Local advice on buying a home in the downturn

By BEN WERNER - bwerner@thestate.com

The prime home-buying season is getting under way, and this year, more so than any other in recent history, buyers and sellers are anxious about what to expect.

For sellers, the main worry is how long will their house remain on the market and will they get the price they want.

For buyers, the concern is whether they will qualify for a mortgage to pay for that dream home.

And for some buyers, qualifying requires more work on your part, including providing more paperwork to be approved than was required just a year ago.

The upside: Good buys can be found and most home buyers still can qualify for mortgages, experts said.

Three in five people nationwide carry scores that should be good enough to get the money needed to buy a home, according to Bankrate.com.

Just a little more than one of five potential borrowers have scores that would all but prevent them of getting a mortgage.

Plus, the Columbia area has not been hit as hard by the national housing slowdown.

Home sales in Columbia just started declining late last year after sales in other parts of the nation had receded for months.

The South Carolina Realtors reported in Columbia 10,631 residential homes sales in 2007, a 2.4 percent drop from 2006.

Nationally, existing home sales dropped by 12.8 percent to 5.65 million in 2007, the National Association of Realtors said. New home sales nationwide slid 26.4 percent to 774,000 last year, according to the Commerce Department.

Interest rates are at historical lows around 6 percent for a 30-year fixed-rate mortgage, said Kevin Fernald, a mortgage department sales leader at First Citizens Bank. They were more than 7 percent a decade ago.

“Money is still available,” Fernald said. “What’s being negotiated now is like what was being negotiated 10 or 15 years ago.”

What does that mean to potential home buyers?

Lenders are now sticking firm to their standards of what counts as acceptable credit scores and debt levels.

This means lenders are willing to deal only with borrowers who have a total debt equal to less than 36 percent of their income and who have FICO credit scores above 650, which is considered OK, or even better, a score above 680.

During the past decade or so, lenders were willing to be more lenient with customers who had lower credit scores and higher debt levels.

“The pendulum went too far and what’s happening is it’s adjusting,” said Carolyn King, a Columbia-based mortgage originator with Carolina First Bank. “I feel like the change is for the good.”

But the changes that are good for the financial strength of lenders are not necessarily going to be good news for many potential home buyers.

Not too long ago home buyers did not have to show proof of their income, did not need money for a down payment, and low FICO credit scores — below 650 — could easily get mortgages, said Greg McBride, senior financial analyst with Bankrate.com.

A lot of home buyers were approved and moved into homes that today they would not be able to.

The way the industry is now, McBride said, “If your credit score is below 650, good luck.”