If you’ve been reading this for a while, you’d know that it’s been getting harder to get a mortgage. Well, today we have proof of it for all to see. This chart is courtesy of the Federal Reserve (by way of the Big Picture). Some commentary after the chart:
Now for some thoughts:
1. See the line that represents prime mortgages? Yep, it’s gone continuously up since this started a year ago.
2. See the line for “non traditional?” Remember back late winter where things sort of “eased off” in terms of credit? Yep, that’s when those loosened up again. Well, that’s changed again.
3. Subprime – well, let’s just say that subprime is going the way it should – up so that only those with large downpayments can get them and they end up paying more for them.
So what should you take away from a chart like this? A couple of suggestions:
1. If you are planning on buying a house or building a house, you better plan on being able to document your income and your assets completely.
2. If you have something “marginal” about your financial profile (income isn’t quite enough, documentation is challenging, credit is spotty) you can expect to have to come up with more of a downpayment and work through more details. You also might want to consider moving your timeline up and trying to do it now rather than next spring – it’s looking like it’s going to be harder then…..
3. If you are looking to buy a house for the first time, you might have to rent a little longer and save up a little more of a downpayment than you would have.
All is not lost, the mortgage world is not dead, just a bit harder than it used to be. Call me if you’d like to chat about it.
Bill Rice says:
Looks like a return to old fashioned bank lending.
What will Wall Street investors do without the attractive mortgage returns? Will investor demand swing the cycle back–if so when?
Wonder what Lew Raineri thinks?
August 11, 2008 — 6:28 pm
Dan Green says:
Good info, Tom. The “well-heeled” borrower should read, and then re-read what you’ve written.
One of the hardest parts about the contraction here is that the average homeowner doesn’t believe it, or doesn’t believe it impacts them personally. The media did such a good job of branding “sub-prime” as a problem of the poor that the wealthy think they’re immune.
The Fed’s survey shows otherwise.
August 11, 2008 — 6:34 pm
Gary Smith says:
After a recent conversation with a client (I’m a home inspector) just after his finale decision to proceed with the purchase he says, “yep, I’ll sink about 30 or 40 in this baby and flip it in about 2 or 3 years”. I’m thinking…”ya just haven’t learned have you”!
One of the compounding reasons we’re in this “mess” is the mistaken ideals of home ownership. What happened to buying a home cause you like where it is and the floor plan makes sense. Owning a home is now a business decision…not a place to raise your family and live comfortably as you share the community atmosphere.
Folks are almost insulted now to even think that the “profit” from this business venture is no longer a reasonable, predictable byproduct of the investment. Hell, sometimes business deals go south! We’re spoiled (I’m thinking misguided) now after about 5 or 6 years of “buy it and flip it”.
The quicker we return to borrowing money so that we have a place to live and the faster we return to being honest with ourselves about personal debt the sooner we stabilize the market.
I don’t think we’re anywhere near the bottom…I believe we’ll need to flush many more of the “flip its” out of this system. Then those numbers in the chart will begin to look normal again.
August 11, 2008 — 8:16 pm
Nigel Swaby says:
The bad news is it’s getting harder to get a mortgage. The good new is eventually it will get easier again once lenders stop writing off billions of dollars in losses.
For those who can’t buy now, maybe this episode will be a worthwhile lesson in saving money and paying bills on time.
We’ll see.
August 11, 2008 — 11:20 pm
Jonathan Blackwell says:
I don’t have a problem with that trend at all. Earn your loan and earn your house. It is certainly more work for me to deal with the over the top documentation needed, but we need to protect this industry right now so in the long run it is worth it.
Good read.
Jonathan Blackwell
http://www.GoGreenWithFHA.com
August 12, 2008 — 6:28 pm
Mortgage Samson says:
I’m still trying to place a Jumbo SISA 90% LTV. The chart is not encouraging. Perhaps an appropriate place is the circular file.
August 12, 2008 — 7:02 pm
Tom Vanderwell says:
Bill,
What will Wall Street investors do without the attractive mortgage returns….
Uh, what attractive mortgage returns? Ask the people who paid $123 a share for Bear Stearns about the attractive returns…..
Dan – excellent insight into the average homeowner – I think you’ve got it nailed…..
Nigel – maybe this episode will be a worthwhile lesson in saving money and paying bills on time.
I think you’ve got an excellent point. Many people are going to realize they need to plan a bit more, not necessarily a bad thing at all.
Jonathan – I agree – what we need for now is a return to common sense lending where you need to “earn it.”
Tom
August 12, 2008 — 7:25 pm
Highgate Estate Agents says:
In the UK things are tightening up.
Data compiled by Credit Suisse shows that there were 17,300 mortgage products on the market in June 2007. Today there are just 4,000.
Last year, 100 financial institutions were vying for mortgage business. Now, almost all net new lending is provided by just five banks – Lloyds TSB, Abbey, HBOS, HSBC, Barclays and Royal Bank of Scotland.
August 13, 2008 — 8:08 am