The Changing Mortgage Market

Over the last decade, many flexible financing solutions have been introduced:

100% mortgages with private mortgage insurance to cover the lender’s risk . . .

80/20 mortgages with a second mortgage covering the 20% down payment . . .

adjustable rate mortgages to provide lower interest rates and payments . . .

interest only mortgages to lower monthly payments even further . . .

step-up mortgages with lower introductory rates . . .

sub-prime mortgages for poor credit or high risk borrowers.

This loosening of lending standards has led to an increase in mortgage delinquencies, and as indicated by the graph above, most of this increase has been with subprime borrowers. However, these recent changes in the mortgage market affect all borrowers:

fewer programs, for example the disappearance (largely) of 80/20 loans . . .

increased standards such as credit scores, cash reserves, debt limits . . .

increased scrutiny in the underwriting process, delaying closings . . .

Understanding these trends in the mortgage market will help you to make more educated decisions about when to buy, and how to fi nance your purchase.