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Generation Next won't be spoiled like Generation Now

Back when times were normal

Rewind about two decades ago and we were accustomed to double digit interest rates on mortgages. Now a days people will cry FOUL if they were ever quoted a double digit rate on a mortgage. Back then though it was completely normal.

There was no such thing for 100% financing (For the average home buyer) People were accustomed to SAVING up 20% to put down on the house.

Again, now a days you tell a future home buyer you ask the home buyer to put 20% down, they will laugh and will find another lender.

It was the NORMAL back then for that frame of mind. It was an actual good frame of mind, to have 20% invested into your house, maybe not the double digit rate but if you had 20% invested in your home, you will be trying your hardest to keep your payments on time.

We became spoiled

So lets fast forward to the NOTORIOUS housing boom...

Let's see what consumers became comfortable with...

No down payment ?

That's Fine we have 106% 1st lien financing all you need is 580 credit score.
We have 100% 1st lien financing all you need is a 560 credit credit score.
We also don't require RESERVES!!

2. Don't want to show Uncle Sam your income?

Great news we have a NO DOCUMENT and NO ASSET program for you!!! All you need is 600 scores!!!

3. Appraisal issues?

That's ok!! We have our own appraisers we can use and if they don't get the value we need we will FIRE them!

4. I can't afford a Fixed rate now got any other options?

You came to the right place!! We have Interest Only Arms that are 2% lower than fixed rate and way cheaper than Fix loans. Go qualify for that house you can't afford and just refinance 2 years later when your house value increases by 50%

5. My Debt to Income ratio is too high

Are you nuts?? GO SEE NUMBER 2 !!!

Generation Next won't be spoiled

Crazy when you stop and think about what people were qualifying for back in the days huh? Again it was the NORMAL, that was the mind frame.

So the old saying goes, the market always seems to correct itself...

Very true indeed, heres a list of what Generation Next will have to be accustomed to.

Very few 100% financing options. Lender's are requiring more investments into the house from buyers even with FHA wanting a 3% min. invested initially. We still want you to get a home but show some accountability, its like when you borrowed your dad's car you didn't treat it like gold until you got your very own car you paid for!! Think about :)

2. No Doc loans are a thing of the past, Lenders are promoting awareness for self-employed borrowers to be careful what they are writing off next year because that will be your income to be used for your application. Ever wonder how people that only made 2k a month were able to live in a 1/2 a million dollar house? People were abusing the system, let's not promote more foreclosures.

3. No more influencing appraisers. All the Major lenders are using 3rd party Vendor Services for Appraisals. This is a good thing and is about time, why would you want an inflated appraisal and come to find out when it's time to sell your upside down?

4. Arms are not the super hero rate droppers no more, more than likely the arms show little difference now.

5. Reserves and Down payment are being BRANDED for the future. Reputable lenders are preaching to the next generation of home buyers to start SAVING UP, which is a smart mind frame to instill to our future generation of home buyers.

There is no Easy Button

Take notice America, instead of complaining about what WE HAD let's start teaching our future home buyers what they COULD HAVE if they are smart in saving their money and not relying on the EASY WAY out.

Times are changing either we start adapting to it or be a thing of the past. The overall picture is not about strict rules, its about promoting SMART loans and no more NONSENSE loans...

People need to realize that there are no more LIAR loans and start SAVING some money for reserves and down payment for a house.

Let's promote a smarter new generation of home buyers. Im all for qualifying the home buyer just as the next person, lets be smart about it.

__________________

As always thanks for checking out my blog, feel free to leave a comment and have a great day!

Just-In-Time's Loans

Posted by Justin Williams - Loan Officer on 04/27/2008 09:24 PM

Comments (19)

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19 Comments on Generation Next won't be spoiled like Generation Now

APR

2008

Hi Justin,

You are so very, very right. It is amazing. And, the current generation is going to have a difficult time adjusting and will have to go through some pain as well during their adjustment.

Bill - Glad you agree, just trying to promote awarenes, you won't believe how many questions I get like " Well my dad got a no doc loan, why couldn't I"

Justin, I never could understand why someone who didn't have that great of credit could get a 100% loan with a higher interest rate. Obviously they don't have great credit so they don't pay their bills on time, why should it be any different when they buy a house. I am happy to see some sense coming back in to home lending but now I wonder if they are swinging the pendulum too far the other direction.

Marchel - YesI think things are settling down right now and it might be true that some of the loan programs are just too strict it may seem but I think the overall picture of promoting a smarter home buyer process is key here, I want to qualify future home owners just as much as you guys do :)

Justin This is a great blog and I hope plenty of people read this. I think that people laugh or get upset when you tell them they have to put 3-5% down or if they aren't putting anything down (thanks to the down payment assistance programs and sellers) but have to pay closing cost out of their pocket then some people even get mad about that. More often now days we run in to folks that do not want to invest ANYTHING of their own but want the perfect loan with the perfect rate in the perfect situation.... I dont get it. But I cant complain because there are plenty of educated clients that have down payments or want to know the steps to go through before they start the purchasing process. Again EXCELLENT Blog!

Dione - Thanks for your lovely comment and supporting my insight. Its crazy to think that people are still in the mode of subprime days and that down payments are crucial to the buying process. Yes DAPS and Seller Assistance is still notorious now but what happens for our next generationer's when that privilege might not be available for them? Thanks for commenting!

APR

2008

Justin,

I am happy that there is a movement back to being responsible. It made no sense for lenders to give money to people who were not able to save or to pay bills that they already had. Thanks for the post.

Juatin - One of the best postes i have read. Very well done sir!

Paddy - Thanks for your feedback, much appreciated and commenting

Casey - Im glad you found this post insightful and I appreciate the comment you left behind, take care

APR

2008

You do such a good job breaking down your blog posts and so easy and fun to read! I love how you put there is no easy button for this! By the way... I like your little saying on the bottom "just-in time loans" :)

Times they are a changin". Good information.

It is amazing how things change rapidly. Just think, the easy loans you mention were available just 3 years ago! I wonder what 2011 will be like?? :)

I think you may mean two decades ago. A decade ago was only 1998 and many folks could get 95% financing at interest rates less than 8%.

Other than that, you are so right about the new generation.

In the early '90s we had double digit interest rates. That changed by the end of the decade. I have a chart of Freddie Mac interest rates (by month) from 1971 on my website. If you want to get really scared, take a look.

I hope you're right about things changing. My experience is that people get smart until they get stupid again. Talk to agents who have been at this awhile and they will tell you that they have been through a few cycles of banks lending wildly, getting conservative and then doing it all over again. Wall St. is a perfect example. Every 10 or so years the VC's will give money to anyone who breathes. Most lose their shirts, they regroup, new people come in and it happens all over again.

Ain't this the truth:) I sure hope we can come to grips with "Living within our means". It may be hard to do, but when there is no ATM left, that's all there is to do.

Naoma - Thanks for the compliment :) Hehe yeah I been branding Just-In-Time for a while, Realtor's get a kick out of it :)

Velda - Ab-so-lute-ly :) Thanks for commenting

Rick - I have a feeling we might be seeing 100yr mortgages like in Japan, they are called 3 generation mortgages, holy smokes! :)

Karen - Good eye, I have corrected the statement, Have a wonderful week!

Peter - Hey I saw your chart and it is scary :) It definitely does seem like a roller coaster where it goes up and down, thanks for providing feedback.

Laura - Living within our means is definitely something we need to strive for to keep grounded, love the atm remark :)

MAY

2008

Justin - You are correct. I got into the business as the refi boom faded and the 100% boom began! When the refinancing dwindled down, the purchasing side shot WAY UP! I've put many people into homes on stated income deals as well as 100% loans, but tried to warn everyone about the pitfalls they would face, especially if they were on those sub-prime ARM loans. Education is the key. The problem is the simple fact that many loan officers never educated their clients and in return they are out of this business and their customers are losing thier houses! Those programs you mentioned above were about helping people own a piece of the American dream. For many, it's become a nightmare. The market will correct itself, as it always does and we'll all be better for it.

James - Education is definitely key! Yes it was a fad the past and more and more homeowners are realizing its just that, thanks for commenting and stopping by bud!

MAY

2008

Justin, right on. I like your take on generation next......! It's kinda sorta like generation last. There's last or back, there's "was," and "now," and there is "next" and "later." We're heading toward the time you mentioned. Those of us who purchased our first homes in the 60's and before..........purchased with at least 20% down - I think. Don't remember when PMI came into being. I know our interest rates in the 80's were about 12%.......WOW!!! We actually - almost - paid off our homes, whereas our parents/grandparents did. Times have really changed - in more ways than mortgages though, don't ya think? ;-)

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