The level of risk in the home finance market has led to massive restructuring of loan product guidelines as well as a reduction in products available.
Risk based pricing is clearly the direction that the remaining lenders have moved to. Simply stated, most loans require pay stubs, w-2's and tax returns. Its back to the old way of doing things as "you have to prove you can afford the home you are trying to buy. The riskier your loan, the more you will be paying, if you can even get the loan. When a lender as big as Bank Of America eliminates Alt A programs, it is big news to the industry. An Alt A is a stated income loan, a no ratio loan, or a no doc loan. I am very pleased to say that Countrywide has chosen to continue to provide these types of home loans, which gives us a huge competitive advantage. In a volatile market such as this change occurs very rapidly, and products offered can be eliminated at any time.
To put in simpler terms, I will use an ice cream example, as my wife is a big fan of it.
Imagine that you promised to take your wife out for ice cream. You had been putting it off for awhile and was finally time to take her out. You decided to go to her favorite ice cream store, only to find out that they no longer have the 100 flavors they have always had. She really enjoyed the large selection as she could choose the one that fit her preference at the moment she went there. Even worse, the only flavor that was available was vanilla, with nothing daring or risky to found on the menu. You decide to leave and go to a different ice cream store only to find that they all gone to this all vanilla only format as well. While driving around in vain searching for something more than vanilla, all of the stores decided to go to a cash only system. You could no longer use a credit card and pay later. Even worse, the price went up during the time that you were looking around for what you wanted. At this point, you are merely hoping to be able to get some ice cream. Frustrated, you stop by the atm to get some cash out to buy the vanilla ice cream at the inflated price that you really didn't want when you left your home. Fortunately the atm was located next door to my office at Countrywide Ice Cream. You came in and found that we still had all of the flavors that you wanted to choose from and at a reasonable price. You are happy , relieved, and you tell all of your friends.
(note for my legal friends - there is not really a Countrywide Ice Cream...yet)
If you are considering purchasing a home or refinancing and would to get advice from a local mortgage professional call Ron Wysocarski at 386-562-2651. You can also visit his website Ron At Countrywide.