Buying

Here's some blogger news -- we (spouse included) are going to closing on a house this week in a neighborhood west of Gainesville (exurb country, but we don't commute). It's a bank foreclosure. After it sat on the market for about four months, we offered 10% less than their reduced asking price (it started out with an asking price 20% higher in April) and our offer was accepted. There were a few reasons for our decision to buy:

(1) The payments will equal the cost of renting;
(2) The house is priced 40% lower than the lowest price in the neighborhood 3 years ago when we looked there;
(3) We haven't owned a house in 3 years so we qualify for the first-time buyer tax credit of $7,500 (really an interest-free loan);
(4) We're fatigued with renting and some of the issues it brings;
(5) We like the neighborhood well enough and already know several families there.

We decided to go with an FHA loan from a smallish local bank. The seller (bank) is providing the rest of the closing costs (in essence, we are financing them). Of our own cash, only 3% is going down. Our interest rate is 6.0% with no points.

Perhaps our situation is somehow unique, because stories like this one from the AP don't jive with our relatively easy transaction:

Government rescue package will do little to help more homebuyers qualify for mortgages

"KANSAS CITY, Kansas (AP) -- By late Saturday afternoon, only three prospective homebuyers had visited the open house Valerie Morrill was hosting. The Prudential real estate agent recalled a year ago, she'd see 10 to 15 people during an open house in this midtown Kansas City neighborhood.

She said the government's efforts to bring stability back to the economy and the credit markets may help but she's seen no immediate improvement.

'It's just the buyer pool is so low,' she lamented. 'Eighteen months ago, you needed $500 to buy a house.' Now, all the special rates and government programs are gone, leaving buyers facing a 10 percent down payment. 'You have to have money and nobody has money'
. . .
'People want to buy. The problem is you can't get them qualified for financing because the lenders have tightened up so much that only people with the highest credit ratings get approved,' [flipper Marc] Montalvo said. 'We haven't seen the interest rates fall and the qualifications become more realistic.'

In the first quote, lamenting bygone days of $500 down is ridiculous, and it's what got us into this mess to begin with. While FHA's 3% is also risky, it's still available to buyers the last time I checked and is far less than 10% that Valerie says is necessary. The latter quote from Mr. Montalvo makes no sense at all. Interest rates have been falling and indeed are still at a historic low point for mortgages. And qualifications are finally realistic (our lender asked for our paystubs, W-2's, and bank statements -- standard stuff). I don't want the housing market to ever go back to "Stated Income, Stated Asset" loans, if that's what he means by realistic, because of the terrible economic aftermath that those have brought us.

Back to the buying news -- feel free to agree or disagree with our decision. I do think the Northern Virginia area (especially the exurban part) has been experiencing some "clearance sale" exuberance, and the current buying spree could easily fall apart with the rest of the economy. But the market at this time is at least up on volume, which does help keep some local people employed. I called a local service company this week, and the lady I talked with said she was going to closing this week, too. I think there are some people who are feeling good about affording a house again. (With a caveat that foreclosure pricing is generally the most affordable at this point).