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Mortgage Brokers Going Down
August 23rd, 2007 categories: Buying, Real Estate Finance, Real Estate News
So I’m sure you’ve been hearing about all the mortgage lenders going out of business and how sub-prime lending is becoming extinct. Well….it’s true! As interest rates have risen and adjustable rates have, well, adjusted, new home owners are feeling the pain. From around 2000 to 2005, everyone, including myself, was in a rush to buy a home before prices got too high. Many of these homeowners were first time buyers and had little money to put down. This is where the “creative” lending came into play.
Many people bought their homes with adjustable rate mortgages, or ARMs, and anticipated that their home would appreciate in a few years, giving them the ability to refinance before their variable rates shot through the roof. Now, since the market has shifted and people aren’t seeing 5–15% appreciation a year, some homeowners are in trouble.
The biggest problem for these homeowners, is that the once plentiful “creative” lending, is now just a thing of the past. Lending guidelines are much stricter today than they were just 6 months ago. I have clients who can’t buy the home they wanted because the loan they qualified for just five weeks ago, no longer exists! In fact, the bank that was going to do the loan doesn’t even exist anymore. More and more, I hear stories like this…
…Well I was going to buy this house I really, really loved, but I waited too long and now there aren’t any loan programs that I qualify for…
As the number of short sales and fore closures rise, the number of mortgage banks will inevitably go down. Even though the amount of these types of sales are low in San Diego, especially when you compare it to the number of new homes that were recently built, they are affecting the market.
So if you’re thinking about buying a home and you don’t have great credit and you don’t have 20% to put down….QUIT WAITING! I promise you, things will not get easier anytime soon. And in case you’re curious, here’s a list of mortgage banks that have “imploded” in the last year or so.
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Denny Oh
(858) 243-2092
I’ve been fielding LOTS of questions and listening to LOTS of concerns from clients here in the Raleigh real estate market about this. I wrote the first installment of a three part series just today to try to get some good solid information out there on what is happening and what has changed. Best I can tell from my mortgage friends, credit score, down payment, and the level of documentation required are very important now.