close

Mortgage industry cracking down on loans

3 min read

Q: Bob, I have heard a lot about how the mortgage industry is cracking down on loans. Even on good to go customers what’s your take on this

Greg T.

A: Greg, my take? The Mortgage crackdown on ANY not just “Good to go” customers affects us all.

If you think the level of soaring foreclosures doesn’t affect you or your neighbors-you’re wrong.

Many lenders have tightened requirements for mortgages even for people with good credit. Such a climate affects not just buyers and sellers of homes but also creditworthy homeowners seeking to refinance their once attractive adjustable rate mortgages become much more costly. The effects threaten top ripple through the economy as debt-burden consumers pull back on spending and watch home prices continue to slump.

Although the new environment creates opportunities for some, such as those seeking to buy foreclosed homes at bargain prices for many other, it casts a new cloud on the real estate outlook.

Ways it affects you

If you’re seeking a mortgage. Expect greater scrutiny and more challenges from lenders worried about flaws on your application, such as high credit card balances or missed payments on any bills, inability to document your income and any doubt about the appraised value of the home.

A lender is less likely to approve a new mortgage if your monthly payments would consume more than 28 percent of your monthly income or if you can’t come up with a down payment of at least five percent.

Strategy: Raising your credit score even a small amount can make a big difference in getting a better mortgage rate. To do so quickly, reduce credit card debt and fix any errors in your credit report. (Go to www.credit.com for strategies on how to do this)

At today’s interest rates, a FICO credit score of (this may vary) 630- based on your credit history- might push your rate for a $300,000, 30year fixed-rate mortgage above seven percent, even though your credit score is higher than the scores received by “subprime” risky borrowers. A better score of 720 might lower the rate all the way to six percent.

IF YOU ARE SEEKING A BARGAIN BUYING A HOME. You will find the best buying opportunities over the next two years (in my opinion) in markets with high mortgage default rates and many home owners have loans that have interest-only payments for the first several years. (After an initial period, required payments often soar on interest-only loans, leading to a high default rate.) These include areas within several states where real estate prices had a huge run-up in recent years- Phoenix, Ariz., Santa Cruz, Calif., Watsonville, Calif., Santa Barbara, Calif., Santa Maria- Lompac, Calif., Naples, Fla., and many others. Home bargains can be found in areas that have endured heavy job loses- Detroit, Mich., and Flint, Mich., Cleveland, Ohio, Youngstown, Ohio and Texas.

Greg, I will finish this next week with selling your home, if you want to refinance, if you fall behind, etc. Stay tuned. I hope everyone enjoyed that three day Labor Day weekend.

Have a real estate question? Write, call, fax or e-mail:

Bob Jeffries, Realtor

Century 21 Birchwood Realty, Inc.

4040 Del Prado Blvd., Cape Coral, FL 33904

239-540-6659 Office

239-542-7760 Fax

e-mail: bobjeffries@juno.com

Web site: c21birchwood.com