Concerned questions from a home owner regarding the “credit crisis”

The other day, one of my past clients asked me:

“I was wondering if there are issues that could arise if this credit crisis continues in a downward spiral? The market hasn’t been doing well in the past week with concerns about the “credit crisis”.

Is there any reason for concern that we could have our home loan called in early if our mortgage company gets into trouble? Are there other issues that we should be thinking about if this causes a ripple affect to other areas of the economy?”

 

These are excellent questions and I simply don’t have a precise answer.  We are in historic times and it’s still not clear if what’s happening is a “correction” or “recession”.    It is too soon to tell how long this will last and how it will wind up.   There is a definite ripple effect that is not only impacting our local markets but has also reached Europe and Asia’s markets since they are also invest in the US mortgage backed securities.

As far as how this will impact home owners and mortgages?  It depends on the type of mortgage you currently have and if you plan on retaining your mortgage and/or home.   Here are just a few things to consider:

• If you have an Adjustable Rate Mortgage that is getting ready to adjust in the next 12 months or sooner, I highly recommend that you meet with a Mortgage Professional in order to make sure you’re in the best position to refinance should you plan on staying in your home.   If you’re selling your home prior to your ARM adjusting, you shouldn’t need to refinance.
• If you are selling a home that is in the “jumbo” market; your home may be sitting longer.   With the hike that jumbo rates (loans over $417,000) have recently faced and less products available (no interest only or ARMs); there are fewer buyers who qualify to purchase the “jumbo home”.
• With fewer buyers in the market, it is very probable that home values may begin to slow down the fast pace that we’ve been enjoying lately.   If you have been considering refinancing or obtaining a second mortgage, you should do so soon.  Loan to values (equity) greatly impacts your interest rate and availability of programs.   Declining values will impact your mortgage options.

Now more than ever it’s important that you take care of your credit.  Meet with your Mortgage Professional and have an Annual Review which includes making sure your mortgage is still working for you and that your credit scores are where they need to be.   This is not the time to be sitting back and being casual about your mortgage.