For a large number of homeowners, the past year dealt a serious blow to their property values. Many who work in the real estate market are hopeful that 2009 will bring an upswing in their battered sector of the economy. They believe prices and interest rates are currently at about the low point and consumers will take the opportunity to purchase new homes and mortgage loans in the first quarter of 2009. Most financial analysts see it differently, however. They believe the recession is only beginning and that home prices will continue to decline in the coming year. Consumers in some markets might take the opportunity to grab the current low rates offered on mortgage loans. The excess of inventory exacerbated by increasing foreclosures, however, will likely keep the housing market down. Making matters worse are the mortgage loans at adjustable interest rates that will reset soon. That will likely increase the foreclosure rate and add to the inventory of unsold homes. Some consumers who would like to buy right now are finding that they are not eligible for mortgage loans like they once were. Lending standards have tightened significantly, which will exclude many buyers who would have qualified for mortgage loans a year or two ago.

Many people who currently own properties would like to lock in the low rates and refinance their mortgage loans. Applications for mortgage loans hit the highest level in five years last week. Over 75 percent of those were to refinance current mortgages. But many of those applicants were not approved. One mortgage lender in South Florida said that only about 5 of the 50 customers who called about refinancing recently qualified. Many markets across the country have homeowners who now have larger mortgage loans than the values of their properties, due to the drop in home values. The more restrictive lending practices are leaving these mortgage loan holders out in the cold. Lenders are requiring a higher percentage of equity in the home, a high credit score and a low debt to income ratio. This reality is very different than that of a year or two ago, when lending practices for mortgage loans were looser.

Many refer to the previous loose lending standards as the wild west. Those standards often required little or no down payments for mortgage loans and appeared to disregard the credit worthiness of many applicants. Although the new lending standards may be compounding the already suffering real estate market, they will offer a necessary correction for a credit market that appeared to be out of control. Only time will tell if 2009 will grant the market enough time for the credit industry to correct, and free up enough money in mortgage loans to spur the housing market.

References Home loan rates ... Home loan rates ...

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by: marciafreeman
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