Gathering Storm: Get A Mortgage While You Still Qualify

By
Mortgage and Lending with SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) NMLS 223495

There's a storm brewing over the horizon.There's a storm on the horizon, and it's being fueled by the promise of cheap mortgage money someday.

As long as buyers perceive that the future holds cheaper prices and lower interest rates, they're going to continue to sit on their hands.

"Money's cheap," I told a group of 30 high-FICO, low-taxable-income businesspeople at a recent seminar.  "The problem is, most of you can't have any." 

We lenders and agents depend for our livelihood on a shrinking pool of creditworthy buyers.  Fannie Mae describes these riskworthy buyers like this:  they're W-2 wage earners with low debt ratios. 

I call them "Golden Buyers."  Today's golden buyers work for corporations and medium sized companies--the same companies who are being strangled by a lack of credit to conduct business and to expand.

While the yields on government bonds are falling to all time lows, the cost of borrowing for the companies who employ our "golden buyers" has nearly doubled since the first of the year.  Companies are paying an average of almost 11% for credit as the year comes to a close.  Last January they were paying 6%.  As costs rise, cutbacks are inevitable.

Golden Buyers are about to hit a wave of unanticipated layoffs.

The federal government has committed more than half of our Gross Domestic Product in an attempt to solve this credit crunch.  So far, all it's done is to convince the world that corporations aren't a good place to invest money, that they can't conduct business on their own, and that the only safe place to put money is in government bonds.

I'm Mike in Tucson, your preferred Tucson, AZ Mortgage lender.
Mike Jones (Tucson Mortgage Company, LLC): Loan Officer in Tucson, Pima County, Arizona
Think of me as your Tucson mortgage expert.
Call me if I can help you with a mortgage to buy your next house:  (520) 349-9090

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Ambassador
890,930
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Nice...  I'm just wondering what sorts of plans will develop in the next administration if THIS is supposed to be the conservative one. 

Dec 15, 2008 02:05 PM #1
Ambassador
754,103
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Lane,

Thanks for being the first to comment.  We're living in interesting times!

Mike in Tucson

Dec 15, 2008 02:07 PM #2
Rainmaker
241,422
SacramentoCommercialLoans Bank Turn downs welcomed
Sacramento commercial loans - Sacramento, CA
Quick closings 916-847-7212

Great post. A true catch 22 for for the US economy as a whole. 2 out of the four legs of our economy are broken with the 3rd one to come. Thank you for the post.

Dec 15, 2008 02:08 PM #3
Rainer
258,789
Mick Michaud
Distinctly Texas Lifestyle Properties, LLC Office:682/498-3107 - Granbury, TX
Your Texas Lifestyle is Here!

Yep, "stupid is as stupid does".   Seems the corporate world is focused on their little piece of the pie not realizing that they are cutting their own throats.  That's what banks are doing by hitting corporations, etc.

Cheap money to noone who can qualify isn't going to help anyone.

We wouldn't be in this boat if the government hadn't "helped" the banks to make bad loans in the first place.

Dec 15, 2008 02:33 PM #4
Rainmaker
643,145
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro

Mike, It has been a roller coaster ride and I think the ride is no where near ending!!

Dec 15, 2008 03:22 PM #5
Rainmaker
87,293
Alan Barker
Boomerang Leads - Smithfield, UT

The economy sure has a lot of variables. The "golden" buyers just might be riskier than us "self employed buyers" as the economy shakes up more. I think the lending market should weigh ones ability to "save money" a little more in their qualification guidelines.

Dec 15, 2008 03:29 PM #6
Ambassador
2,758,601
TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029

Mike, Like, the picture of the desert. You are right though about the roller coaster ride and the cheap money right now. Who knows where this plane is going to land... 

**** Merry Christmas **** 

Dec 15, 2008 06:16 PM #7
Rainmaker
631,147
Don Rogers
Keller Williams Realty Chesterfield - O'Fallon, MO
Realtor, Broker, CDPE, GRI, OnullFallon MO & St Charles County MO homes

Mike,

You are so right the pool of "GOLDEN BUYERS" is getting smaller everyday.  This is going to be a very interesting time that we are moving into.

Dec 15, 2008 10:27 PM #8
Ambassador
273,793
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

Mike... this is why I subscribe to your blog!  You are a Straight Shooter!  Right on - "you can't have any!"  The way mortgages are priced, it's almost impossible to do a "free refinance!"

Dec 16, 2008 12:20 AM #9
Rainmaker
575,553
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

Everyone wants to lend me money when I don't need it. It will be a problem with all the foreclosures on the credit reports that will take some time for them to become credit worthy again.

Dec 16, 2008 08:27 AM #10
Rainer
38,744
Kevin & Maryellen Garasky
KMG Mortgage Group - Kevin & Maryellen, Idaho & Washington - Coeur d'Alene, ID
KMG Mortgage Group - ID & WA

Mike,

This is the first opportunity I've had to read your blog, and this was a good one.  I hate to rain on the parade, and even though I do agree with the premise of the post, I can't agree whole-heartedly.  You are right when you say that cheap money does no one any good if they don't qualify for it.  But in a year of tightening underwriting guidelines, we are having one of the best years ever.

I certainly don't mean to minimize our current economic situation.  Things are bad.  But, for us at least, business has been good.  I am grateful to our clients who believe in us, 100% of our business for the last 13 months has been referral.

I think fellow mortgage professionals need to hunker down and open up their database.  Contact your previous clients.  Can you better their current situation?  Do they have friends and family who need assistance?

Otherwise, you are right on the money.  Cheap money will do no good if you sitting around waiting for the phone to ring.

Great post!  Keep up the good work!

Maryellen

Dec 16, 2008 09:25 AM #11
Rainmaker
510,059
Ann Heitland
Retired from RE/MAX Peak Properties - Flagstaff, AZ
Retired from Flagstaff Real Estate Sales

I had two offers presented by two different agents on an investor-type property this weekend. Both agents have done other purchases with their investor-clients. At the counter-offer stage, one of the agents called to tell me that her client had heard from his bank: the conversation they had had the day before, and the LSR, wasn't valid. Credit score great. Income/Debt ratio, ok. But they owned too many investment properties. Wow!

Dec 16, 2008 02:34 PM #12
Rainmaker
1,317,601
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

The golden buyers are really afraid to do anything.  several companies are "promising" layoffs!  It certainly is a very challeging time for many golden buyers!

Dec 16, 2008 03:58 PM #14
Rainmaker
339,591
Karen Cooper
Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas - Leander, TX
Helping Homeowners w/Home Loans in 27 US States

Mike - It sure is a challenging time we're facing. But I'm seeing these low interest rates opening up some great opportunities for my Southern California client base especially, but even more recent clients in Oregon are benefitting. Yes indeed, appraised values can be a hurdle; and with continued guideline tightening, it sometimes feels like we're getting boxed in; and the inflation rates and pain that will come with them resulting from these low rates are setting up some additional storm clouds on our horizon. I'm living in the NOW, doing what I can today...and supplementing his intense focus with a lot of prayer!

Dec 17, 2008 01:49 PM #15
Ambassador
754,103
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Karen,

What an encouraging comment!  Thanks.

Joan,

We certainly are living in challenging times.

Ann,

Different banks have different ideas of what "too many investment properties" means.  Some arbitrarily stop at 4 investment properties.  Others allow as many as 10 properties owned.  Still others say it's the number of mortgages on those non-owner-occupied properties that counts.  You might not want to give up on this buyer yet.

Maryellen,

Welcome to the fold!  I hope you subscribe and come back often.  Database mining is where the gold is.

Terry,

Thanks for commenting, and especially for the referral.

Eleanor,

I'm doing par loans in the mid-fours, and charging fees and origination on top.  Clients are pretty happy with that.

Don,

"very interesting" is right!

Michael,

There's a story in the news right now about a bi-plane clipping a cow on an emergency landing in England.  Neither the pilot nor the cow were injured.  May we be so fortunate in this "landing."

Alan,

From your mouth to God's ears!

Marchel,

I agree that the ride's not near the end.  Thanks for commenting.

Mike,

It's possible that we would be worse off, but we won't know until I'm pushing up daisies.  LOL

UCL,

You're welcome.  Thanks for commenting.

Mike in Tucson

Dec 17, 2008 08:14 PM #16
Rainmaker
287,621
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Turmoil & hard times always bring out innovation & creativity - get through the tough part & lets see what opportunities & good ideas come out on the other side!

Not to sound heartless, but we've needed some "shaking up" for quite a while.  It is going to hurt, but the end result will be improvement in the long run.

Dec 18, 2008 12:28 AM #17
Rainer
179,139
Mark MacKenzie
Phoenix, AZ

Hi Mike,

I believe this to be true, "As long as buyers perceive that the future holds cheaper prices and lower interest rates, they're going to continue to sit on their hands."

And while we have seen a surge in refis (not so many purchase apps), there is certainly a perception that rates will go lower - which is not a good thing for motivating the market to act now. 

Dec 18, 2008 05:59 AM #18
Ambassador
754,103
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Mark,

I wouldn't trade lower rates for lower prices.  The opportunity now is in the pricing for real estate.

Kent,

We're going to do well, my friend!

Mike in Tucson

Dec 19, 2008 07:25 PM #19
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