Some Questions and Answers For the New Year
Originally Published January 2009
By Al Friedman
I’ve been repeatedly hearing a lot of the same questions over the last several months, concerning real estate, and I thought I would use this time to attempt to address some of them.
Q. With all of the problems experienced by the banks and Fannie Mae and Freddie Mac, isn’t it almost impossible to get a loan to purchase a home these days?
A. Actually, mortgage loans are readily available. The reality is that interest rates are at the lowest they’ve been in 30 years. The only loans that were completely taken out of the market were the “sub-prime” loans, which didn’t really exist before 2000.
Q. Yes, but don’t you have to have perfect credit to qualify?
A. Obviously, a mortgage lender is going to expect borrowers to have a certain amount of credit worthiness. A credit score in the mid 600’s or higher is going to be a score that should generally be good enough to obtain a loan. Lenders are not looking for perfection. They just want to have a sense of confidence that the borrower can make the payments. Keep in mind that individual lenders will have different qualification criteria.
Q. Isn’t it true that you need 20% down, or higher, because of the banking problems?
A. No. In fact there are great FHA programs allowing a purchaser to buy a home with as little as 3.5% of the purchase price. Also, VA programs are available, still, allowing the purchaser to get into a home with no up front cash required. Obviously these programs are not for everyone, but can fit the needs of the majority of homebuyers in our area.
Q. What about first time buyers. Are there special programs available for us?
A. The state and local municipalities will occasionally initiate first time buyer programs. Generally, they are available for a period of time, until the funding monies get used up. You should consult a real estate or mortgage professional to find out more details on the availability of these programs.
Q. Do you expect home prices to go up, or continue to drop in 2009?
A. The one thing I tell folks when asked this question is this: My belief is that no one single person can realistically predict what will happen to home prices. This is based, in large measure, on the fact that home buying begins with consumer confidence. Consumer confidence begins with jobs. If a person is currently employed, and believes they have job security and stability for the foreseeable future, they’re more likely to go out and purchase a home. If people are in a similar position, prices would likely start stabilizing, and potentially start rising again. This would be due to the fundamental principles of supply and demand. The number of buyers increasing, versus number of homes going on the market decreasing, will begin changing the marketplace from a buyer’s market to a sellers market. If the opposite happens, and unemployment rises, then the opposite scenario will happen with home prices.
We are very fortunate in the Baltimore/Washington corridor in which we live. We are one of the more diverse economies in the country with our combined public and private sectors employing a higher percentage of residents than what you see in other regions of the country. We are also marching forward with the BRAC Program, which I wrote about previously. This will bring tens of thousands of new, residents into the area over the next several years. With all of these factors taken into account, we have historically had a much more stable housing market in our metro area. I don’t expect that to change any time soon.
For more info on this and other real estate matters, please visit my website at
By Al Friedman
I’ve been repeatedly hearing a lot of the same questions over the last several months, concerning real estate, and I thought I would use this time to attempt to address some of them.
Q. With all of the problems experienced by the banks and Fannie Mae and Freddie Mac, isn’t it almost impossible to get a loan to purchase a home these days?
A. Actually, mortgage loans are readily available. The reality is that interest rates are at the lowest they’ve been in 30 years. The only loans that were completely taken out of the market were the “sub-prime” loans, which didn’t really exist before 2000.
Q. Yes, but don’t you have to have perfect credit to qualify?
A. Obviously, a mortgage lender is going to expect borrowers to have a certain amount of credit worthiness. A credit score in the mid 600’s or higher is going to be a score that should generally be good enough to obtain a loan. Lenders are not looking for perfection. They just want to have a sense of confidence that the borrower can make the payments. Keep in mind that individual lenders will have different qualification criteria.
Q. Isn’t it true that you need 20% down, or higher, because of the banking problems?
A. No. In fact there are great FHA programs allowing a purchaser to buy a home with as little as 3.5% of the purchase price. Also, VA programs are available, still, allowing the purchaser to get into a home with no up front cash required. Obviously these programs are not for everyone, but can fit the needs of the majority of homebuyers in our area.
Q. What about first time buyers. Are there special programs available for us?
A. The state and local municipalities will occasionally initiate first time buyer programs. Generally, they are available for a period of time, until the funding monies get used up. You should consult a real estate or mortgage professional to find out more details on the availability of these programs.
Q. Do you expect home prices to go up, or continue to drop in 2009?
A. The one thing I tell folks when asked this question is this: My belief is that no one single person can realistically predict what will happen to home prices. This is based, in large measure, on the fact that home buying begins with consumer confidence. Consumer confidence begins with jobs. If a person is currently employed, and believes they have job security and stability for the foreseeable future, they’re more likely to go out and purchase a home. If people are in a similar position, prices would likely start stabilizing, and potentially start rising again. This would be due to the fundamental principles of supply and demand. The number of buyers increasing, versus number of homes going on the market decreasing, will begin changing the marketplace from a buyer’s market to a sellers market. If the opposite happens, and unemployment rises, then the opposite scenario will happen with home prices.
We are very fortunate in the Baltimore/Washington corridor in which we live. We are one of the more diverse economies in the country with our combined public and private sectors employing a higher percentage of residents than what you see in other regions of the country. We are also marching forward with the BRAC Program, which I wrote about previously. This will bring tens of thousands of new, residents into the area over the next several years. With all of these factors taken into account, we have historically had a much more stable housing market in our metro area. I don’t expect that to change any time soon.
For more info on this and other real estate matters, please visit my website at
