Borrowers hoping the market will return to normal need a reality check. The recent subprime crisis and declining home values are pretty good indicators that the recent market has been anything but normal.
Over the past, home values were over-inflated, lenders were overly generous, and borrowers were borrowing more than they could afford to repay. The results - a epidemic of defaults and declining home values.
This phenomenon, commonly referred to as a "market correction," doesn't mean that the mortgage refinance world is a thing of the past . . . far from it! Homeowners can still get a refinance on their home loans, but qualifying today will dictate they play by a new set of rules. . . or should we say, the old ones!
Lenders have tightened the screws when it comes to borrowers with bad credit. Equity is now the name of the game; without it, a lender is far less likely to touch a borrower with a shaky credit history. Borrowers looking to refinance may even find themselves having to come up with some sort of down payment.
There's a great deal of speculation out there about the future of subprime lending. The subprime market remains a risky, but very profitable product for lenders. Most lenders feel that these loans will resurface again when home values start increasing. But in the meantime, if you're a subprime borrower, you're going to have to sit tight until that day arrives.
In today financial environment, you need to scrutinize a lender just as closely as they scrutinize you. With so many lenders going under because of the housing market crisis, you’ll need to make sure that your lender will be around for the long haul. Do your research and be certain that you're going with an established financial lending institution that has deep pockets and can ride out this market slump.
If this mortgage crisis has taught us anything, it's that a fixed-rate loan is worth its weight in gold - especially because rates are currently at such historic lows. With market values unstable, choosing a fixed-rate loan that guarantees that your rate won't skyrocket when it adjusts will provide you peace of mind.
