What is really going on in the Mortgage Market?
I'm sure most everyone has read or seen a news article about the state of the Mortgage Market and its effect on Real Estate. There is so much information, and to my way of thinking, mis-information floating around I thought I would try and summarize what is going on and how it affects you as homeowners and potential buyers and sellers in the Phoenix Real Estate Market.
Lending guidelines for borrowers are tightening daily - and in some cases hourly. the word on the street is that borrowers will not be able to secure the funding they need to buy or home, or even to close on a home that is already in escrow. All of that is true, but dig a little deeper and the reality is that the borrowers that are affected are those seeking subprime, higher risk loans, people with FICO scores lower than 680, those who want to place a minimal downpayment and finally "no doc" borrowers - those who cannot document their income.
There has been a lot of questionable lending in the past few years and it's coming to a head now, and actually returning to what used to be considered normal. Remember the days when you had to show up with at least a 10% downpayment?
Over the past few years, questionable lending practices opened the doors for people to qualify where they could not before. Today, as the housing boom slows and home prices are slipping, foreclosures on those easier to get loans are epidemic.
So, where do you stand? According to www.bankrate.com here are the risks of foreclosure:
Prime-rate fixed rate: 1 in 588
Prime-rate ARM: 1 in 189
FHA fixed-rate: 1 in 147
FHA ARM: 1 in 101
VA: 1 in 244
Subprime fixed-rate loan: 1 in 77
Subprime ARM: 1 in 31
So, be watchful, it's going to be rough going for a little while, but if people hold on and ride it out, the market will normalize.
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