Post Mortgage Meltdown - Can I get Financing?
The subprime meltdown and the subsequent credit crunch have completely transformed the US mortgage industry.
The past ten years have become a memory, with virtually every aggressive financing option no longer available. The only viable mortgage products remaining require full documentation of income, good credit, and stable employment. Wow....finally some common-sense in a mortgage world gone mad.
Pre-Subprime Meltdown:
Before the financial crisis that destroyed the mortgage market, 100% financing loan programs were availalable to all. The only real requirement that existing in those days, were that you prove you were a US citizen. (non-citizens could only get 90% financing!). With credit scores in the high 500's, you could still obtain 100% loan financing. In November 2008, only USDA and VA loans offer 100% financing. FHA loans have removed their option to allow the seller to gift 3% to the buyer, so they are now capped at 97%. Fannie Mae and Freddie Mac offer 97% options, but no 100% programs at all. If anyone tells you differently, they are giving you bad information.
The Alternative A credit market, also known as Alt-A loans, which used to offer very appealing niche loan financing products catering to borrowers with credit scores from 660 and up are also gone. These lenders offered loan programs to borrowers with scores down to 620. Aggressive programs, such as 100% no doc financing, were typically not available to borrowers below a 660 middle score. Today, even these seemingly viable products made to very strong borrowers have dried up. They were a victim of the global mortgage chaos that devoured the sub-prime banks and saw even the big 3 Automobile companies suffering and on the verge of collapse. Alt-A lenders had very liberal DTI ratios, reduced and even no income documentations, and the ability to turn any loan into an interest-only mortgage!
Leading Alt-A lenders included GreenPoint, SunTrust, Lehman/Aurora, and First Horizon. Beyond these market leaders, there were hundreds and hundreds of small niche banks and mortgage companies that arose to fulfill the demand for certain niches. Almost all of these lenders are now out of business, and the ones remaining have removed all Alt-A products from their product line. The big loser with these products drying up are the small business owner with great assets and credit, but income "reduced" through their desire to reduce taxes.
Post Subprime Meltdown:
As 2008 ends, hundred and hundreds of banks are closed operations. The aggressive loan options that arose over the past decade are now gone, and more than likely will never return. The credit crunch is making it even tougher for average customers seeking home loans to get a loan. FHA is king again, as the only program that lenders are comfortably loaning money towards is the hallmark of the mortgage business -- the FHA loan from the Department of Housing and Urban Development. Credit score requirements are now in the low 700's, where before a 680 was sufficient. Cash-out refinance mortgages on single family homes are very hard to get, and for many people, impossible. HELOC's are being reduced for millions of customers. Additionally, investor loan financing is extremely hard to obtain, no matter how strong the client.
As 2008 comes to an end, home loans are still very hard to obtain. Fannie Mae and Freddie Mac have imposed stricter guidelines effective December 1st, 2008. These guidelines will further restrict the ability to obtain mortgages for many poeple. There are extremely tight restrictions now placed on home loan customers --- such as limiting the number of properties financed, the addition of new, more stringent credit requirements, and much to the detriment of borrowers with past credit blemishes, there are new rules and restrictions for borrowers who have had a past bankruptcy and/or foreclosure.
The past ten years have become a memory, with virtually every aggressive financing option no longer available. The only viable mortgage products remaining require full documentation of income, good credit, and stable employment. Wow....finally some common-sense in a mortgage world gone mad.
Pre-Subprime Meltdown:
Before the financial crisis that destroyed the mortgage market, 100% financing loan programs were availalable to all. The only real requirement that existing in those days, were that you prove you were a US citizen. (non-citizens could only get 90% financing!). With credit scores in the high 500's, you could still obtain 100% loan financing. In November 2008, only USDA and VA loans offer 100% financing. FHA loans have removed their option to allow the seller to gift 3% to the buyer, so they are now capped at 97%. Fannie Mae and Freddie Mac offer 97% options, but no 100% programs at all. If anyone tells you differently, they are giving you bad information.
The Alternative A credit market, also known as Alt-A loans, which used to offer very appealing niche loan financing products catering to borrowers with credit scores from 660 and up are also gone. These lenders offered loan programs to borrowers with scores down to 620. Aggressive programs, such as 100% no doc financing, were typically not available to borrowers below a 660 middle score. Today, even these seemingly viable products made to very strong borrowers have dried up. They were a victim of the global mortgage chaos that devoured the sub-prime banks and saw even the big 3 Automobile companies suffering and on the verge of collapse. Alt-A lenders had very liberal DTI ratios, reduced and even no income documentations, and the ability to turn any loan into an interest-only mortgage!
Leading Alt-A lenders included GreenPoint, SunTrust, Lehman/Aurora, and First Horizon. Beyond these market leaders, there were hundreds and hundreds of small niche banks and mortgage companies that arose to fulfill the demand for certain niches. Almost all of these lenders are now out of business, and the ones remaining have removed all Alt-A products from their product line. The big loser with these products drying up are the small business owner with great assets and credit, but income "reduced" through their desire to reduce taxes.
Post Subprime Meltdown:
As 2008 ends, hundred and hundreds of banks are closed operations. The aggressive loan options that arose over the past decade are now gone, and more than likely will never return. The credit crunch is making it even tougher for average customers seeking home loans to get a loan. FHA is king again, as the only program that lenders are comfortably loaning money towards is the hallmark of the mortgage business -- the FHA loan from the Department of Housing and Urban Development. Credit score requirements are now in the low 700's, where before a 680 was sufficient. Cash-out refinance mortgages on single family homes are very hard to get, and for many people, impossible. HELOC's are being reduced for millions of customers. Additionally, investor loan financing is extremely hard to obtain, no matter how strong the client.
As 2008 comes to an end, home loans are still very hard to obtain. Fannie Mae and Freddie Mac have imposed stricter guidelines effective December 1st, 2008. These guidelines will further restrict the ability to obtain mortgages for many poeple. There are extremely tight restrictions now placed on home loan customers --- such as limiting the number of properties financed, the addition of new, more stringent credit requirements, and much to the detriment of borrowers with past credit blemishes, there are new rules and restrictions for borrowers who have had a past bankruptcy and/or foreclosure.
About the Author:
You can contact Brian and his team directly at Georgia Mortgage Company . Learn more about Anderson Lending Group and the wide variety of investor loans available by visiting: http://www.andersonlendinggroup.com. You can apply online and receive a pre-approval within hours.
posted by Credit Counseling at
2:45 AM
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