Mortgages Still Available

[Stu Barnes]

Originally Posted by saturnfan

Not totally.

For example, I'm a member of State Employees Credit Union. They have just begun to offer some new mortgage products that are very favorable and will even try to help members refinance out of bad loans with other lenders.

What this crunch means is that lenders will now apply sound underwriting standards as they should have been doing all along.

Bad underwriting combined with inappropriate mortgage products contributed to building the housing bubble. Like a boil, it must pop, release the poison, and then clear up.

Well said

[saturnfan]

Thanks.

The outrageous prices in some areas would have been moderated if there were no "creative" financing methods allowing people to pay more than they could really afford.

Just like the margin explosion prior to the 1929 stock market meltdown. Assuming the value of an item can only go up is not a good thing to bet your future on.

[TuborgP]

Originally Posted by NYC2RDU

I would think it depends on the numbers.

If you earn $80k or more per year and are looking to buy a house for under $300k with a 20% down payment then you're probably ok.

If you earn $120k or less per year and are looking to buy a house for over $500k with less then a 20% down payment then you're probably not ok.

But doesn't that make sense?

That does make sense. Most mortgages are resold and the original lender is not the one who holds the note. Investors are wanting a higher rate of return to buy jumbo loans. Banks can't sell them at interest rates they previously could. The cost is becoming more expensive because there are fewer dollars to be borrowed. The old supply and demand axiom. That is why the concept of liquidity is so often mentioned. Fewer dollars in the equity market is driving stock prices down as there are fewing dollars chasing the stocks. However if you are holding notes the return on those notes will be greater with increased rates. If as predicted we see more defaults in in the jumbo market and the good credit market then money will become tighter for those loans . Interest rates may not go up if no one buys. TLuv you are only screwed if you have bad credit.

[rwally]

"Over the past two weeks I have seen two major companies go under and supposedly over the next month at least 20-30 will go also."

Can you elaborate on where you heard that more are expected to close and any names that wwere mentioned?

----
"The 100% financing "from what I have heard" will be harder to find, but there is an NC Bond program that is 100% financing for first time homeowners and with a few other stipulations."

Don't forget FHA...it's a 97% financing program that can be adjusted to 99.25%. There is also the Fannie Flex 100 (100%), the Flex 97 (97%), the My Community program (up to 100%) and the USDA Rural Development program which goes up to 102%. And that's just for starters.....

[tluv00]

We are looking right now and interest rates keep jumping every time another lender goes under. From what my Realtor tells us some companies are trying to use the prospective borrower to alleviate some of their losses by jacking up interest rates (sometimes 2-4 percent) and giving the old "you should have locked in" or "you did not qualify" line. Credit wise my wife and I have absolutely no issues. We are going to do a 15 year fixed and put down a large deposit unless otherwise compelled to invest it.

[saturnfan]

You should do well.

[ChipL]

base rates at the moment are holding pretty steady with the exception of the jumbos as previously stated and quite a few of the lender niche loans. (ie the funky scenarios providing only bank statements to prove income, stated income, and no doc loans)
The average buyer ie those with credit scores over 580 no recent bankruptcies, or foreclosures, and the ability to show how much money they make through paystubs and w2s, or tax returns, are still able to purchase a home at 97-100% financing without many problems.
The buyer who is probably getting themselves into more thanm they can afford and thereby increasing the risk for the lender (ie the no doc loands and the stated loans) are being crunched down on and more down payments is being required, more assets are being requested shown to kind of "back up" the income that is stated.
It is a good thing. The foreclosure rates that have jumped recently in my opinion are not only the subprime market, they are borrowers who made a lot of money had over 700 scores and did no doc loans in investments purchases and in the end could not afford the loans.
The price jumps in FL, and other areas of the country have raised taxes, and insurance, while at the same time made the lending market over the past years the highest it's ever been with more and more people having the ability to purchase. The higher amount of foreclosures is in proportion with the higher amount of mortgages that have been made recently.
So in the end. It's a correction. People are still able to get loans. They just have to shop a bit more. (and FHA will probably make a grand come-back)