Lately there have been some surprises for a number of borrowers that in some cases have taken them out of the market entirely because the were not aware of changing guidelines. 

An example:  I recently had a client who has been sitting on the sidelines for at least a year watching home prices fall.  He finally found the home he wanted to purchase at a price he felt was to good to pass up.  He was purchasing this home as an investment property and he wanted to put down 5% and finance the remaining balance.  When he started this process months ago, investment properties could be financed with as little as 5% down.  Now they require a minimum of 20% down on an investment property and some want as much as 25% down.  Additionally, many of the banks want more cash reserves left over in the bank after closing.  In this particular clients case, he needed an additional $20,0000 down and another $7,000 in the bank for a total of $27,000 more needed to close his loan. 

The client's own bank and credit union also had similar guidelines so in this particular case, he was not able to close his loan and take advantage of the great deal he found.  This particular client said that if he had known that the banks were going to require a larger down payment, he would have purchased sooner.  He thought he was doing the right thing by waiting for prices on homes to keep falling.  He never expected that the lending guidelines would change that much.  

So why am I writing this... It's my job to provide information to my clients that will help them make an informed decision.  Right now, waiting for the market to bottom may or may not be a good strategy.  For some, it may mean the difference of being able to purchase at all.

Consider this; an item you want is on sale.  If you don’t have the money to pay for it, is it still a good deal?

Every consumer wants to save money.  In the current housing market, consumers want to “time the market,” in hopes of being able to buy a house at the lowest possible price. 

This can be a good strategy, but a homes sale price is only one piece of the puzzle.  When it comes to buying a home, a very big piece of the puzzle is how will you pay for it?

More than likely, a consumer is going to take out a loan to pay for their new purchase and one current risk that many people are not considering is this…

THE LOAN THEY QUALIFY FOR NOW MAY NOT BE AVAILABLE IN THE FUTURE, OR IT MAY END UP COSTING MORE TO GET IT.

It’s no secret that banks have adjusted their lending guidelines as they worry about a borrower’s ability to pay back the loan.  Don't get me wrong, there is still mortgage money available, it's just that the banks are making more prudent lending decisions than they were before when it seemed they were handing out mortgage loans with virtualy no qualifications.  Every day there is an article about how it is more difficult to qualify for a mortgage, and for some consumers, waiting to “time the market” to get the lowest price will present a challenge if the loan they once qualified for is not longer being offered.

Some recent changes in mortgage lending that possibly can prevent a loan from being approved or that may increase its costs are as follows:  

•  Many banks have raised the minimum credit scores needed by a consumer to obtain a mortgage.
• Some banks are requiring more financial reserves or cash in savings for a consumer to qualify for a loan.
• Increased down payments are becoming the norm to lower the loan-to-value.
• We have seen changes in acceptable limits of debts a consumer can carry to qualify for a mortgage.  Many banks want to see lower levels of debt than in the past.
• Banks are starting to eliminate piggy back loan programs such as 80/10/10 financing etc.  These programs were used in the past to lower the amount of cash a borrower needed to put down.
• No documentation and stated income loans are quickly becoming more and more difficult to find.
• Lending on manufactured homes has been virtually eliminated with few sources remaining.  Many banks will not even accept applications on manufactured homes right now.
• Down payment assistance programs have been eliminated.

Again, I have to emphasize that there is mortgage money available.  If however the loan you wanted to obtain with 5% down now requires 10% or 15% down, or the bank required you to have more cash in the bank after closing, or the final debt ratios have been lowered to a point where you no longer qualify or maybe you still qualify but there is a hit to the interest rate or points then waiting for the market to bottom may or may not have been prudent, and this is especially true if you cant close the sale.

While home prices are falling and for the most part so are interest rates, it’s the ease a consumer has in obtaining a loan that will enable them to purchase the home they waited for.  If in the end, the loan they want is no longer available or it costs more in add on’s to the interest rate because lending guidelines have changed then is it still a good deal?

The availability of mortgage money and the changing guidelines need to be a consideration when a consumer is thinking of waiting for a better price on the home they want to buy.  After all, the homes selling price is only one consideration... how you will be paying for it is another big part of the deal.

 Give me a call today!

Mark A. Miskiel

"Delivering a level of service that can only be described as exceptional!"

(928) 634-7987

miskiel@msn.com

NMLS # 198563 

First time buyer loans, Purchase, Refinance, ARM Conversion, Combo Bill Pay, Construction, 2nd Home, Investment, 100% Financing, Lot Loans, Reduced/No-Closing Cost Options, Reverse Mortgages, FHA, VA, Rural Housing, Lot Loans, Manufactured.

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