With the changing outlook on the sub-prime mortgages, is it still feasible to search for these types of loans?
I recently applied for a loan and my FICO is about 730, I wanted to put 5% down and my income to debt ratio is about 50.7%. The house is in the middle of an attempt to rehab so is has no flooring and needs a lot a work. When I had the property appraised, they came back with a list of problems and said the property was “sub-standard”, no kidding. The lender gave a huge laundry list of things that would need to be corrected, floors installed, walls cleaned, windows replaced and on and on: all before they would be willing to approve a loan of $112,000. Is this the direction all lenders are going?
What direction is the sub prime lenders heading, anyone?!!
Imagine a giant faucet that gushed water for years, now imagine a giant ball valve being turned off.
That’s where sub-prime is headed. Wait till the Democrats take the White House. That giant sucking sound will be the liquidity coming out of our economy.
Go to www.itulip.com and watch the video report at the top of the page on sub-prime and it’s effects 1-2 years from now.
Yep - properties must be in average condition now to get funding, even with the sub primers.
Could be a boom time for HMLs coming up!
Why not just go with hard money and avoid all of the headaches?
It sounds like you approached a conventional lender and are engaged in cost to cure discussions.
This is SOP with “as is” lenders and has nothing to do with the lending contraction currently underway.
There is a strong possibility that you would be better served by a ARV based loan program.
Regards,
Scott Miller
"Subprime" refers to loans given to people who have low FICO scores. The concern is that people who don't like to pay their bills were given all these real estate loans, now they are going into default all over the country. The lenders were packaging subprime loans as real estate "investments" and selling them on Wall Street. That's where the lenders made their money, so when someone walked into a mortgage brokerage, if they were breathing and had a pulse, they got the loan.
Now the lenders are actually having to exercise good judgement with who they give the loans to, and the people who don't pay their bills for cars, credit cards, HOUSES...whatever.... are going to end up in foreclosure. This process will flood the market with foreclosed homes, increasing supply, and lenders are going to tighten their standards, lowering demand.
An analyst from Bank of America projected that demand could be cut by more than 25% due to stricter lending standards, according to one article I read; Three of the nation's largest subprime lenders are going into bankrupcy and are being investigated by the Securities Exchange Commission and it's difficult to predict exactly how long this bust cycle could go.
Property standards like this have been in place for years and have not become more restrictive in the past 3 weeks. However, lenders are scrutinizing appraisals more and more as we are seeing declining or stagnant values in many areas and there is a lot of appraisal fraud. Housing data this week showed a decrease in home values nationwide for the first time in over 10 years.
With your credit score you should definitely not be using a subprime lender. Those are the lenders who are best suited to help credit challenged borrowers.
Whether you are using them or A paper lenders, the vast majority will require the property to be in at least average habitable condition. Since the property needs work, it would be best that you look at a rehab loan. Rehab loans are based upon the after repaired value and may be enough to cover the purchase, fix up, costs, and possibly payments.