So- you want to buy a house? These days, more than ever- if you are looking to purchase a home, please get the financing part in order first. There's more reasons for taking the financing route first, even before you start looking for houses. Between lenders tightening their standards, lenders go belly up, lenders stop lending, and liquidity of the market. No money, no home purchase. That's it.
What I have been hearing from the lending professionals, lenders' rules changes by the day. One Realtor told me, that when one of her colleagues (she represents the buyers) and her clients was sitting at settlement table - they were told that their lender, could not financed their purchase. That is awful situation to be in! And the lender, happens to be American Home Mortgage. They were told at about the same time AHM folds.
I am amazed to learn that a number of my colleagues, don't see the seriousness of the liquidity problem! Hello... no money, no sale. Period. We, the professionals "owe" it to our clients -- buyers or sellers -- to be on top of what's going on in the market these days... and how's going to affect them.
The conforming loan market, that is capped for $417,900 is still fine. However, secondary market interest rates for loans over this amount, have gone up the roof!
Mortgage rates, especially for jumbo mortgages of more than $417,000, have soared within the past month as credit fears, stemming from a collapse in the subprime market -- those given to borrowers with checkered credit histories -- have spread to loans to higher credited borrowers. The average Toll home sells for more than $620,000.
via Reuters
If you are on the market over and above this amount, what do you do? Plain and simple - you need to come up with more money to the table. That is higher down payment. To get rid of the second trust higher interest rates, you want to have a 20% down payment.
And, make sure you know the lender (read: financial health) you're dealing with. Those fly-by-night (internet) lenders, can take you up for a ride. Be careful, it's a rough road out there. The back to basic approach would be: Deal ONLY with 'reputable' lending institutions.
You want to know how bad the crisis is and how is it going to affect your home purchase? Read more, here:
* FDIC Eyeing Big Banks as Troubled Home Loans Rise [Reuters]
* Investors Gauge Fed's Plans as ECB Acts Again [Reuters]
* Accredited Home, HSBC Close Offices as Subprime Crisis Spreads [Bloomberg]
* Overdue Real-Estate Loans Jump at U.S. Banks [CNN/Money]
* Housing Woes Hit High End [Money]
Image: CNN/Money
