This column was first published (accurately and prudently edited) by the Michigan City News Dispatch a few months back...
Don’t Believe It!
The national media has been repeatedly reporting recently that “no-one can get a mortgage to buy a home unless they have perfect credit and at least 20% down payment”.
This is patently untrue.
Mortgages for primary residences are still readily available with as little as 3.5% down through the Federal Housing Administration (FHA).
In Northwest, Indiana, for instance, the maximum loan amount equates to $280,000 for a single family home intended as your primary residence. As our average purchase price is nowhere near that high, this financing meets over 90% of our needs locally.
At last count there were over 1,000 single family residences on the market here in La Porte County. This presents problems as well as opportunities. The primary problem this presents is that there is simply too much supply. Of course, according to the laws of economics, too much supply results in lower prices.
The media continually reporting that no-one can purchase a home without perfect credit and a large down payment is further reducing demand. These two items, coupled with the disastrous economic news with which we are being deluged on a daily basis, is creating what is a “perfect storm” of effects which can only result in lower property values, less purchase activity and the resulting slowdown in activity for all of our local merchants.
We, the business leaders of La Porte County, have to make a point of spreading the word to everyone we know that the news we are hearing nationally is simply not true locally. Now is actually a very good time to purchase a home!
Interest rates are still low. Through FHA, purchase money mortgages are readily available to those with good credit as well as those with imperfect credit (as low as a 580 credit score can still qualify), and the home prices are reasonable.
It is understandable how the news came to be presented in this light. Nationally, home prices have dropped drastically. Also, in many markets, “jumbo” loans (in excess of $421,000.00) are the norm. In some of these markets, what they are saying is absolutely accurate. However, I have been in the mortgage business in Northwest Indiana for over 17 years and have yet to write a “jumbo” loan.
Our area has been, is now, and will in all likelihood continue to be a “bread & butter”, "working class" area (insert your term here).
In addition to this, many of the problems with the mortgage market and home values nationally are due to regionally limited areas in which values rose exorbitantly over the past several years, many times with no underlying justification other than inflated demand. When these areas returned to what are actual values, it appeared they had depreciated.
However, in my opinion (for what it’s worth) in reality, they were never really worth the higher values, but were “trading” daily for those amounts never the less. Does any of this sound familiar given what we are hearing from the stock market every day?
Here is the upside, and it is a major, in my mind the primary, fact in our situation: we never had our property values here in Northwest Indiana “bubble”.
Ask yourself, did my home appreciate in value in the past several years by 50, 75, 100%? In almost all cases, the answer will be no. Because much of the country enjoyed the “profit” of the “increase” in value, it seems to me that we in Northwest Indiana should not have to share in the cost of the resulting fiasco.
But, the media is telling us every day that we are in trouble.
This not universally true.
We need to get it through our heads, and through the heads of our families, friends, co-workers, employers, employees, community leaders, and local media, that the entire country is not Phoenix, or Las Vegas, or Miami. The housing market in many areas of the country is fine. We will all be impacted by this mess in many ways; it is unavoidable.
However, we do not have to let ourselves be impacted inaccurately and for no reason.
We have great people here (the fundamentals of our local economy are strong). We have an abundance of available homes. We have readily available financing through all of our local FHA lenders with as little as 3.5% down which will be sufficient for many of the available homes.
It seems to me that we’re in pretty good shape. But you won’t hear that on TV.
Michael R. Gowan
Northwest Indiana Sales Manager
Hallmark Home Mortgage
219-874-1088 (work)
219-221-1893 (cell)
mgowan@hallmarkhomemortgage.com
So it's a touch later than when I first wrote this - it doesn't make it any less true!)
