(Knoxville, TN) Unless you’ve been on a deserted island over the past month, you know the financial markets are experiencing mortgage chaos. Historically, Knoxville fares quite well during turbulent times in the housing industry. However, tightening in the credit markets has resulted in lenders offering fewer loan programs. Mortgage professionals are advising current home owners and potential buyers to contact a local mortgage advisor well before they look to refinance their current mortgage or buy a new home.
“There are an alarming number of foreclosures throughout the country and East Tennessee has seen its fair share”, says Matt Padgett, President of Knoxville’s Keystone Mortgage Group.
As home prices soared across most of the country in the last few years, banks and lending institutions took risks that home prices would continue to increase, and home buyers did the same. Adjustable Rate Mortgages (ARM) were offered to people with less than perfect credit histories and many times these borrowers were buying homes with no money down.
“Keystone recently helped a customer whose ARM adjusted resulting in an increase of $250 in their monthly payment. After putting them in a fixed rate program, they were able to save an additional $75 per month over the $250 increase”, Padgett said.
ARM’s are adjusting and home prices are not increasing at the rates they once were. People are finding they owe more than their home is worth, and the property market has slowed, so selling the house before an ARM adjusts isn’t a good – or often even a viable option anymore. People are sitting in houses they can no longer afford and foreclosures are increasing.
“As more homes go into foreclosure, the credit markets continue to tighten up the amount of credit it makes available to lenders, this results in fewer home loan options”, adds Padgett.
People who wish to refinance and get out of their ARM’s are finding that they are no longer eligible for more conventional mortgage loans because the lending institutions are clamping down on who gets approved.
All of the foreclosures lead the credit markets to tighten – driving up interest rates, and causing loan programs to disappear which limits who can get a mortgage. It is a true vicious cycle.
There is good news for Knoxville.
“The local housing prices have not been slowing down at the rate seen in much of the country, nor have we experienced the depth of job cuts seen elsewhere,” Padgett adds.
However, mortgage professionals are seeing a general tightening of mortgage loan guidelines for local customers, along with more foreclosures. Padgett cautions homebuyers that larger down payments and higher credit scores could be required to get you into your next home.
The industry went overboard with relaxations of mortgage requirements over the last five years – the reverse tightening of regulations is seen as a necessary correction by many in the industry.
“Prudent steps you take now to secure your finances and prepare for a refinance or home purchase will make the mortgage process smoother and more successful for you in the future.”
Padgett offers the following advice to homebuyers:
- Get pre-qualified, reach out to a mortgage professional early. It’s possible you will need the extra time to work on improving your credit score and save up a down payment.
- Remember many people who qualified 6-9 months ago for a 100% mortgage are not even close to meeting the guidelines for 100% mortgages today.
- If you have an adjustable rate mortgage, read your loan documents and talk with a mortgage advisor well before your rate is set to adjust.
Keystone Mortgage provides Tennesseans with the best mortgage experience, period. So what are you waiting for? Apply here now.