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 feel that potential home buyers will be encouraged to take on mortgage loans with the new low interest rates and help reduce the current glut of home inventory. But analysts outside the real estate sector do not agree that the new year will bring such rosy economic prospects. They foresee a deepening of the economic recession and a continued downturn in home values. Consumers in some markets might take the opportunity to grab the current low rates offered on mortgage loans. But the inventory surplus from foreclosed properties may continue to hold back the real estate market. Making matters worse are the mortgage loans at adjustable interest rates that will reset soon. Many predict that will contribute to the already overburdened inventory of 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. About 80 percent of those applications were for refinancing. Unfortunately, a fair number of those who applied were denied. According to a lender in Florida, a very small percentage of those who contacted him in the last couple weeks to refinance have actually been approved. Some homeowners that purchased in areas like South Florida that have experienced a decline in values are finding that they owe more on their mortgage loans than their homes are worth now. 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. It was as if anyone was approved for mortgage loans, regardless of his credit history. The new lending practices may seem harsh, yet they are essential to repairing the credit industry. 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. More related information Loans | Home mortgage | Mortgage refinancing |