Market Update From San Diego Mortgage Expert Matt Young
MySanDiegoMortgage.com welcomes Matt Young from MDC Financial Service Group for our latest market update. Read on for his story and advice, and scroll down for his direct contact information!
MORTGAGE LENDING 2011: WHERE WE WERE, ARE, AND ARE HEADED
THE BUYING FRENZY
I left the practice of law in 2002 to enter the real estate mortgage-lending world. Learning a whole new vocabulary and implementing that into the real-life workings of a mortgage broker, was tough at first, but the knowledge came pretty quickly and within about six months or so, I was pretty self-sufficient. Loan programs were well defined. Demand was brisk. People bought homes as quickly as they could in order to secure a price now ahead of what would sure to be a never-ending trend of upwardly moving values. As the buying frenzy increased, so did home values. They increased so much that buyers could no longer afford the 10% or 20% down payment, to say nothing of those hefty 30 year fixed payments on the ever-increasing loan amounts.
Rather than be OK with having people wait until they could afford to buy a home, banks and investor groups created loan programs that allowed for smaller down payments ($0 down and in some cases financing closing costs on top of the 100% loan amount), smaller monthly payments (interest only payment and in too many cases, payments that weren’t even covering the interest accruing on the loan each month), and smaller piles of documentation necessary to prove the borrower’s income (in many cases no documentation at all was required). The borrowers, having these new options available to them, snapped them up with all the self-control of a piranha in an Amazonian feeding frenzy.
We all, of course, know the end of that story. Since the start of the housing crash in 2006, banks that based their whole business platforms on these “creative” loans have vanished while others quickly eliminated these risky loans from their lineup.
By 2008, the risky type of loans were gone and the industry seemed to be making loans that were really clean: down payments were being made of at least 10%, borrowers income was required and provided, and appraisals were being scrutinized closely. The industry seemed to have corrected the problem.
Unfortunately, as most people now know, the finance world since has undergone several rounds of legislation that has made getting a loan one of the most exhausting and frustrating processes one can endure.
However, remembering a few things will help get you through escrow. Continue reading