You longtime readers (since March 29th) will remember my original Mortgage Mania article “Subprime Loans - Should Palo Altans Care?” that discussed some potential ripple effects of the subprime lending boom and bust, and the resulting changes in lending requirements for purchasers of million-dollar plus homes in Palo Alto and surrounding communities.
In that article I mentioned that tougher lending standards were on the horizon. Since major lenders do loans all across the country, they take a one-size-fits-all approach to guidelines, and in attempting to shelter themselves from risk associated with rising loan defaults in free-fall markets like Detroit (or Antioch, Gilroy, etc.), for example, they are making changes to lending guidelines that will make it harder for high-income folks with strong credit to buy homes here.
For some in-depth knowledge on this issue, the changing guidelines, and what you can do now if you are in the market for a home, I turn to Curt Van Emon of OPES Advisors, a wealth management firm with offices in Palo Alto, San Mateo and now Los Gatos. OPES is latin for wealth, and my go to source for analysis of what changing lending rules mean to my clients.
Curt is a fellow blogger, so you can read all of his analysis here at financeambition.com. I’ll just give you the summary here.
- As I mentioned back in March, guidelines are changing, and so buyers wanting to use interest-only loans for purchases will need to qualify based on their ability to make payments including principal AND interest.
- It will become harder to qualify for an adjustable rate mortgage than a fixed rate mortgage
- Buyers will qualify for lower loan amounts, meaning less buying power. (Goodbye 4-bedroom house, hello 3 bedroom)
When do the new guidelines take effect? July 22. So, read Curt’s recommendations, mark your calendar and contact your Realtor if you are planning on buying a home anytime soon.
If you aren’t currently working with a Realtor who is financially savvy and can explain what these changes mean to you, I know where to find some.
Stay tuned for updates on if and how these new guidelines affect buyers and the local real estate market in and around Palo Alto.
Thanks for reading . . .
Tags: Area-information, bay-area-real-estate, Buyer and seller tips, Home buying, Loan Application, Option ARMs, Preapproval, Preapproval, Prequalification, Real estate, real-estate-market, Stated Income Stated Assets (SISA), Stated Income Verified Assets (SIVA)
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