Good Loans Still Available Despite Lots of Bank Repo Homes

Consumers can still find good home loans despite tight lending due to large numbers of bank repo homes, according to David Reed, founder of Integrity Home Mortgage and one of the past presidents of the Austin Mortgage Bankers Association.

Reed reiterated that despite negative national news about foreclosures, unemployment and lack of loans, the average American can still find a good home loan. He said that any American who has a job, average credit score and have some money for down payment can get a good home loan.

Reed also said that now is the best time to buy because mortgage rates will not go down further.

He is also advising potential first-time home buyers who have a stable source of income and have good credit not to believe news items about banks implementing very tight screening standards. What has changed, he said, is the reduction of the types of home loans offered.

Reed further explained that the market for home loans is now homogenized – focusing generally on one type of home loan, which is the conventional loan.

Before the housing market collapsed, Reed explained, subprime loans and other alternative loans comprised 40 percent of all home loans. After these types of loans put the entire nation into the worst economic condition since the Great Depression, lenders have eliminated these loans. They no longer offer subprime, alternative documentation or stated loans.

Now banks are going back to the conventional way of lending, requiring prospective home buyers to have a stable job, good credit and money for down payment.

Home loans choices have gone down to only a few – conventional loans requiring compliance to the standards set by Fannie Mae, Freddie Mac, VA, USDA and FHA.

Reed explained that fewer home loan choices will make it easier for homebuyers to compare loan rates, as the home loans are almost the same in structure.

Mortgage rates will likely remain low – between 4 and 5 percent – until the end of the year, Reed said. He explained that mortgage rates need to stay lower to keep attracting investors.

But he warned that prospective homebuyers need to buy now because when the rates go up, they will climb up to the 7 percent range quickly. He also said that jumbo loan rates are now becoming more attractive. Rates for jumbo fixed 30-year home loans are now just above the 5 percent range.

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