Thursday, October 2, 2014 · 2:25 a.m.

Tips for homebuyers

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Indicators continue to point toward recovery in the local housing market, but the topic is complex, and not everyone agrees on what's happening.

Though area Realtors say that inventories are shrinking—which is a good sign—some people remain skeptical and suspect that banks are hoarding foreclosed inventory, making it appear that inventory is decreasing. 

Some people have stories about recently getting multiple offers on a house, while others have stories about a home that was hard to sell. 

Less inventory might mean a seller has a better chance to get multiple options, but it also could mean that it's harder for buyers to find what they want. 

And inventory is just one indicator that experts use to gauge market conditions. Time on the market, closed sales and home prices are other numbers industry insiders look at. 

And situations vary in different areas. So what is happening nationwide or in larger cities isn't necessarily what's happening locally.  

Dr. Chris Brockman, UTC finance professor, said that it's premature to say the local market is great but that both buyers and sellers are feeling more comfortable.

"Overall, buyers and sellers are more optimistic and confident in the housing market," Brockman said via email. "Luckily, Chattanooga wasn't hit as hard as many areas when the real estate market crashed."

For anyone who doesn't know what to make of the industry lingo and differing opinions, here are tips and background information for current homebuyers. 

History
One of the outcomes of the 2007 mortgage crisis was that it became harder to get a loan. At that time, home prices were on the rise, it was easier to get a loan and people began borrowing more than they could afford. 

Before the economic crisis, some lenders provided 97 to 100 percent financing for a home.  

Lenders made it easy for those searching for the American dream, a home of their own. But soon, the dream turned into a nightmare.

The economy began to struggle and unemployment rates increased; and some who had gotten loans easily couldn’t afford to continue to pay, leaving the lenders to shoulder the property.

Lenders who provided 100 percent financing found that it didn’t give customers much incentive to stay in the deal.

The recession deepened, and lenders who were stuck with excess property stopped lending money for new home construction.

Lending advice: Shop around 
Lending will likely never go back to the way it was, but the process might be getting a little easier for people with solid credit.

Hamilton Brock, chief operating officer for Collier Construction, said banks are a little quicker to lend money and that it hasn't taken the company as long to close on contracts recently. 

And Keith Sanford, Chattanooga market president for First Tennessee, said if he were trying to get a loan now, he would make calls and evaluate different rates. 

"There is more demand and competition," Sanford said. "Sometimes, it can mean a little better rate if you get two banks competing."

Buy for less than you think you can afford 
First-time homebuyers should make a purchase for less than they think they can afford, Brockman said. 

"In the past, buyers felt that they could stretch themselves financially because their home would increase in value forever and they would get nice big raises and after five or so years they could actually afford the house," he said.  

Don't look at a home as the same kind of investment as stocks, bonds 
The mortgage crisis created a switch in perspective, Brockman also said. 

Homebuyers had been looking at their homes as investments. And yes, it's an investment, but not in the same way that stocks or bonds are, he said. 

"You should view your home as a way of not 'throwing away money' on rent; and if you're lucky, when you're old and retired, you will have paid off your mortgage and have a valuable asset," he said. "It might still only be worth what you paid for it, but you can now sell it and move to Florida and live comfortably."

Click here for 13 more tips for first-time homebuyers. 

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