In Spite of the Headlines, Mortgages Still Available to Most

Given all of the media attention on the credit crisis, buyers and sellers are concerned. I’ve received many calls from individuals who wonder whether or not there is any money available for home financing. These are certainly unprecedented times - with banking giants such as Bear Stearns, Lehman Brothers, Indymac, and Wachovia disappearing. With the government bail outs of AIG, Fannie Mae and Freddie Mac. The markets are extremely volatile, and the analysts are finally admitting we are indeed in a recession. The fears of buyers and sellers are warranted. With everything that has happened, is there still money available to buy a home? The answer is absolutely.

With the government takeover of Fannie Mae and Freddie Mac, the federal government made sure that there is liquidity in the mortgage market by providing financial support to allow Fannie and Freddie to continue to buy and sell mortgages. In addition to increasing liquidity, it also caused a drop in interest rates by easing the minds of investors in the mortgage backed security market. With the government guaranteeing mortgage-backed securities through Fannie and Freddie, it also guaranteed the continued availability of funds for mortgages.

In the recent past, almost anyone could get a loan. In the industry, we said if you could fog a mirror, you could buy a home. Now, it takes a little more than that. Stated income and other low documentation loans have virtually vanished. Today, you have to prove your income and that you have some money in the bank to buy a home. Underwriting guidelines have tightened significantly in the past year. Does this mean if you have so-so credit and a limited downpayment that you can’t get a loan? Absolutely not. There are certainly higher standards than before, but there are still plenty of loans available. FHA loans, insured by the government, have become extremely popular. FHA allows borrowers with not so perfect credit to get into a home with just a 3.5% downpayment. The program allows for gifts from family members as well. And, it allows non-occupant co-borrowers to help with qualification. It is actually very flexible - but does require full documentation of employment, income and assets.

So in conclusion, in spite what you are hearing in the news, there is plenty of money available for home financing. Recent actions by the Federal government assured that funding would continue. However, the rules have changed - and probably for the better. With tighter lending guidelines, foreclosure rates should decrease in the future. And look around - there are many great deals for buyers, lots of inventory from which to choose, money is available and interest rates are low. The opportunity has never been better.

Give me a call if you’d like to discuss your home purchase plans. Getting pre-approved from a reputable mortgage professional is the first step!