The housing industry is reborn with new loan options and low interest rates
A few years ago, the housing market was struck deeply by the Great Recession.
The market was inundated with distressed properties — foreclosures, short sales — and those buyers who could secure financing found killer deals.
Now that the economy has stabilized somewhat, financing has become more readily available and families are looking to buy new homes again … and they’re doing it in droves.
“We’re seeing a strong recovery, especially in Utah Valley,” says Kellie Little, director of marketing for Edge Homes in Orem. “There has been a pent-up demand for new homes, but financing has kept a lot of people out of the market for the past few years. However, things are changing.”
Here are three reasons homebuyers are seeing more success in securing financing.
1. Low interest rates
Financing ebbs and flows heavily on the state of interest rates. For the past few years, mortgage rates have been at historic lows.
“Interest rates are really favorable for buyers right now,” says Kyle Haskell, a sales agent with Edge Homes in Orem. “We don’t know how long these low rates will be around, but we know they won’t last forever.”
Lower interest rates give a family more purchasing power with their dollars. Most buyers look at the monthly obligation associated with their mortgage, then determine how much they can spend on a house from there. Lower interest rates mean more house — or at least house price — for the same payment.
2. New mortgage programs
While some aggressive mortgage programs caused problems leading up to the collapse of the housing industry at the end of the previous decade, new programs have been developed to help buyers — particularly first-time homebuyers and buyers in rural areas.
“A lot of my clients used the USDA Rural Development loan because it has a zero-down option,” Kyle says. “However, Utah Housing Corp. has just come out with a loan that provides the same zero-down option and you aren’t restricted by geographic area.”
Mortgage lenders have flexibility from a number of programs that make financing a home easier than it’s been in past years.
3. More financially educated buyers
“I have noticed most buyers recently are very educated and come ready to buy,” Kyle says.
Call it “lessons learned.” Or maybe, “necessity breeds innovation.”
Because of the experiences of the recent past, lenders are requiring more from buyers. They are requiring financial stability and are more strict on requirements.
And buyers are responding. They are asking the right questions to find what home is best for them and how they can afford it.
Giving buyers an Edge
Edge Homes has become a regional leader in home building by not only building great homes, but by finding solutions for buyers.
Edge Homes allows for lower up-front deposits than other builders, allowing more people to buy homes from them.
“A lot of the time, our buyers will go through the whole process and not have to put more than $2,500 in deposits to build a home,” Kyle says. “Then, that money goes toward the cost of the home.”
Also, Edge teams up with lenders to have incentives in specific neighborhoods. For example, in one community Edge is developing, Edge has teamed with a partner in what they call a buy-down program. It is a fixed-rate loan, but Edge helps pay the interest for the first two years of the loan.
It’s just one more way of opening up financing for potential homeowners.