- Contact Info
Realtor/Broker NC/SC
704.651.3888
- Categories
- Real Estate News
- Buyer Info
- Seller Info
- Real Estate Investing
- Charlotte Area News
- Off-the-Wall
- NC Mortgage News
- Home Inspections
- Monday Mattoid Musings
- Archives
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
Is The Sky Falling - Home Buying Made Too Easy
April 25th, 2007 categories: Real Estate News
Like a lot of predictions - it depends on who you ask. Right now there is shaping up to be a major shake-out of the so-called sub prime mortgage providers. You don’t hear much about it on the local news, but read or listen to any financial news and there are a lot of doom and gloom comments. Of course all this is just prediction, and if anyone actually knew what would happen they’d be a zillionaire. In case you are wondering, the sub prime mortgage market is best defined as mortgage that are provided to those who have low credit scores. If you get a sub prime mortgage, the provider is not going to have “welcome to your sub prime mortgage” service typed across the paperwork. It becomes obvious when you compare the interest rates, fees, etc. to other more “standard” mortgages. Now, there is nothing necessarily wrong with a lender for charging higher fees to cover higher risk clients. The problems arise when these lenders make it so tempting and so easy to get a mortgage even if you have no money to put down, little to no savings, and a credit score that hardly has a pulse. I don’t know the percentages, but it looks like a lot of the companies that specialize in these types of loans are teamed up with builders who are building homes targeted for the first-time buyer. You can see how easy it is for a young couple dreaming of that first home, walks into the brand new subdivision. They see the beautifully decorated models, the sales person shows them how low the payments will be, and before they know it, they have signed on the bottom line. What the naive buyers don’t realize, don’t ask, or don’t read is that the low payments are very temporary. Soon the payments are rising faster than they can keep up with. Next thing they know, the foreclosure process is underway and they are out of their home. There have always been foreclosures and probably always will be. The issue at hand now that is causing so much concern is that the above scenario apparently has been escalating at a scary pace. So much so, that some of the largest companies specializing in this area have announced bankruptcy or serious worries about staying in business. Now you might say “…so what?, my credit is okay, I’ve got a good interest rate..life is good for me..” Well yes and no. Will you be affected directly? probably not… indirectly? probably so, and that is what worries the financial gurus of the world. When any large financial institutions start failing, it has a ripple effect. Investors invest money in banks and lending institutions. When these fail or become unstable, they pull their money out. This further causes the lenders problems. Then other investment sectors see large failures and they get nervous and pull their money out…and so on. In theory it could have enormous impact…in reality it will hopefully be fairly limited. From my fairly limited view, I think it will at least cause a shake-out of this sub prime lending practice. It is a difficult message to deliver, but there are people who are better off not being able to purchase a home until their financial position improves. I’m not a proponent of the government helping people budget, but I suspect new legislation will be enacted soon that limits the freedom the sub prime lenders have enjoyed recently. The result will be a pullback to more traditional banking practices. Maybe correction we need…