Current State of Vacation Home Financing….What To Expect?
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By: Mike Kennedy July 15th, 2008 Category: Interest Rates and Loans, Obtaining a Mortgage |
There certainly has been a lot of bad news recently about the current state of the mortgage industry in the United States…but for those buyers out there looking to purchase real estate or a home for sale at Deep Creek Lake the big question becomes- “How are all these current problems in the mortgage industry going to affect me?”
Recently, we had the pleasure of Jerry Merrick, a local Vice President of Mortgage Lending at BB&T Bank, speak at one of our sale meetings. He provided us with an excellent update on the current state of the mortgage industry and what second home buyers can expect to deal with when obtaining a mortgage loan. Most of the changes in the mortgage industry are being made in the non-conforming “Jumbo Loan” segment -loans over $417,000. Coincidently, very few changes have been made in the conforming loan segment - loans less than $417,000. Below is a quick summary of these changes;
Stricter Underwriting
For those looking to borrow more than $417,000 banks are returning to more traditional underwriting standards. This means that borrowers will have to document and prove all stated income and be subject to asset verification. Gone are the days that you could simply write down on your loan application how much money you make and the bank would take your word for it.
Larger Down Payments
You’ll probably now be required to put down approximately 20-25% on the purchase of a second home. Loans that only required 5% or 10% down are a thing of the past.
Two Appraisals
Some banks are now requiring two appraisals on loans for vacation homes priced over $1,000,000.
Points
Those with credit scores less than 700 may now have to have to pay ½ point. Maintaining a higher credit score will be very important in the future.
Unfortunately, those looking to borrow money for the purchase of a vacation home here at Deep Creek will no doubt have to jump thru more hoops - and even though delinquency rates are extremely low in Garrett County and Deep Creek Lake due to the affluent nature of this real estate market - it is important to keep things in perspective - the good news is that banks are still lending money and very much want to continue doing so - and interest rates from a historical perspective are still low - rates in the mid to low 6% range are still the lowest they have been in the last 25 years- with the exception of 2003.
Is now a good time to lock in a rate? Only you, the borrower, can make that decision. If you think that rates may go up with more continued bad news in the mortgage industry then now may be the time to lock in…….if you think that rates may go down as loan delinquencies stabilize then you should probably wait and see what happens. No matter what you decide, these stricter lending guidelines and much needed changes in the mortgage industry should have an overall positive effect on the real estate market here at Deep Creek Lake and throughout the rest of the country.