I know I have been predominately optimistic about the local real estate market, however, over the last few weeks I'm starting to think we might not be out of trouble yet. In fact, the problem may be getting bigger. Why the change of heart? Lender guidelines, "Declining Markets, and Americans spending habits"
This ugly tag of a "declining market" that lenders and mortgage insurance companies have set on most of Colorado and the nation is going to hurt. If a market is designated as a "declining market" financing becomes much more difficult for those who are trying to obtain financing (purchase or refinancing). 100% financing, forget about it. In a "declining market" 95% financing is difficult to find, a lot of lenders will on financing 90%-92%. Ten, twenty years ago this would not have been a problem (actually the norm), however, very few people plan or have the ability to make a down payment now.
Lender and mortgage insurance guidelines are becoming more conservative by the day. Stated income loans, which most self-employed borrowers use to qualify, are becoming extinct or so limited they are only useful to a small percentage. Other similar guideline changes have excluded thousand from home ownership or trapping them in bad loans that they can't refinance.
For example, I talked to a borrower the other day, he purchased his house 2 years ago with no money down. He has a great credit score 743, he has never made a late payment in his life, however, because he lives in a "declining market" and is self-employed he has no chance at obtaining a new loan at this time. He can't afford his payment when it increases $650/month, he is going to have to walk a way from his home.
So we have an excess of homes on the market, thousands of people who own homes and now in trouble (because of the economy, life changing events, or bad loans), lenders shutting the doors on a majority of society, and Americans who like to spend and hate to save. This is bad news for the national economy and local real estate market. However, all of the plans that have came from the White House or Capital Hill will do little or nothing to stop the slide. Watch out!!!
Prosperity Financial - Your Mortgage Manager
Lafayette, CO
www.colomortgages.com www.myprosperityfinancial.com www.3bed2bath.net
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The credit crunch and economic uncertainty have resulted in anxiety within investors as well as more unyielding lending standards. Fortunately, CRE remains rather attractive given the circumstances. A good foundation of fundementals, an abundance of capital, and sustained allocation must be maintained for CRE to preserve its appeal.
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