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The good and the bad of buying a house in Loomis

New lending rules make it more difficult to buy
By: Jon Brines, Gold Country News Service
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Renee Eisert is now settling into her new dream home in Loomis, with the freshly painted walls and new carpet, her family of five now has a place of their own. But if you ask her if the home buying process has been fun you’ll immediately get a different expression on her face. “It took us four months to buy a house,” Eisert said. The Eiserts bought a house from a seller who was short-selling their home. Basically, the market value of their house was less than the seller owed their bank and the seller would need their bank’s approval to sell it for a discount. It’s tricky and takes months. The Eisert’s Keller Williams realtor Denyce Skiff said her clients are not alone. “Buying a house is more challenging than I’ve seen in my entire career,” Skiff said. Last year, the number of short sale houses listed for sale or pending sale in Loomis far outpaced those that had closed, according to Multi Listing Service data. In December, five short sale properties were sold in Loomis, with seven pending and 15 for sale without a buyer. Real estate broker Ed Kittle said many people are faced with difficulty getting a loan now. “Underwriters are scared to death because the powers that be are putting pressure on appraisers and underwriters to make good loans,” Kittle said. Working with Doug Jones, a mortgage specialist with Big Valley Mortgage in Roseville, the Eiserts secured an Federal Housing Administration loan with 3.5 percent down. “It is a great time to buy,” Jones said. “Housing price and mortgage rates are at historically low rates. The FHA lending programs are extremely flexible. You can get a lot of people qualified.” And while that is good news for homebuyers looking to battle a crazy California housing market, there are a lot of lending changes that could make getting that American dream harder to obtain. Earlier this month the Federal Housing Administration commissioner announced new borrowers seeking the 3.5 percent down payment program will now be required to have a minimum FICO score of 580. Borrowers with a lower score will be required to put down at least 10 percent. For Eisert, a larger down payment requirement would have killed their dream. “We wouldn’t have been able to come up with it. It wouldn’t have happened for us,” Eisert said. “If they increase the down payment, what is the point of doing FHA? You might as well go through a conventional loan.” The FHA is reducing allowable seller concessions, or how much the seller can help the buyer, from 6 percent to 3 percent. The FHA is also raising the up-front Mortgage Insurance Premium, paid by borrowers, from 1.75 percent to 2.25 percent. That will raise a homebuyer’s monthly mortgage payments. “FHA is hemorrhaging money,” Kittle said. “Everyone knows that that’s why they are changing the rules.” With the stock market stabilized, U.S. Department of Treasury stopped buying mortgage-backed securities last month and plan to allow them to go back into the stock market as early as April, which experts warn could cause mortgage rates to start climbing again. Jones said even so, FHA is still has the most options for buyers and continues to be where the majority of buyers are getting their loans approved. “FHA has a lot of features in it as a program,” Jones said. “Your mom and dad can co-sign for you. You can have gift funds. You can have lower FICO scores.” Jones said the market and conventional wisdom is driving people to make better choices, which means the housing market will stabilize. “I think it is a matter of people coming to grips that they can only buy something that they can actually afford,” Jones said. For Renee Eisert, her home-buying experience has been an education she doesn’t take for granted. “Eighty percent of the people who bought in the boom didn’t do their homework and didn’t really know what they were getting into and that’s what made us all fall.” Her advice for buyers: be responsible, get organized and monitor your credit. “Have all your paperwork ready and your lender assigned before you find that house,” Eisert said. “I did my homework. I felt like I was two steps ahead.” Skiff said buyers need to be vigilant. “It takes tremendous commitment on the buyer to see the process through,” Skiff said. “If they hang in there they’ll get their home.