LOAN UNDERWRITERS DEMAND HIGHER DOWN-PAYMENTS
HOME LOANS, SHASTA COUNTY, TIPS FOR BUYERS
September 5th, 2008
A writer for Inman News reported today that underwriting guidelines have undergone significant changes in the past 18 months which future buyers should be aware of. Underwriting requirements are developed to assure loans will be paid off with a high degree of certainty. A small percentage of loans, usually a fraction of 1% end up in default. Even with the downturn in the market, the prime loans that are on time and being paid as agreed represent about 99% of all outstanding loans.
The down-payment is the center of focus after the era of easy 100% loans led to the current housing crisis. Other factors contributed to the mortgage melt down but the primary culprit was approving buyers with little or nothing in the way of a down-payment. Down-payments are important for a number of reasons:
- The lender is likely to lose money when a buyer defaults on a loan where no down-payment was made. The down-payment acts as a buffer against money loss for the lender in the event of foreclosure.
- A buyer who gets into trouble can sell more easily if they have equity from a down-payment. By selling, the borrower recoups any equity instead of it being gobbled up by foreclosure costs, back interest and penalties.
- A buyer that has saved for a down-payment is less likely to encounter payment troubles later. They have proved their ability to budget and save.
- A buyer is less likely to hand the keys over to the bank if they have their hard earned money at stake. The buyer has a vested interest in the property compared to the buyer who puts little or nothing down.
Rising prices can create equity and falling prices destroy it. Building equity by paying just your required monthly mortgage payments will require time and patience. Buyers that are planning to buy in the future need to learn how to save today. Make saving for a house a high budget priority. Renters will forever pay rent, homeowners can look forward to a mortgage burning party. Control your destiny. Become a homeowner tomorrow by developing a saving strategy today. Contact me if I can be of help:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
http://fishonforum.com
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