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Credit Crunch Affecting Mortgages? Main Boise Home Loans
So, you mean it is harder to get a mortgage now than two years ago? ;-)

A recent survey conducted by the Fed has found that the credit crunch our economy is experiencing has spread to mortgages. Seriously? As a mortgage loan originator, I hadn't noticed that yet...YEAH RIGHT!

OK...enough with the sarcasm. Truthfully, what I find interesting about this survey is the number of lending executives that have reported a "tightening" of their guidelines for lending mortgage dollars.  Since November:

55 percent of surveyed domestic bank executives (up from 40 percent in November) have tightened their guidelines for prime mortgage products.

60 percent of domestic executives have tightened their guidelines for approving applications for revolving home equity lines of credit (HELOC's).

At face value, this survey indicates that roughly half or more banks surveyed are tightening guidelines on mortgage product applications for prime borrowers.

So...exactly how does this affect you if you are a prime borrower? The answer comes mostly back to your credit score. If you are a homeowner with a credit score in the 700-720 range or higher, you should not have much problem in obtaining a mortgage loan.  However, if you are a homeowner with a credit score in the 650-680 range, you may experience much more difficulty than you would have 3 months ago. There is more to it than just that; employment history is another big factor in determining whether or not your mortgage application is approved.

In the last three weeks, the Fed has cut their key interest rate by a bold 1.25%. When combined, those two rate cuts represent the Fed's most intensive rate reduction in two decades.

In summary, interest rates on certain mortgages are moving lower at a rapid rate. But at the same time, it is getting harder and harder to qualify for new mortgages. The lesson here is simple...take care of your credit score, and you typically won't have problems. Pay your bills on time and keep revolving balances on credit accounts low (less than 30% of credit limit). These two factors represent 65% of your credit score.

 If you have any questions regarding a mortgage you might be considering, or if you want more information on credit scoring and how to improve your credit scores, please contact me at (208) 880-0316. You can also find me on the web at http://www.ericsloans.com.

Regards,
 
 
 
Eric Leigh
1419 N. Midland Boulevard
Nampa, ID 83651
(208) 880-0316
eric@ericsloans.com
 
Posted by Eric Leigh at 2/5/2008 12:10:00 PM
Comments (4)
Re:Credit Crunch Affecting Mortgages?
Eric, any comments on Countrywides rating of Boise as a Cat 3 troubled market for loan origination. What does this mean?
http://blownmortgage.com/wp-content/uploads/2008/02/softmarkets.pdf

Also, Do you see the 30 year start to creap back up. The bond market no-likey what Ben is doing now. The gov is starting to take on too much risk from the TAF and possible mono-line bailouts so I think we may have hit a wall in terms of the FEDs ability to drop rates.
Posted by on 2/5/2008 6:06 AM
Re:Credit Crunch Affecting Mortgages?
drop longterm rates that is...Libor getting difficult in London again as well. I smell a major bank blowing up somewhere in Euro land :-)
Posted by on 2/5/2008 6:08 AM
Re:Credit Crunch Affecting Mortgages?
"If you have any questions regarding a mortgage"---

1. Is Idaho a recourse State? Does a refi or 2nd change that status?
2. Whats the maximum LTV you can do for credit >750, owner occupied / investment?
3. Which major lenders pay brokers the most to originate loans?
4. How do brokers make money? I read some conflicting stuff on brokers Outpost (hillarious site) ...can you share a typical payout sheet (or whatever its called)

Thanks
Posted by on 2/5/2008 6:21 AM
Re:Credit Crunch Affecting Mortgages?
Emdeplam,

Lots of questions...I'll do my best from my perspective:

1) Countrywide's risk assessment of the Treasure Valley as moderate: Not sure if what Countrywide says matters; it more comes down to what Fannie and Freddie say. If they come out and tag the Treasure Valley as a declining market, then we essentially lose 5% LTV on loans that we can originate...Bye Bye 100% purchase mortgages, and I don't care if your credit score is 800. You need 5% down in that scenario.

As far as 30 year rates creeping up...I think that they will, but I locked someone on a cash out refi less than 80% LTV today at 5.5%...and that was down slightly from this morning's open. Bonds are typically the safe haven when stocks don't taste good anymore, but with this much volatility, it is hard to say!

2) Idaho is a recourse state, but whether a lender decides to pursue depends on the terms of the short sale or foreclosure. For instance, on a Deed in Lieu of foreclosure, upon accepting the deed, the lien holder gives up all recourse they had. There is no easy answer, and you would need to consult an attorney for the specifics...but generally, yes, Idaho is a recourse state, and a lender CAN come back at a homeowner for what is owed.

3) Max LTV for Credit > 750, and I assume you mean on a refi?
Primary Residence -- around 90%-95%
Investment 1-2 Unit -- 85%-90%
Investment 3-4 Unit -- 70%-75%
Those assume rate/term refinances and not cash out. Those are only with one lender, and there may be another lender with a niche product that I don't know about.

4) Most all lenders pay mortgage brokers in the same way...premium spread based on the mortgage rate the borrower is locked in at. For instance, a mortgage broker may have a rate of 6% that they can offer a client on a 30 year fixed refinance. However, if the broker locks the client at 6.25%, the lender will pay the broker a spread premium based on the higher rate that the client will pay over the life of the loan. The amount of the spread varies greatly and depends on the current market pricing the day of the lock.

5) How do brokers make money? See above. Obviously, as a broker, it also helps to have several loan originators under your broker umbrella that you get cuts on (duh!) :-)

I hope that helps! You are a great blogger and I love reading your posts. When are you going to become a blogger for Building Credibility?!?!

Regards,

Eric
Posted by Eric Leigh on 2/5/2008 4:53 PM
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