The Recovery Of Housing Market

This BLOG On The Recovery Of Housing Market Was Written By Gustan Cho

Many of us remember the good old days of easy financing starting in the 90’s until the real estate and mortgage meltdown of 2008 . The Great Recession of 2008 hit everyone. Never in history since the Great Depression has so many Americans been affected by the real estate crash. Many Americans, including myself, always thought that real estate was the safest investment. Many Americans invested in real estate even though they were not professional real estate investors. Real estate was the favorite investment for all hard working Americans. Some folks had two, three, four homes besides their owner occupant homes and enjoyed the positive cash flow they got from their rental income. Financing was extremely streamlined and easy where almost anyone could get a mortgage on not just an owner occupant property but also on second homes, third homes and investment properties. Sub-Prime Lending was the name of the game when it came to mortgages where no docs and stated income loans was the ticket for easy fast financing. Bank Statement Loans were one of the most popular loan programs out there for home buyers and real estate investors. Washington Mutual and Countrywide Loans were two household names when it came to mortgages because they were the two largest sub-prime lenders in the nation. Then the 2008 Real Estate and Mortgage Crash happened where it literally affected every American family in the United States and their loved ones.

Real Estate & Mortgage Meltdown Of 2008

The Real Estate & Mortgage Meltdown Of 2008 affected millions of Americans. There is not a city, county, state that was not affected by the 2008 Real Estate and Mortgage Meltdown of 2008. Bankruptcy rates hit historical highs. Foreclosure of homes went through the roof and never in history were foreclosure numbers as high as they were. The whole country was in panic alert. Millions of American homeowners saw the equity in their homes evaporate where hundreds of millions of homeowners had homes with mortgage balances that were higher than the value of their homes. People who retired and counted on their home equity as part of their retirement were forced back to go to work with many just taking job offers that just paid minimum wage. Million of workers were laid off, lost their jobs, or demoted to lower paying positions because their employers were also affected by the economic downturn. The real estate and lending industries came to an abrupt halt. Many full time realtors were forced to take on other jobs to make ends meet. Mortgage loan officers could not make ends meet because the whole lending industry came to an abrupt halt. Many mom and pop mortgage broker shops were forced to close their doors because they could not pay their minimum monthly expenses and licensing fees. Mortgage giants Washington Mutual and Countrywide Loans shut their doors and the entire sub prime lending market collapsed and hundreds of thousands of mortgage loan originators were left without job and either had to seek employment at other fields or seek menial positions where they were overqualified for the position with their current employers. Many American workers still did not recover with the recovery of housing market and are either still unemployed or working on jobs where they are overqualified for. Many business owners lost their businesses while other business owners had to completely change their business model. Life was never the same to many after the Real Estate and Mortgage Crash of 2008.

The Long Recovery Of Housing Market

Millions of homeowners who had underwater mortgages, where due to the major drop of their home’s market values they had mortgage balances that were higher than the value of their property values never thought that there would be a recovery of housing market. These homeowners with upside down mortgages thought that they would be stuck in their homes forever because of the huge drop of their home’s market values. Fortunately, the process of the recovery of housing market start in 2010 and kept on recovering. Many parts of the country, home prices appreciated faster than expected. Many parts of Florida and California, recovery of housing market appreciated double digits each year starting 2012.

Qualifying For Mortgage And Recovery Of Housing Market

The United States Department Of Housing And Urban Development, also known as HUD, is the parent of VFHA. FHA is the Federal Housing Administration. FHA realize that the housing market in the U.S. needed help with the depressed housing market so it went to work in making financing easier in looking for ways of stimulating home ownership by making lending easier so home buyers can qualify for FHA Loans and become homeowners instead of renters. HUD went to work in setting new policies and programs where FHA would insure FHA Loans originated and funded by FHA Lenders. FHA set minimum lending guidelines where it was easy for any home buyer to qualify. Here are the minimum FHA Lending Requirements:

  • 580 FICO credit scores for 3.5% down payment home purchase loan
  • Borrowers do not have to pay outstanding collection accounts and charge offs
  • Borrowers can qualify for FHA LOAN after bankruptcy and foreclosure as long as they met a minimum mandatory waiting period.
  • 2 Year Waiting period after Chapter 7 Bankruptcy discharged date
  • No waiting period after Chapter 13 Bankruptcy discharged date as long as it is manual underwriting
  • Borrowers one year into a Chapter 13 Bankruptcy repayment plan can qualify for a FHA Loan as long as with Chapter 13 Bankruptcy Trustee Approval and manual underwriting.
  • 3 Year waiting period after the recorded date of foreclosure and/or deed in lieu of foreclosure.
  • 3 Year waiting period after a short sale date.
  • The rules and regulations set by HUD which is in charge of FHA,  FANNIE MAE AND/OR FREDDIE MAC which is in charge of Conventional Loans, VA LOANS , and USDA became very lax because these government agencies were directed to promote home ownership. Due to the strong emphasis on promoting home ownership, the recovery of housing market started to recover faster than expected.
  • Home values spiked where it has appreciated double digits in many areas of the United States. Statistics per the United States Census Reports, average housing prices in the United States was $281,000.
  • Demand of new homes has gone up throughout the United States and the right hand rule is that as long as a consumer has documented income, they can purchase a home with very little down payment.
  • Home buyers can purchase a new home with only 3.5% down payment and do not have to worry about closing costs because closing costs can be covered by a sellers concession by the home seller of lender credit by the lender of the home buyer. FHA permits that the down payment can be gifted by a relative of the home buyer.
  • VA Mortgages and USDA Mortgages do not require down payment and home buyers of VA Loans or USDA Loans do not have to worry about closing costs because closing costs can be covered by sellers concessions and/or lender credit.
  • Fannie Mae and/or Freddie Mac permits down payment on a home purchase to be gifted.

If you are interested in qualifying for a home loan, please contact Gustan Cho at 262-716-8151 or email Gustan Cho at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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