WOW!!! The last week has been a roller coaster. The stock market has seen it's largest decline since 9/11 based on market jitters in China, Japan and Europe, as well as a remark from former Fed Chief Greenspan that we "might" see a recession by the end of the year.
This resulted in a flight to security in bonds which helped mortgage rates decrease. Home prices came out and they are all over the map. Some areas are seeing decreases in value and other only modest gains.
But the biggest changes are in the lending world. Many subprime companies have gone out of business and on the heals of Federal criminal investigation of New Century mortgage, several more are on their way out. Last week there was also a fear that the Alt A mortgage market would see a decrease in value due to high risk loans. Alt A is where most stated income, non-owner occupied or high loan to value loans have been placed. Many of the properties that were purchased as speculative investments were done in this category.
Last week I was informed by several of my lenders to get ready for change. Yesterday it came. Lending guidelines are getting much more conservative for non-owner occupied properties and stated income loans. The loan to value has decreased, credit score requirements have increased as well as a few other loan specific requirements have been put in place.
The bottom line is that if you don't have stellar credit or can't fully document your income, be prepared to bring cash to close if you are purchasing or a smaller loan to value if you are refinancing.
The good news is that for high credit borrowers there are many flexible products with great rates.
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