The public at large knows about some of the sub prime mess from the talking heads on the major network news programs. In general though, I am not sure how many realize what kind of tightening is going on at lenders.
I have heard from many people who want 100% financing with subprime type credit scores and don’t realize those days are gone for the most part. Some are even still asking about 100% investor loans with less than stellar credit.
Both prime and subprime lenders are eliminating entire programs and products that just 3-6 months ago were readily available. Should this be called ‘The Casey Effect’?
Many conforming lenders are talking about requiring 6 months liquid reserves. Back in the day when I got my first mortgage, the absolute limit on percentage of gross pay going towards your mortgage was 28% and overall debt to income ratio was 36%. You were allowed EIGHT PERCENT of your gross for car or credit card debt if you used your entire 28% for your home purchase. We may be going back there soon.
1 Comment
August 14, 2007 at 8:11 am
It seems to me that lenders’ credit tightening (which has been quite dramatic, across the board) will exacerbate downward pressure on real estate prices and, unless things loosen up, slow a recovery.
Regarding your post, many borrowers fail to perceive what’s going on in the credit markets currently, and why.
In today’s Wall Street Journal there’s a story about a woman in GA who is upset about not being able to refinance out of an ARM: she owes $1 Million and two appraisals value the house at $900,000.
“Good credit counts for nothing,” she says. Ha! How about LTV?
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