John Bendall owner of Re/Max Classic Group asks; how will the new tighter lending requirements affect your ability to buy a home?

As we have heard so frequently on the news lately mortgage companies are starting to seem more and more people defaulting on their loans.  Some of the causes are the leveling off of home prices and the increase in interest rates.  People who had relied on some creative financing to purchase a home are having trouble keeping up with variable rates.  The Fed decided to hold steady this week on interest rates, giving those who are having difficulty making their monthly payment no relief. Borrowers are defaulting on their loans to such an extent that it is having a real impact on the banks making the loans.  For that reason lending requirements are starting to tighten up.  Does this mean the end of easy money?

It does seem to mean the end of “no money down” loans.  According to the National Association of Realtors four out of ten first time home buyers in 2005 and 2006 took out a “no money down” loan to purchase their homes.  This will likely make buying a first home considerably more difficult for the time being.  It is also likely to make what was already a stressful experience even more so.  Worries of out of control payments are likely to make buyers wary when shopping around for a mortgage that suits them. 

The upside to buyers in the current market is the excellent selection of homes available.  There are more homes to choose from and more competition among sellers, so that may mean finding a great home at a great price.  Stricter lending policies are not entirely a bad thing either.  They may make money a little more difficult to come by, but in turn this insures that borrowers are only borrowing what they will actually be able to pay back.  This will hopefully reduce the amount of foreclosures and defaulted loans in the future. 

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