A Loan to Fit Your FICO Score

 

REALTOR® Outlook

By Kay Wilson-Bolton

March 5, 2007

The lending community has either caught on, or been caught; and the days of many creative loans, created just to make the deal, are over.

Subprime loans (less than desirable but available for those who need them due to low FICO or credit scores) have been all but eliminated for the next generation of homebuyers. Many of the subprime lenders are suddenly out of business.

Real estate agents who promoted these loan programs share in the responsibility for the hardships on borrowers who cannot now make their payments.  There is no doubt that these loans were viewed as great opportunities as home ownership potentials were created, but there is a price to pay for programs that appear to be “too good to be true.”

Also on the wane, if not disappear, is the “stated” income loan where a borrower can simply state their annual income without proving it.  If the income stated lines up with the charts of predictability, the loan can be approved.

More and more loans will be approved only after full documentation, like the good old days.  The adjustment to this trend will have as much impact on the housing market as any we have seen to date.

Many of us view this as a favorable move towards the stability of families and homeowners across the board. Some borrowers are able to make the sharp adjustment in payments based on the adjustments in their interest rates; many cannot.

The results are catastrophic for most, but for those who had no investment in the property in terms of down payment or closing costs, it is easier to walk away.

Banks are working with borrowers on short payoffs, but they are making borrowers work for approval by requiring hardship letters, tax returns, monthly bank statements, budgets and explanation for spending propensities.

Banks are not paying buyers closing costs and they are requiring agents to reduce commissions. They do not want to foreclose on borrowers, but they are not taking losses lightly.

A cycle of adjustment is ahead of us. It is overdue and it is the right kind. We might see predator lending practices disappear.

 

 

Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and CENTURY 21 Ability. She brings a regional perspective to local issues. She can be reached at 805.340.5025. Her website is http://www.readysetkay.com

 

About Kay Wilson-Boltonhttp://www.kaywilsonbolton.netWith a full-time career in real estate, I can add to your bank of knowledge, not only in real estate but in many areas of life that deal with people and relationships and choices. My real estate career has taught me many lessons about planning ahead and looking forward. I believe in helping along the way so that they can be the best they can be in any situation. I serve as a Fire Department Chaplain and Coordinator for the Many Meals Project which serves homeless and hungry families in my community. The event is far more than many meals. I make pastoral visits to the inmates in the County Jail System and offer them what God says about "all things being new" and His remarkable plan for our lives. I have served my community as Mayor and in many volunteer capacities. I serve others by serving God first. My husband is involved in prison ministry and is a graphic artist. We live a simple life in Santa Paula with an office cat named Scout, three rescued poodles and two cats at home.

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