Easy Money Mortgages Disappear
The sub-prime mortgage market has crashed. Major sub-prime lenders have gone bankrupt and some are under criminal investigation.
Sales of new homes are well under estimates and in most parts of the country it is a buyer's market. The inventory of homes for sale is growing daily.
Unfortunately for those with lower incomes or less than perfect credit, mortgages may no longer be available. Mortgage lenders are reverting to the old fashion practice of thoroughly checking the credit of potential borrowers, requiring they have sufficient income to afford the mortgage (including taxes and insurance) - and subsequent rate hikes if it is an ARM - and are requiring downpayments. Believe or not, this was not the practice as late as the beginning of this year.
If you have an ARM, I still think you should refinance to a fixed rate mortgage before rates start to rise. If you want to buy a home, this is a excellent time to do so.
However it is going to be tough for those who are already underwater or who will not be able to afford the next adjustment of their ARM interest rate. If you are in that situation, contact your lender now and start to work things out. There will be such a glut of houses on the market that lenders will be very willing to work with you to try to keep you from defaulting.
Tags: mortgages sub-prime mortgages