Delaware Real Estate
As with other states throughout the United States, Delaware has seen a rapid decline in the price of real estate over the past several months. Job market reduction, employers reducing work force or leaving altogether have contributed to the financial crisis that faces many throughout the country today. This in turn has created an increase in the number of foreclosures and short sales that are being done due to lack of financial resources for the homeowners. There has been a recent selling of many of the available units on the market as buyers wish to purchase prior to the prices and value going back up.
General Real Estate Prices and Comparison
Delaware has seen a rapid decline in real estate prices much like the rest of the country. Local information includes Wilmington predicting an overall decline of 11.1 percent, Dover expecting 10.6 percent decline, Smyrna expecting a decline of 10.8 percent and Newark predicting an overall decline in real estate prices of 11.6 percent. These percentages of decline in real estate prices are comparable to elsewhere throughout the country and are expected to continue to hold true.
Although Delaware is seeing a decline in overall pricing, the state tends to see a higher than average real estate price overall due to low property taxes and no state or local taxes. In addition, Delaware reports a higher than national average cost of living. As a financial turnaround appears to be on the horizon for Delaware, a quick sell off of homes and property has been seen. This is due to buyers wishing to make their purchases before the cost and value of the property goes back up.
Fastest Growing Cities
Wilmington is reported as the fastest growing city in Delaware. This truly is no surprise when one considers that nearly 50 percent of Delaware’s entire population lives in and around Wilmington. As rural areas continue to decline, the population is moving towards areas such as Wilmington where job markets are expected to improve dramatically. There is a new automotive plant being retrofitted to produce hybrid cars. This will bring many jobs to the area. Because of this, people are moving closer to where the jobs are. Wilmington is the location of the new automotive plant.
Types of Mortgages Allowed in Delaware
There are two types of mortgages allowed in Delaware which are determined by the institution who is lending the money. The types are conventional and government mortgages. Within the government classification of mortgages, there are four different types which include government backed institutions, FHA mortgages, VA mortgages, and RHS mortgages.
Conventional Mortgages
Conventional loans are provided by private lenders such as banks or private mortgage companies. These loans require a review the potential buyer’s income and credit history before the loan application is approved or denied. In addition, the maximum amount they are willing to lend and what amount of down payment on the home they will require is determined by income as well as debt to income ratio. Debt to income ratio is determined by comparing other debt with income. A buyer’s credit score may also influence the interest rate that is offered by the institution.
FHA Mortgages
The Federal Housing Administration provides a mortgage option for a first time home buyer who is buying a home as their permanent residence. This type of loan is not intended for people who wish to buy property to use as rental property or those who buy real estate with an intent to make upgrades or repairs and then sell it shortly thereafter. This is known as “flipping”. One must maintain the home for a period of at least two years before refinancing or selling of the home is allowed. Many times no down payment is required for this type of loan, making it easier for low or moderate income borrowers to own a home. The ability to meet the monthly payment schedule is required however.
VA Mortgages
A VA mortgage is set up strictly for those who have served or are serving in the military. If a member of your household has served or are serving in the military then your household may qualify for a VA, or Veterans Affairs, mortgage. Generally speaking, no down payment is required with this type of loan. However, the household must be able to show that they have the ability to repay the loan based on the monthly payment amount for the requested mortgage dollar amount.
Government Backed Institutions
Government backed institution loans are in general the same as conventional loans. However, these loans are provided by a lending institution which is backed by the government. This means that the government acts like a co-signer on your mortgage. Essentially all government mortgages fall into this category as well as the individual categories.
RHS Mortgages
RHS mortgages are provided to people who live in a rural area with low to moderate income. This loan is provided by the Rural Housing Service. People with low credit scores who cannot qualify for a conventional mortgage generally will be able to qualify for this type of mortgage. These mortgages do not require a down payment or mortgage insurance. This type of mortgage is intended to help rural areas rebuild and expand. With many moving into larger cities looking for work, rural areas are seeing a dramatic decline in home sales.
Delaware Interest Rates
In general, there are three interest rates for most mortgages which include fixed rate, adjustable rate, or interest only. Fixed rate mortgages do not vary from its original interest amount. The length of the mortgage for repayment for this type of mortgage varies from 10 to 40 years and the monthly payment is a fixed amount. Adjustable rate mortgages vary in the amount of interest you are charged and is determined by current interest rates. The amount of your monthly payment will change as the interest rate changes. Most of these type of mortgages include limits on how much the rate can change and how frequently. Interest only mortgages allow you to only pay interest on the principle amount of the loan for a short period of time. After that period you are required to pay the principle of the loan. Different methods of repayment on the principle are available. The type of interest rate that is assigned to your mortgage is determined by the amount of the mortgage, the lending institution and usually the buyer’s credit history. Higher mortgage interest rates are usually assigned to those with lower credit scores unless a governmental mortgage is obtained. Government mortgages tend to carry a lower interest rate due to the backing by the government.
As the economy continues to begin recovering, housing prices and real estate prices are expected to improve as well. Even as the real estate market begins to recover, interest rates are expected to stay low for an extended period of time. It is thought that the lower interest rates will gradually begin causing the housing prices to go up again until they reach the level that formerly was seen. While no one is expecting a total recovery to the housing boom of yesterday, an improvement in real estate value is expected as the economy recovers slowly.