3100.00, and you would pay off about $900.00 per month. I say this because if you buy a house and lose your job and have to move back with your Mom, you can rent your property today and still make money!
We do not have stated income loans like we used to! Stated income, stated assets, 0 down, with poor credit scores were everywhere. People had nothing invested in the property, so they walked away from it as soon as the market turned.
We don’t have 0 down Bank statement loans either! We did before 2008.
Loans with Interest-only payments were done with 0 down payment, so you would never pay your mortgage down. We do these today with 25% down, and you need lots of reserves.
People were able to buy a property with Negative Amortization Loans too! Those loans start at a number, and then the buyers can pay the negative payment, the interest-only payment, or the fully amortizing payment! What do you think they chose? LOL!
Values were rising, and there was a decent inventory compared to today. People decided to become flippers doing 100% financing and buying multiple properties simultaneously. When the market stalled, they could not rent them, and they could not sell them without paying out of pocket, so they stopped making payments and eventually short-sold or had them foreclosed upon.
Builders were building more than double the amount they are today!
When the market for mortgages tightened, all of the 0 down, stated income, bank statement, interest-only, negative amortization, with no verification of anything went away… We went from everyone able to qualify to a small percentage of people who could qualify!
Everyone who qualifies today will qualify tomorrow for the most part, and that will not change. The difference between qualifying for a loan in 2006/7/8 and 2009+ is dramatic. Heck, qualifying for a loan since Covid has been more challenging than ever!
If there is a bubble, then a lot has to change. Higher interest rates, more inventory would have to pop up, people would have to lose jobs, rents would have to go down, investors would have to find a better place than real estate for their money, and so much more. I am not saying it won’t happen, but I would not be shocked Real Estate prices roared through the 2020s!
Interest rates had a slight bounce the past couple of days, and they are pretty flat today. Let’s hope the damage is done for now, and we can live with these fantastic rates or better! These rates are still historically low!!!!
30-year Government Loans (FHA / VA) are in the low 3’s
Conventional Loans up to $647,200.00 – low to mid 3’s
High Balance Loans $647,201.00-$ 970,800.00 are in the mid 3’s
Jumbo loans above $970,801 are in the mid 3’s. We can do high 3’s with as little as 10% down. We can do 1-year findings on these too!
5/1, 7/1, 10/1 Arms are in the high 2’s and low 3’s!
Bank statement loans – They are available with 10% down again! low 4’s to low 5’s depending on down and credit score.
Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the mid 4’s.
0 down loans are in the mid 3’s – 620 credit score min right now! Mid 3’s for the most part up to $670,000.00 Price.
0 down Jumbo to 1.2 Mil – 700 credit score – call for a quote
Private Money lenders – hard Money Loans – 35% down!
No Ratio Loans 30% down
Debt Service Coverage loans with as little as 25% down
Bridge Loans – are typically 4.99 – 5.99% with limited fees – But they get you where you need to go!
Interest rates are subject to change without notice! Above are LA County Loan Limits.
I will be around all weekend, and I hope to hear from you! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day a better tomorrow, and please call me when you have a client that needs to borrow!