“The mortgage business swings like a pendulum,” said Elaine Shepperd, Cornerstone Mortgage Co. branch manager in Temple. “The government is tightening down on all the lenders.”
Caren Hildinger, a certified mortgage planning specialist in Temple, agrees with the pendulum analogy.
“We’re getting back to the basics of prudent underwriting,” Ms. Hildinger said. “The guidelines have been so lenient some people were getting mortgages that didn’t need to be getting them. And now the industry has paid for that. The type of business you did a year ago, you can’t do now.”
Mortgage professionals point to three specific changes in home lending guidelines they say are necessary corrections that get back to the basics:
lNo more borrowing with little or no money down
lGood credit scores necessary
lNo more 100 percent financing
Although myriad circumstances can attribute to someone losing their home, Bell County foreclosures suggest the need for more stringent lending requirements. Foreclosures are up 33 percent for the first four months in 2008, compared to the same period last year.
To illustrate the new mortgage mindset - a more conservative approach where saving money for a down payment and high credit scores are rewarded with good deals - Ms. Hildinger, branch manager at Castle & Cooke Mortgage in Temple, points to a recent customer.
A client one year out of bankruptcy wanted to borrow money to buy a house. Because of his credit history, the best deal he could get would probably have been a loan with a high interest rate that might go even higher. The loan candidate elected to wait another year - even though he had to pay rent - allowing his credit rating more time to recover. The client is scheduled to close this month on a loan with “an attractive interest rate.”
“Sometimes it pays to delay gratification with a solid game plan in place,” said Ms. Hildinger. “I can take pride in knowing that he has made a very sound financial decision, which is not likely to put his family back in the same unfortunate circumstances which led to the former bankruptcy.”
Temple-Belton Board of Realtors president Terri Covington said when it comes to buying a home patience is a virtue.
“We are seeing lenders tightening up a little on credit approvals - which isn’t a bad thing. There are buyers who need to wait until they are more financially secure before they commit to purchase a home. Typically, sales fall through whenever clients fail to use a local lender,” Ms. Covington said. “When we receive an ‘approval’ from a local lender, we feel confident we can proceed with that buyer.”
