Buying a Home in the Tough Housing Market

The housing market these days is under pressure. Foreclosure rates are on the rise and those trying to sell a home are experiencing great competition. It's definitely a buyer's market, which means for those who have good credit, it may be the perfect time to buy a home. Prices are lower and more affordable than they've been in years and interest rates are low--making it attractive to potential home buyers.

Do you have what it takes to buy?
There are three main things you need to buy a home in this market. If you can check off all three items, now may be the right time to buy a home.

1. Steady income. Lenders want to see that you have a steady source of income. They like to see consistency (or an increase) in your income for the past few years. They also like to see consistency in your employment--longevity with one employer or jobs within the same industry.

2. Good credit. Borrowers with a credit score of 750 or higher get the best interest rates and loan terms. Borrowers with credit scores above 700 still get decent rates. It's credit scores under 700 that are finding it tough to obtain mortgage financing.

3. Down payment. If you have 5 to 10 percent for a down payment, and a high credit score, you're ready to buy a home and obtain mortgage financing. Some lenders are requiring up to 20 percent.

What to do
If you fit the criteria, then you're prepared to be a home owner, but now what do you need to do?

1. Educate yourself. There are a multitude of websites where you can educate yourself on the real estate market. You can also turn to a professional real estate agent to help you locate homes that fit your criteria. They're also a wealth of information on the real estate process and mortgage financing. They can be invaluable to create a smooth transaction.

2. Be a realist. The amount you're approved for and what you can realistically afford are two different numbers. When a lender calculates the amount you can qualify for, they use your gross income, not what you take home. Also, they don't take all of your bills into consideration. So make sure that you can afford the mortgage payment, including the taxes and insurance on the property before you move forward.

3. Obtain a pre-qualification. Show the seller you're serious and ready to buy by getting pre-qualified. It can also give you negotiating power if you're up against another buyer that isn't pre-qualified.

It's a buyer's market so if you're interested in buying a home, now is the time. If you fit the criteria, now you know what you have to do.