Thursday, September 6, 2007
State of the Mortgage Market
I posted earlier in the week about how co-ops may have helped avert a crisis here so far. But the ripples of the credit shakeout are going to touch our market too. One of the ways it's happening is that the bar to qualify for a mortgage has been getting raised nation wide, which has made it harder for NYC buyers to get financing for their deals too. I received an email message today from Melissa Cohn, President & CEO of The Manhattan Mortgage Company about the state of the mortgage market. It's a great take from the front line, on the recent changes and how they are impacting home buyers.
"Today’s mortgage market has certainly gone though many sweeping changes over the past few months. With over 120 lenders having shuttered their doors this year alone, the biggest question that we are asked is "how do I make sure my loan will close?"
She raises the point that working with a mortgage broker, who in turn works with multiple lenders can, "help provide you with approvals from more than one lender at no additional cost." Having wider choices in lenders might help present options for buyers. The lending environment is more like the old days you need better credit, more cushion, and more money down but people meeting qualifications are getting loans. Here's Melissa Cohn's top changes seen in the Manhattan mortgage market recently:
- Lower loan to values: it’s harder today to find 100% financing - and the larger the loan, the bigger the down payment your lender will look for. The stronger the profile, the more you can borrow.
- Better credit scores to get the best rate: while there are still a few banks that are not credit-history-driven, most banks want to see credit scores of at least 700. If you are unsure of your credit score, run it.
- There are ways to improve your credit if the score is low
- More liquidity: banks today are asking for larger reserves from borrowers. They want to know that you have a cushion post-closing just in case that rainy day happens.
- Qualifying for the interest only loan: interest only loans are still very popular but today banks are demanding that you qualify at the fully-indexed amortizing payment - making it harder to get the interest only loan.
- No Income verification loans: these are now getting harder to find. They are being offered to those who are truly self-employed and are harder to get for the salaried borrower.
- While we have seen many changes, there is still good news in the mortgage market. There are a large number of portfolio lenders in our area that are still making mortgages at very competitive rates – you can still get a JUMBO 5-Year ARM below 6.00% today – and with bond yields back at 4.50%, our traditional lenders will keep their rates low as we head into the fall season.