The mortgage crisis: What's it all about?
Flip on the TV and as you surf through channels, you will see the news media telling you how awful our economy is and will be in 2008. Granted, we've had some problems in the mortgage industry. Unfortunately, too many people were misled to believe that they could afford to purchase a home when they really were not in a financial position to do so. Everyone wants to own a home so you can't blame anyone for trying. The 'relaxed" underwriting guidelines after 9/11 really backfired in the big picture - yes, for a few years the market was setting records, but now, the market will be setting a very different kind of record, and one that no one wants to see again.
Today, if you have a good work history, consistent income and a good credit score and payment history, you're in the driver's seat! Literally hundreds of homes to choose from and sellers very motivated to work with you. I've had conversations with lenders, attorneys and other agents -- everyone agrees, it's really a great time to be in the real estate market. You will get a good deal - you will have more choices - you may not get a "steal" but, if the mortgage crisis has taught us anything, it's that there is no free lunch.
This is what I think about the mortgage crisis and how it relates to our overall economy. Remember how everyone felt after 9/11? There was a tremendous amount of uncertainty that extended to all aspects of our daily lives, especially financial concerns. And, just like after 9/11, if we close our doors and stop living or change our life plans, the economy will suffer.
Take a look at your own personal finances and if you are comfortable moving forward with your plans, don't let the current "crisis" drama hold you back. The crisis should have little impact on anyone who didn't buy into the subprime lending tactics- 100% financing, piggyback loans, ARMs, balloons and more. There's nothing wrong with all of these strategies, under certain circumstances and for certain borrowers. It's only when your credit score is 550, debt ratio is 80%, you've had 3 late rent payments in the past 12 months, and you've only been in your job six months, that things start stacking up against you. Find an unscrupulous lender and you've just started a life-changing event. It sounds bizarre, but it was happening, and still can if you aren't careful.
The problem with all the foreclosures right now is primarily because so many borrowers who took out 100% loans with adjustable rates, under relaxed underwriting guidelines in the past few years, not only bit off more than they could chew in the first place, but the bite is about to get even larger for them - the "teaser" rates are going to adjust up and many of these folks were unable to improve their financial picture since taking out the original loan so that they can now afford or qualify for a refinance into a fixed 30 year mortgage.
I sat at closing tables where you might hear buyers discussing how they would come up with the cash to turn on utilities - if you don't have utility deposit money, you probably should not be making an investment of this kind.
The bottom line is that you can't save people from themselves. I can't tell you how many times I tried to convince a buyer (my own prospect), or a buyer's agent, to qualify with a reputable lender that we could all trust. Most of the time they will not do it. They would rather work with a complete stranger (lender) that they found on the internet, or someone at work that they barely know mentioned in the break room. People have privacy concerns. People think you have ulterior motives. I suppose people think we (agents) get kickbacks or something from the lenders we work with, even though we explain to them that it is against the law.
My biggest motivation for working with a particular or favored lender is that due to the simple fact that because I send him or her repeat business, they simply don't want to disappoint me. The want that business stream to continue.
A reputable lender won't tell you that a buyer will get a loan if it is not really going to happen. They don't want to waste your time, their time or the buyer's time. Many of the better lenders even offer credit repair assistance so that they can guide you and eventually make you a loan when your financial picture is brighter.
A good lender won't tell you that they can close in 10 days, if it is not really going to happen. They do their job efficiently, provide great customer service to my clients, get the package to the closing attorney in a timely manner (sounds like that should be simple - it is not), and they get the loan funded either before or during the closing, again, in a timely manner.
When you are working with some e-lender, in Nebraska, who's following up on 100 other internet leads, he's probably throwing all of them against the wall and the good ones - the easy ones, a small percentage of those "might" actually get closed. The others, oh well. . . . When you are sitting at a closing table with all your worldly belongings in a Ryder truck in the parking lot of the attorney's office, the last thing you want to hear from the attorney is "we never got the package and the lender is not responding to our attempts to contact them." I've seen it and it is not a pretty picture. The stress it causes can be really dangerous.
Work with professionals. Don't be afraid of getting into the market right now if the time is right for you personally. Find a good agent, ask for a lender recommendation, sit back and enjoy the ride. The experience of buying and/or selling can really be enjoyable and rewarding if you allow others to do their jobs for you. After all, they are getting paid so you might as well get your money's worth, right?
Get in the market now, you are probably saying to yourself? I know you think I am only saying this because I am a real estate agent. Yes, it is true, agents make money with buyers and sellers staying in the market. However, the bigger picture is this - we all need our economy to continue growing and to stay strong.
The fact of the matter is that the more financially sound buyers and sellers that enter the market, the better off we will all be.
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