For example, she says, in Fairfax Station, homes that cost about $900,000 two years ago are now available for $775,000. In Reston, buyers could not have found a single-family home for under $475,000 two years ago.
"Today, they can find many" in that range, she says.
For those buyers willing to navigate the complex loan process to take advantage of these more affordable prospects, FHA loans have become the preferred tool, according to local mortgage experts. In March, as a result of the enactment of the Economic Stimulus Act of 2008, the FHA loan limits were temporarily increased. The current loan limits range from $271,050 to $729,750. The maximum amount of $729,750 is available only in high-cost metropolitan areas, including the District. Previously, the FHA's loan limits in this area were capped at $362,790.
Steve Salvatore, with Preferred Service Mortgage based in Vienna, says most of his current clients are going with traditional tools such as FHA and Veterans Affairs (VA) loans, rather than less conventional interest-only products. For example, he says he recently worked with a client moving to the area from Florida who had filed for Chapter 7 bankruptcy a few years ago. He was able to obtain a jumbo FHA loan for $530,000.
FHA requires a minimum credit score of 580, and these loans permit the use of appraisal forms with no additional documentation. In addition, the home buyer and seller, individually or jointly, can pay closing costs as agreed to in the sales contract. Another perk of the FHA loans, Mr. Salvatore says, is they allow for the use of gift funds of up to 6 percent of the purchase price to pay for the down payment and/or closing costs of the home, through nonprofit corporations such as AmeriDream Inc.
The seller or a family member donates money to the nonprofit, which then provides these gift funds for the down payment to the buyer.
Mr. Salvatore says that, although this tactic ultimately lowers the net profit for the seller, it makes the offer more attractive to potential buyers.
"There are a lot of properties on the market, and when competing, that is one of the ways you can separate yourselves from the others," he says. Mr. Salvatore says that skeptical buyers need to realize that the housing market is constantly in flux, so if they want to take advantage of current options, they shouldn't wait to see if the rates go down further or if the market turns around.
"We're in for more gyrations," he says. "It's cyclical. I counsel clients to find a window with [interest] rates they are comfortable with, and go with it."
Mortgage experts also say that, if potential buyers feel jammed because they can't sell their primary property before buying a new one, renting their current house is a smart answer.
