Prepare well for the most affordable mortgage options.
by Phil Britt
The Northwest Indiana housing market should be solid again in 2015, slightly ahead of the pace of a solid 2014, according to local experts. Most of the buying and selling of homes occurs in the spring and early summer, with real estate showings picking up significantly from Easter through Labor Day.
But even before the winter broke in mid-March, the early year activity was running slightly ahead of a year ago, local experts said. “We see good things for Northwest Indiana and the northern half of the state,” says Jack Barkely, senior vice president and director of the residential lending center for Centier Bank, Merrillville.
“2015 should be on a par or better than 2014,” says Tim McColly, director of the McColly School of Real Estate and McColly Real Estate's training director. Closings have increased since 2011, though there was a slight drop in 2014. Closing were running slightly ahead of last year's pace in the first couple of months of 2015.
Home values are relatively steady, much better than the declines many areas saw a few years ago, but not as good as the annual appreciation many homeowners had come to expect before the real estate market faltered along with the rest of the economy at the end of the last decade.
Consumers who attended college are often saddled with large student loans that limit their home buying ability or the amount of home they can afford. Barkley expects the student loan overhang impact to last for some time.
Typically three- to four-bedroom homes are the most popular, though people looking for homes run the gamut from first-time homebuyers seeking starter homes, to move-up buyers to “empty nesters” looking to downsize. First-time homebuyers are older than they were a few years ago.
Northwest Indiana continues to benefit from an influx of homebuyers from Illinois, seeking to take advantage of the Hoosier state's much lower property taxes, McColly adds.
Different communities have different amenities that draw buyers, be it short or convenient (e.g. the South Shore) commutes to work, schools, larger properties or assisted living for the elderly, Barkley says. Some Baby Boomers, now in their 60s or older, are looking to purchase ranch and other properties with fewer or no stairs and easy accessibility, he adds.
Newly built homes are limited to areas like south Lake, Porter and LaPorte counties, where there are still areas of open land.
While admitting that it's harder to get a loan today than in the early 2000s, when 0 percent interest rate loans were available for many consumers and people found it relatively easy to qualify for a loan, credit today is easier to obtain than some in the national press would lead one to believe, according to Barkley. “You have to have equity to be able to get into a home.”
The more the equity, the higher the credit score, the better the loan-to-value ratio and the better the borrower's other financial health, the lower the interest rate the home buyer will be able to obtain.
“We've implemented risk-based pricing,” Barkley explains. Other lenders have followed similar policies. So people with higher credit scores can get better pricing than those with lower credit scores. Similarly, people who can afford larger down payments will get better rates.
There is a lot of talk about the Federal Reserve boosting interest rates later this year, perhaps as early as this summer. However, Barkley doesn't think the Fed's expected move will have much effect on mortgage interest rates. “It will affect short-term rates more than long-term rates. With mortgage interest rates today around 4 percent (for those with higher credit scores, higher down payments, etc.), mortgages today are extremely affordable.”
Barkley adds that buyers who would have a hard time qualifying for a traditional mortgage should consider Federal Housing Administration loans, as well as state-run mortgage programs. Barkley also recommends that veterans look into the terms of mortgages through the Veterans Administration.
McColly recommends that potential home sellers try to look at their home with the critical eye of a buyer. The buyer will not want to have to make a lot of changes when he moves into a home, so spruce up landscaping, make sure carpets, walls and flooring are thoroughly cleaned, etc. He also recommends de-cluttering the property–cleaning out the basement, removing excess furniture, etc.
Barkley recommended that potential home buyers do everything that they can to improve their credit scores–pay off or aggressively pay down outstanding balances on credit cards; talk to a reputable Realtor to determine how much home one can afford and get prequalified on a mortgage. To find the right agent, Barkley recommends that potential homebuyers look at a Rea ltor's career longevity and success, which typically can be found on the Web.