Debbie Siegel's Mortgage Minute
Changes in the Lending Market Impact Investors
As you know, due to the recent high levels of mortgage loan defaults, several sub-prime lenders were forced to leave the business and file for bankruptcy protection. The high rates of foreclosure, coupled with these corporate bankruptcies, have resulted in changes that are now impacting the entire spectrum of mortgage lending.
What does this mean for investors?
Now that the pool of sub-prime lenders has dwindled, the availability of funds for non-conforming loans has dwindled, too. Indirectly, it means the flexibility we enjoyed in real estate financing is no longer a guarantee.
In response to the sub-prime crisis, traditional banks and lenders have tightened their underwriting guidelines. Conforming lenders, for example, have increased their own credit score requirements.
* Next 37 17 investors only!
For customers with reasonably good credit, these new guidelines make it more difficult to find 100% financing programs on primary residences, second homes, and investment properties. In addition, the increased competition for loans has made alternative documentation loans more difficult to obtain.
In short, an excellent credit score and the availability of a down payment are more important than ever when obtaining a real estate loan.
As gas and oil prices continue to rise - and property taxes, too, in many areas - it's important to remember that when calculating whether you can afford a mortgage you'll need to include these costs as well.
In this changing mortgage market, banks and other lenders will be looking at customers' abilities to meet their obligations with increased scrutiny.
Got questions about real estate financing? Contact Debbie at
Debbie@westchester-mortgage.com or 617-965-1236. She'll consider them for
inclusion in a future column. Debbie Siegel is president of Westchester
Mortgage in Newton, MA. She is licensed in several Northeastern states.
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