How Does Wall Street Affect You?

I talked with a mortgage broker friend of mine today to get his thoughts on the current crisis on Wall Street and how it is affecting his customers day to day.  Of course, how his customers are affected directly impacts the real estate industry as most people need a mortgage in order to purchase a home.  He told me that it is now becoming harder for someone with a marginal credit score to obtain a home loan.  The days of 100% financing are over except in the case of some Rural Development loans.  Borrower qualifications have tightened along with loan underwriting guidelines.  Rates are going up, but have not yet reached double digits as they were in the 1980’s.  Stated income loans, popular with the self-employed, are practically nonexistent now.  Adjustable rate mortgages, better known as ARMs, are frozen.  This makes interest rates higher for someone with good credit as the lender can no longer make money as the ARM adjusts.  He has to make his money by giving his good credit risks a higher rate.  If you have good credit and a stable job or secure source of income and need to buy a home due to a job transfer or space requirements it is still a good time to buy.  As my friend said rates are up, but still historically low.  If you are an investor and want to purchase a rental property or want to purchase land to develop in the future now is the time to do it.  The inventory is incredible.