Mortgage Updates

I'm not an industry "insider" I am someone who has worked within the Real Estate and Mortgage industry for over 30 years. (Yes I started at a tender age!)The events that have unfolded over the last year have been shocking. Certainly, I believed that a correction in the market was necessary and that prices could not continue to escalate. I expected to see a moderate decline. I did not expect for the whole market to melt down. But then I was naive... not knowing about CDO's or how far the sub prime, negatively amortizing option ARMs and stated (liar) loans corrupted the world banks in the less than truthful purchase of these opaque and rickety securities.

What I "see" in the ever tightening of the lending environment is the fall back to the "class system". The homeowners and the renters. Property ownership will revert to the privileged few: Those with money for down payments, and rightfully, those with good credit, solid jobs and a savings history.

So, why would I still buy a house? For that matter, why would anyone want to buy a house? First and foremost - choose a house you can be happy in for at least 5 - 10 years. Perhaps, even one that you can live in for the rest of your years. A house will be a home, a home, a home. It will again be the place where your roots are.

A house will not be an investment to be traded up every year (or even every 2 -5 years). A house will be your hedge against future rising rental rates. A house will be your tax write off, putting an estimated $2,000 to $5,500 back into your pocket. (Depending on income and amount of interest deductions.)

Since last July, every week there have been changes in the financing options for home buyers. Loan products keep diminishing. Documentation requirements keep increasing with a tightening of underwriting. What works today, may not be available tomorrow. The liquidity crisis and the failing of loans have already decreased the Loan to Value for buyers financing by 5%. -This was where 100% financing was available. This is due in large part to new restrictions by hemorrhaging mortgage insurance companies. In declining market areas, such as most California Counties, the down payment requirements are increased by another 5%. Thus a 10% minimum down payment is required on most conventional loan programs. There are still a few exceptions - California bond programs*, FHA and VA.

I would like to ring a bell. Have a loud proclamation go out... "Hear ye hear ye... Buy your house now... while you can." It is only a matter of time before home ownership will no longer be seen as a "right" of the American Dream, but a "privilege".

* CA bond loans are only for 1st Time Home Buyers.

If you would like a list of declining markets in California sent to you, email me: Ingrid Pierson at ipierson@americaschoicemtg.com.