Observations of the Mortgage Market
Over the past two weeks I’ve had the opportunity to speak with dozens of potential home buyers around the country. Here are some of the key trends/takeaways I’ve noticed.
1. People in formerly bubble markets - California & Florida specifically - are excited at the prospect of more affordable housing. The question of prices dropping further is not a consideration, affordable monthly payments are.
2. Most people are unaware of the changes in the credit markets. Some are still looking for stated income, pick-a-payment and subprime loans.
3. It’s no longer a matter of how much a borrower can qualify for, it’s if they can qualify at all. I’m having to turn down loans that could have been approved as little as three months ago because of low credit scores. As far as minimum thresholds go, 620 is the new minimum for a decent rate and 580 is the new minimum to get any type of loan.
4. In general, borrowers are woefully underfunded for reserves and emergencies.
5. The borrowers I’m seeing are not overwhelmed with debt. At least 50% of my callers can qualify for the VA or FHA loans I’m originating.
6. Some people just have unrealistic expectations like the would be borrowers with unbelievably low scores…sub 500. Some sellers have unrealistic expectations like the seller whose home has been on the market for over a year, but refuses to cut price further.
7. The gloom and doom I read about in the media and blogs is not reflected in the interactions I’m having with potential homeowners across the country. 80% of the people I talk to are first time home buyers and aren’t carrying any baggage.
8. I need Realtors to refer. My company is often the first step for these borrowers and since many of them are first timers they need help with this purchase. If you’re a real estate agent that wants purchase leads with pre-approved buyers, please fill in my contact form.
9. Buyers are well aware of the realities of the marketplace and are searching for foreclosed, bank owned and short sale properties. Most however, don’t know the pitfalls of such properties.
10. In general, it appears government loans - FHA and VA - are going to ease the way for home purchases in the near term. This is probably a good trend in easing the credit crunch for home loans.