Most loan help off the table

This story first appeared in the Nov. 29 edition of the Kansan.

For those looking to buy a home right now, there’s good news and bad news.

“Despite what you hear, we still do loans,” said Paul Suderman of Midland National Bank. “Call us and ask questions. Don’t take what you hear on the radio and television as gospel. Call and ask us, that’s what we are here for.”

That’s the good news — area banks are still able to create home loans for people willing to buy a home.

But getting that loan is more difficult — whether the prospective buyer is a first-time home buyer or not.

“Credit scores are a really big issue,” said Harry Wolfe, a former real estate agent and now president of Central National Bank of Newton. “Credit has to have personal attention. If you don’t have a good score, conceivably, even with a down payment you won’t get a loan.”

Many of the incentives that were available to prospective buyers have changed — there are still FHA, Veteran’s Administration and USDA Rural Development loans available, but all now require buyers to have funds available for a down payment.

“There isn’t much out there in incentives,” said Marcene Carstensen of Midland National Bank, “but we’ve done more housing loans for this time of year than we normally do.”

Also hurting first-time owners is a looming struggle for Habitat for Humanity in the Newton area.

Whether or not donated materials will be available to build a home in 2009 has yet to be seen. Wolfe, who is on the organization board, also said there is a problem finding a place to build a Habitat home.

“The available lots to build a house on, it’s a small list,” Wolfe said. “There have been no new subdivisions in the last 10 years that would allow it, just from the size of the house standpoint.”

He said as the economy worsens, and the price of rental and starter homes rises, more people will get left behind.

Those who didn’t jump into the market last year will have a harder time getting a loan — namely because they will have to have down payment money.

“Probably the biggest adjustment we have seen is all the incentives for first time buyers are gone,” Wolfe added. “The 100 percent financing has been eliminated.”

Due to new federal guidelines and banks tightening their belts, buyers need to bring about five percent to the table.

But that doesn’t mean it has to be cash, Suderman said.

“You can use equities, and there is other collateral,” Suderman said. “You can get creative if you need.”

One incentive Wolfe said is available is having the home seller pay up to 3 percent of closing costs — but that requires the buyer to bring 5 percent to the table as a down payment.

For those who buy now, and are willing to wait on the incentive, there is one big option that Prudential real estate agent Pat Washburn is telling his customers about — a tax credit that was part of a 2008 economic package designed to stimulate home sales.

“You will still have to qualify to get a loan,” Washburn said. “But the bonus is you will get a 10 percent credit on your taxes.”

The credit, which is available only to first-time homebuyers who purchase before July 1, is 10 percent of the purchase price up to $7,500, which is then paid back during a 15-year time period at no interest.

According to realtor.org, the credit is only available if the household income is less than $75,000.

“It amounts to an interest free loan,” Washburn said. “If you sell your house in that 15 years, you have to pay back the outstanding balance. If you take a loss on the sale, they forgive the credit.”

Washburn said the National Association of Realtors is lobbying on Capitol Hill to extend the credit, make it available to all home buyers and to remove the repayment portion as well.

“We take the position that home sales are good for the economy,” Washburn said.

Whether or not the credit will be extended or tweaked remains to be seen, but it is available for those who qualify right now.

Washburn said, along with Suderman, Wolfe and Carstensen, real estate is a buyers market.