The Mortgage Meltdown and the Raleigh Real Estate Market - Part 2 of 3
August 27th, 2007 Categories: Mortgage and Finance
The Raleigh real estate market has definitely been affected by by recent changes in the mortgage industry. As a result, buying or selling real estate in Raleigh has changed too. Much confusion exists. We need a better understanding of what this means to the local buying and selling public.
In Part 1, I discussed what the mortgage meltdown is and what has changed in the mortgage industry. So what does this really mean to someone wanting to buy a home in Raleigh, North Carolina? What about someone selling a home? Today, let’s talk about the more obvious one… home buyers.
Buying a Home in Raleigh
In the previous article, I listed several things that have changed for borrowers applying for a home loan. Two big ones were:
- A good credit score is more important than ever
- Full documentation is required where it may not have been in the past
A more difficult to define change is the somewhat limited availability of 100% financing. Loans not requiring a down payment are still available, especially for conforming clients with good credit scores and full documentation. If either of these two elements are lacking, 100% financing may not be an option for borrowers.
The bottom line is that anyone seeking a loan to buy a home in Raleigh, or anywhere else for that matter, needs the advice of a mortgage professional now more than ever before. The rules have changed since you last purchased a home. I can promise you that.
Does this mean you might not be able to get a home loan in today’s environment? The only way to answer that question is to seek professional advice. For some, nothing has changed. There are still lots of financing options for home buyers. The sooner you discover those options, the better choices you can make. If you need the name of a good, reputable mortgage lender, send me an email or call me at 919-602-7000 and I’ll be glad to recommend someone.
The real estate agent you choose to represent you is also a decision you should make very carefully. The degree to which your agent has his or her mind around this new mortgage environment is critical to your home buying success.
In Part 3 of this series you will read about how savvy home sellers and their agents will be carefully considering the validity and associated risks of the financing terms in any offers they receive. The North Carolina Real Estate Commission considers terms of finance to be a material fact and requires accurate and complete disclosure. Your Raleigh real estate agent must be a skilled negotiator and capable of putting together an offer that will be accepted. Especially when there are competing offers. Unlike many other areas around the country, we still have that scenario here in the Raleigh market.
Your real estate agent must also have the guts to insist that you spend some quality time talking about your options with a good mortgage professional. Beware of the agent who puts you in their car and drives off to show you homes without a high quality initial consultation session that includes this conversation with a lender. Or at least requires that conversation as the very next step in the process.
Be sure to stop by the next day or two for the final installment in this series where you will learn the implication of all this for home sellers. We will also spend a little time expanding on the reaction of the financial markets and do a little speculating on whether we have seen the worst, or if there is more unraveling to come.
Be sure to click on the comments link below and get involved in the discussion. I’d really like to hear your thoughts!
Related Articles
The Mortgage Meltdown and the Raleigh Real Estate Market - Part 1 of 3
Bob,
Your article hit the nail on the head. Seeking the advice of a mortgage professional before making a contract is critical, especially homebuyers looking to put little to no money down. 100% financing options will become more and more limited, even to those with stellar credit. As far as the homebuyers putting 5% down or more with good credit, lending should remain business as usual. Keep in mind, the rules of underwriting are changing daily and until the market shows a bigger appetite for mortgages, expect these rules to favor the bank rather than the consumer. A stark contrast to what we have been enjoying over the last few years.
Buyers need to be pre-approved for a mortgage not just pre-qualified. There is a differnce in the two which a lot of buyers and seller get confused about. When a lender tells you that you are pre-qualified for a mortgage that his or her professional opinion but not an approval from a lender. A pre-approval is an underwriter reviewing your file and giving you a commitment that the lender will finance your purchase. There is a big difference between a loan officers opinion and an underwriters opinion. No offense to loan officers because I am one but sometimes we don’t see all the facts that come in to play and an underwrtier does.
With all of the proram changes that are occuring on a daily and weekly basis it is very important that you have the seal of approval from and underwriter versu a loan officer.
As a mortgage lender, I would stress the importance of getting a full consultation with a reliable realtor and mortgage lender. The fundamentals of the mortgage business have not changed that much for the typical buyer. But some buyers are going to have difficulty finding loans or may find themselves needing to bring more downpayment and/or pay a higher interest rate. The RDU area is still and will continue to be a great place to buy and loans will continue to be available for almost all buyers.
Thanks for expanding on the topic guys!
Brian - The limited availability of 100% LTV is a big surprise for many clients. Everyone got pretty used to it over the years and with money being so cheap it made sense most of the time. Interesting what you say about the market having to regain its appetite for mortgages. Check back for part three. I’m gonna take a stab at addressing that subject and would appreciate your input.
Bruce - Amen on the pre-approved issue. I’ve been preaching this for years just to make my buyers more competitive on their offers. looks like there are plenty of other reasons for it now.
Andy - Thanks for mentioning that for most people nothing really changes. The group that is most affected is a small one.
Installment 3 should be up by Wednesday, or so.
Bob,
This is great information that you are providing and the lender comments have been right on target. I would like to comment from the perspecitive of a mortgage lender that has actually been caught up in this mess. I worked for HomeBanc Mortgage until the day they closed their doors. While we knew a change was coming, we never thought the doors would be closed. While this caused a couple of days of uncertainty for both myself and my clients, it became quickly apparent that there are MANY strong companies out there that WILL make it through this current market phenomenon. The money to lend is STILL out there. Banks are just getting more careful about who, where, why and when they lend it. It has to make sense as my underwriter would always say.
My advice is consistent to the other lender comments.If you are thinking about buying a home in the near future, consult with a trusted mortgage professional now. Make sure the lender is working for your best interests. A good lender will ask you LOTS of questions in regards to current financial goals as well as future. They want to be sure they are finding the best product combination to help you achieve those goals. Your lender may even tell you something you don’t want to hear, such as how to get yourself in a position to go Full Documentation on a loan or, you “probably should look at a less expensive home based on the budget we’ve discussed”. Those things mean your lender is looking out for you and your financial interests, not just his or hers.
The point is to make sure your mortgage lender is working for YOU! And lastly, I absolutely agree that the best route is pre-approval. If you are pre-approved, it is like having a check just sitting there at the bank waiting on you to find your new home. That is a win-win situation for you. You don’t have to worry about whether you’ll qualify and it can actually strengthen your offer on the home if other offers don’t have financing in place. Why would you NOT want to get pre-approved?
Tom - Thanks for your comments. It’s good to hear the perspective of someone who worked for one of the companies that was unable to continue operations. Sorry you had to go through that, but I’m glad that you still have confidence in the mortgage industry. Good point about the level of questions a borrower will get from a loan officer who has their best interest in mind.
[...] In Part 2 of this series I discussed the impact of the mortgage meltdown on clients wishing to buy a home in Raleigh and surrounding areas. Today’s final installment will cover what this means to the average Raleigh home seller. I will also attempt to address the reaction of financial markets to the mortgage meltdown and speculate on whether we’re done, or if there is more bad news to come. [...]