And it was an excellent article to boot about how skiddish lenders are changing their minds and denying previously approved mortgages to people right before closing.
That’s gotta hurt.
A buyer may be able to find another lender to do the deal… but maybe not. If the transaction falls apart the buyer is at least out all of his time, the cost of the home inspection, possibly moving and storage expenses, and may have to scramble to a place to live on very short notice.
This explains a lot.
In Olson’s estimation, at the peak of the housing boom, roughly 20% of the mortgage market was subprime, and nearly 20% was “Alt-A loans” — or “A-minus” loans, typically for those with good credit but with high debt-to-loan ratios or little or no proof of income. Both categories are now nearly extinct. That means about 40% of the residential mortgage market has all but disappeared.
Here’s Heather’s bit.
“Now, buyers are not sure they can get a loan at all,” Barr says. Some buyers, she says, are reluctant to believe that a loan approval contains an expiration date: “The lending rules do change day by day. I tell my clients, ‘If you were approved more than three weeks ago, you need to go back and talk to them again.’ “
Yep, I don’t get calls anymore from folks asking me about the advisability of using an interest-only loan.
“It used to be that if you had the pre-approval, you were good,” says Johnson, an agent at Chase International, a regional independent brokerage in Reno. “Now, five days before closing, you learn that the financing isn’t there anymore.”
{ 3 comments… read them below or add one }
Russ 08.09.08 at 10:18 am
from the USA Today article:
“Who can afford that?” asks Paul, 37, whose property is now back on the market after the deal collapsed. “A person that can afford a $170,000 house does not have $34,000 in cash. It just doesn’t work that way.”
Wow, 20% down is an extremely radical notion? I guess your condo is not really worth $170K. That 20% is much easier to come up with at a purchase price of $100K or less.
I can’t wait until those Nehemiah/Ameridream programs go the way of the dodo in a couple of months. Imagine, buying a house when you can not afford a 3 or 3.5% down payment.
Brian McMorris 08.14.08 at 2:19 pm
Loose credit is the bain of the American economy. The philosophy amongst some of the more liberal part of our population, that home ownership is a Constitutional right, is misplaced, to say the least.
People who cannot pay a down payment probably do not have the discipline or means to consistently (month after month) pay a mortgage, taxes, utilities and basic home maintenance. One needs to develop basic financial management skills before moving on to home ownership.
If it only cost the people who were not competent or unprepared to get in over their heads, I would not be bothered. It would be a lesson for them to make their mistakes. Unfortunately, living in this over-generous (at times) society, their mistakes become my problem. They skate, having lost nothing since they had nothing to start, while I pay through higher taxes and a broken economy.
John Wake - Real Estate 08.14.08 at 2:34 pm
“People who cannot pay a down payment probably do not have the discipline or means to consistently (month after month) pay a mortgage, taxes, utilities and basic home maintenance.”
Good point!
“… their mistakes become my problem.”
On the other hand, it was very rational for those borrowers to take out those crazy generous loans during the boom. It’s probably more accurate to say that the lenders were the ones that made the mistakes, not those who took out the loans (I’m assuming no fraud was committed by the borrower in filling out the loan application).