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Home affordability soars in 2012

Last year was one of the best ones ever to be in the market to buy a house, as a recent report indicates affordability was at an all-time high.

According to the National Association of Realtors, a combination of record-low mortgage rates and list prices helped make 2012 one of the most optimal years to purchase a property. NAR’s Housing Affordability Index reached 198.2 in the final days of the year, one of the highest rates the measure has reached since 1970.

The housing affordability index is a tool NAR uses to assess how reasonably priced home are for property seekers. Any number above 100 is an indication that buying conditions are favorable. And the higher the number is, the more purchasing power the buyer has.

“A window of opportunity remains open for buyers who can qualify for a mortgage,” said Lawrence Yun, chief economist at NAR.

He added that homeownership in the country would liked have increased even further last year, were it not for “excessively tight underwriting” standards that precluded some people from purchasing a house.

Since the housing crisis, wherein home values fell precipitously due to a dramatic rise in foreclosures, mortgage servicers have increased their lending standards in order to more effectively determine whether a borrower has the capability to pay off a mortgage. Among the qualifications prospective borrowers have to show is a strong credit history, information about any outstanding debts and whether they are gainfully employed. Immigrants may be particularly attuned to this employment requirement, as many are in the U.S. so they can work and send money home to their families.

Make smart financial decisions after mortgage is attained
However, because of the expenses that can come with life in the U.S., it can be difficult to buy a house. And even if buyers have the financial means, the standards needed to be approved for a mortgage can be considerable. Furthermore, if approved, certain buying decisions can cause lenders pause, according to real estate expert Broderick Perkins.

“Lenders today don’t just check your qualifying information once or even twice,” writes Perkins. “Three, four or more checks, of one document or another, aren’t out of the question in today’s tight lending market.”

Perkins notes that whether a borrower is approved or not is largely dependent upon what assets they have and the level of risk the lender considers the borrower to be. Thus, if a borrower is approved but their assets change in the course of the lending period, it could bring serious problems for the homeowner because they no longer have the money needed to repay the debt.

There are a variety of strategies, however, borrowers can employ in the years in which they’re repaying their mortgage.

For example, Broderick says that one of the most important things to do is not to make any significant purchases if at all possible. Buying a new car, for example, may be necessary, but the amount of funds needed to pay it off – combined with the mortgage debt – could weigh too heavily on a person’s financial capability. In other words, they may be stretched too thin.

It goes without saying, but Broderick also says that borrowers should strive to pay off their debts on time. Having too many back payments could result in a lender nullifying a mortgage deal because the borrower’s credit has diminished too severely.

Finally, mortgage borrowers should make every attempt to maintain or improve their status on their present job. Broderick says that it’s a good idea to avoid looking for a new job in this period, unless it’s a second job wherein more money can be made.

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