Mortgage Market Putting Squeeze On Borrowers
More and more home buyers are being squeezed on both ends of their home loan, according to the Realty Times.
On the application side, lenders are taking a harder look at Florida home loans before they approve them. On the payment side, both home owners and financial counselors are getting jittery about homeowners’ ability to make monthly payments.
Loans in the “slam-dunk” category (those approved with the least amount of underwriting scrutiny) accounted for 66.6 percent in the last six months, down from 68 percent in the previous six months. HomeSmartReports.com, a San Juan Capistrano, Calif., site that documents sales trends, property estimates and data available to the public, produced the findings.
A new survey conducted by Roper Public Affairs for TrueCredit.com found that 27 percent of home owners think rising Florida home loan rates will make it tough for them to make mortgage payments. The second-guessing of consumers’ ability to make payments certainly doesn’t do much in terms of limiting lender uncertainty.
“When deciding whether or not to make a home loan, lenders look at the borrower’s finances and at the security for the loan, namely the home itself. They’re not going to provide financing even to the most qualified of households if the property itself appears to be overvalued and in a shaky neighborhood,” said Mike Ela, president of HomeSmartReports.
Lenders in a growing number of states are putting the squeeze on home loans. In Michigan, the “slam-dunk” category accounted for 43.3 percent of all mortgages, down from 50.5 percent. In Louisiana, the number dropped from 67.4 percent to 58.2 percent, while Hawaii saw a decline from 83.9 percent to 75.4 percent, and the percentage of those who qualified for immediate Florida home loan approval shifted from 60.6 percent to 55.6 percent.
Meanwhile, TransUnion’s survey also found that rising mortgage rates could directly lead to:
- 23 percent of homeowners to consider refinancing.
- 61 percent of renters to have difficulty paying their rent.
- 78 percent of renters to have difficulty purchasing a residence in the near future.
The survey also reveals that 24 percent currently carry an adjustable rate mortgage (ARM) or specialized loan, a figure that jumps to 37 percent for those aged 25-49. In some markets, the percentage is 50 percent or higher for people who recently signed contracts for home loans.
Market conditions recently prompted the NeighborWorks Training Institute to host a five-day workshop so financial counselors from 4,400 partner organizations could bone up on skills to tutor financially troubled home owners on debt management. The agencies are bracing for an influx of home owners seeking mortgage and budget counseling as rates rise, appreciation slows, and adjustable-rate mortgage (ARM) payments ratchet up.
This Perfect Storm-style convergence threatens to push many home owners into the dreaded state of mortgage delinquencies, dire budgetary straits or worse.
The housing boom has left home prices in the stratosphere in many locales, including here in Broward County. Higher costs can force home buyers to seek greater financial leverage and that typically means riskier ARMs, especially those with additional low initial-cost benefits, including interest-only payments, option-payment and piggyback loan terms.
