Posted on 08/24/2007 11:11:03 AM PDT by Hydroshock
Until a few months ago, it seemed that anyone who could fog up a mirror could get a mortgage.
Now, with a credit crisis roiling the industry, some consumers might think they have a better chance winning the lottery than finding a home loan.
The truth is that you can still get a mortgage. It just may not be as easy--or as cheap--as it was over the past few years.
"If you have good credit, can document your income and have money for a downpayment, it’s largely business as usual," says Greg McBride, senior financial analyst at Bankrate.com.
Borrowers seeking non-"jumbo" mortgages of $417,000 or less and have good credit "will get the red carpet rolled out for them at the bank," McBride adds.
But if you are lacking in any of that criteria, or need to get a jumbo loan, be prepared to be turned down or pay a much higher rate.
"Tough Sledding"
"If you have poor credit, cannot document income, or looking for 100% financing -- it's tough sledding," says McBride.
Subprime loans for people with credit scores of 600 or less? Forget it. The standards have been tightened to the point that subprime mortgages, 20% of the mortgage market last year, are a thing of the past.
Also gone are a variety of products ranging from "no-money-down loans" with low teaser rates to interest-only mortgages that increase the amount owed to the lender over time.
(Excerpt) Read more at cnbc.com ...
Your thoughts?
Assuming liquidity is available, I think the point we’re at now is where we’ll stay for a while, doom and gloom aside.
There are even still decent jumbo loans around. The articles make it seem as if jumbo rates suddenly went to 10.875% or something. Realistically they’re still in the low to mid 7’s for a fixed rate loan, a bit lower for ARMs.
Subprime isn’t “gone” per se, but it’s more sensible. Zero down? Fuggetabout it. Stated income? Maybe if the loan-to-value ratio is under 70%, pretty much ensuring that the lender won’t lose their shirts.
.....Sounds to me like we’re returning to “old school” lending practices...in other words a return to sanity....thanks for posting this article Hydroshock...you keep an eye on the housing market which I enjoy.
I hope you are right, I just wish teh return to sanity was sooner.
I can't imagine why lenders aren't tripping over themselves to loan money to folks with these credentials
sw
I do not know, maybe they stopped drinking the kool aid?
Yes. And assuming it stays here and liquidity issues don’t screw the overall greater economy, I think that’s OK.
100% financing isn’t totally gone, but you need to do a hell of a lot more than fog a mirror to get it. Basically, if you qualify for 100%, then you don’t need it. In other words, you HAVE down payment money but prefer not to use it.
We can argue till we’re both blue in the face as to whether or not that’s smart, but from a lending/risk standpoint, it makes sense.
It will return sanity to the real estate market. All of these exotic, interest only loans simply allowed people to borrow more money to but a bigger home. And when many people get those huge loans, real estate prices get bid up higher and higher. I think it’s a good, common sense thing.
I was a top ranking Account Executive for New Century Mortgage, and my partner and I alone funded 100’s of loans a month for people with credit scores less than 600. Most of them at Higher LTV’s(loan to value). Most of those loans were 2 year or 3 year arms. Now thats was just us. There were a dozen other reps for New Century in my state, and thousands across the country. As a company we funded @ 60 billion last year. Now add up all of the other subprime companys, and you have trillions of dollars in loans where people are just gonna be told “forget it”.
They will be forced to let their houses go back to the bank. The people/banks holding these notes are pooping their pants....if not, they should be.
The banks are doing these people a favor, saving them from themselves.
Earlier in the year I got a no-doc (30 yr. fixed) with a LTV of 80%, at arround 5.8%, buying a point.
The kicker was I didn’t ask for a stated income loan, I asked my bank if I was paying extra for it (they said “no”), and the rate the gave me matched their listed rates for the day on their website.
My wife kept telling me she thought something was wrong, and I kept thinking the bank was nuts, but whatever. I was straight with them, and they were willing to take my word for everything, so no harm done to anyone. I wish we could all do business like this. (I need to get permission for days off from work in writing.)
Not true! This summer, my wife and I did some extensive repairs and renovations to our home to fix some structural problems and modernize it. When we went to refinance with our mortgage company (for a relatively modest amount, BTW, no where near this "jumbo" figure, our company bailed on us at almost the last minute, after assuring us that all was in order up to that point.
We certainly qualify as "prime" borrowers since my wife and I both have good jobs with solid incomes, a great credit score, and no credit card debt. Plus, we were existing customers with this company (which is reputable), and had an excellent payment record. Still, the company pulled the rug out from under us, and suddenly came back with terms that were pretty onerous. We had to decline. Fortunately, we had a safety net set up and will lose nothing, but this was really annoying.
Self preservation?
WallStreet has lost its appitite for these type of loans.
Zero bid....
Couldn’t agree more.
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