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What does Wall Street mean to Housing? - 09/20/08
This week we saw an enormous change on Wall Street that may or may not loosen lending for home buyers. Right now, even with good credit and let's say a decent down payment (10% for example), it's very hard to get a home loan. Lenders are generally slowing down the approval process, scrutinizing the home and appraisal extra carefully and in many cases just unwilling or unable to make the loan.
But right or wrong depending on your point of view, if a new version of the 1980s Resolution Trust Corporation comes down the pike, the federal government with our tax dollars will buy mortgage-back securities and then turn about reselling them. By providing the cash flow and liquidity by "taking off their hands" these numbing securities, banks and mortgage companies will have more freedom and opportunity to make home loans.
Right now, the best loan deal is the 3% down FHA loan, but it comes with mortgage insurance and a tough appraisal process. Sellers can't get away with not doing repairs. The loan is guaranteed by the government and restrictions on the property (and seller) become tougher. But they're good if not excellent loans for most borrowers with credit scores in the high 600s as a minimum.
The fallout of the Wall Street wild ride that was experienced the week of September 19, 2008, will long be remembered. It's not for this website, but the restriction of naked short sales has a lot of hedge fund managers in an uproar but a lot of CEOs of shorted stock very happy. There will be rocky turmoil as the government buys and sells mortgage backed securities. It won't be pretty.
It could take months to sort all this out for the home buyer. As we see it, the new Resolution Trust Corporation isn't buying anything but the securities or notes - they are not buying the foreclosed homes themselves that sit on the books of many banks too. Those will continue being disposed of in the current, herky-jerky way.
Ways to get a home....in short, stop spending frivolously on credit cards. Boost your credit. Work on a down payment of at minimum 3% and by all means, plan to have double that 3% in the bank so you have reserves. So save 6% of your projected home cost budget.
What we love at Open House Genie is that visiting open houses in a painless way to see first hand what's for sale, what your money buys and judge the mood of the seller from the agent.
Overall, we at Open House Genie believe San Diego real estate will boost out of this painful time sooner rather than later. Lower priced homes are getting up to eight bids each. Don't fall for under priced listings! Bid carefully, be willing to walk away.
Write or call us for more help or advice.
Article by Open House Genie
Copyright 2008/2009
Used, copied or quoted with permission only.