Mortgage Loans in 2009
Posted by admin on Jul 27, 2009
2008 was not a good one for most homeowners in this country. Many who work in the real estate market are hopeful that 2009 will bring an upswing in their battered sector of the economy. They believe prices and interest rates are currently at about the low point and consumers will take the opportunity to purchase new homes and mortgage loans in the first quarter of 2009. Most financial analysts see it differently, however. They believe the recession is only beginning and that home prices will continue to decline in the coming year. Consumers in some markets might take the opportunity to grab the current low rates offered on mortgage loans. But the inventory surplus from foreclosed properties may continue to hold back the real estate market. In addition, there are a slew of adjustable rate mortgage loans that are set to readjust in the coming year. That will likely increase the foreclosure rate and add to the inventory of unsold homes. Although there may be buyers ready to deal in light of the current low interest rates, many of them may not qualify for mortgage loans. Banks now have much more restrictive lending practices, resulting in less mortgage loans being awarded to applicants than there were prior to the credit crisis.
Many people who currently own properties would like to lock in the low rates and refinance their mortgage loans. The past week had the most applicants for mortgage loans in half a decade. Over 75 percent of those were to refinance current mortgages. Unfortunately, a fair number of those who applied were denied. According to a lender in Florida, a very small percentage of those who contacted him in the last couple weeks to refinance have actually been approved. Some homeowners that purchased in areas like South Florida that have experienced a decline in values are finding that they owe more on their mortgage loans than their homes are worth now. The more restrictive lending practices are leaving these mortgage loan holders out in the cold. Lenders are requiring a higher percentage of equity in the home, a high credit score and a low debt to income ratio. This is in stark contrast to the lending standards for mortgage loans of just a few years ago.
A lot of financial analysts warned years ago that lax lending practices would lead to trouble. Those standards often required little or no down payments for mortgage loans and appeared to disregard the credit worthiness of many applicants. The new lending practices may seem harsh, yet they are essential to repairing the credit industry. We will have to wait and see if the new year will offer a renewed confidence in the credit market, and ample encouragement for consumers to take on new mortgage loans to get the ailing real estate market going again.