May 10
10
What Are The Current Developments In Home Loans Today?
If you don’t know that things are different in the home loan market today, you must have been living on another planet for the last few years.
A number of important factors have occurred in recent years that have dramatically changed how this market operates: reduced credit availability, lower home prices and increasing home loan rates.
It should have been foreseeable that any market that had the run up that the real estate market had was destined for a sharp drop. But many homeowners who used these soaring values to borrow on easy credit terms, even with poor credit ratings, were bound to be caught in a trap as the prices fell.
These so-called “sub-prime” home loans could not withstand tumbling prices and rising interest rates. Many borrowers with bad credit ratings could hardly afford their mortgages to begin with, and then when the values of their property started to fall as the rate on their mortgages adjusted upwards, the only option open would be to try to refinance. The option to refinance at a more favorable rate became less available since more and more mortgages like this were coming due. A real domino effect took over.
As more foreclosures happened, the increasing inventory of homes for sale further pushed down home values. Lenders seem to have ignored the fact that only a handful (20%) of borrowers were responsible for most (60%) of the foreclosures, and clamped down on all loans. States such as Florida and California, which led the country in escalating real estate values, make up a full 36% of foreclosures.
Still, lenders cut back on loans throughout the country, so that new borrowers had to face stricter conditions for a mortgage.
What does this portend? It is a return to old fashioned lending. Of course, there are those who regret not getting the same opportunity to borrow with low down payments and a poor credit rating.
Banks are only interested in lending to borrowers with top credit ratings and large deposits to put down.
However, borrowers who can meet these strict conditions have a great advantage, since there is a large inventory of properties at greatly reduced prices to choose from, if you can get a mortgage.
Find out what is the lowest rate for you with edmonton mortgages and experienced alberta mortgage brokers
