Gone are the days of the zero down loan program.  Just last week, Wells Fargo and Lamar Mortgage both announced they are no longer offering a loan with 100% financing.  Rumors in the industry let us know this was coming a few weeks ago.  The mortgage companies are responding to the current sub-prime mortgage mess with an over tightening of standards.  Last year it seemed anyone with a pulse could get a mortgage.  This year you have to show income, stable employment, reserves in the bank and have a credit score over 600.  Once you show proof of all that, and you have at least 3% saved up, your chances of getting approved for a mortgage are good.

Why the change in lending practices?

1. Mortgage Fraud Claims Up 42%

2. Foreclosures Are Still A Problem

Perhaps an over reaction to the current housing problems, mortgage companies have stopped the flow of easy mortgage money.  Unfortunately, it is happening at a time when the country needs easier mortgage money.  Already, struggling with higher food and energy costs, many Americans are holding off on a new home purchase. 

Southeast Texas Real Estate Sales have slowed slightly since last year.  There are home buyers out there right now that can’t buy.  Last year they could have got financing.  This year it ain’t so.

According to the Texas A & M Real Estate Center, Beaumont’s supply of inventory on the market stands at 6.5 months as of Feb. 2008.  This is the highest level of inventory since November 2006.  January and February sales number are off from the record numbers recorded in 2006 and 2007. 

How much of the sales slow down is due to the tighter lending standards? 

Its hard to find any exact numbers but in my real estate practice I work with home buyers everyday.  In the past two months, I’d estimate 25%-35% of the home buyers I’m working with can’t get financing at this time.  Either credit scores are too low or they don’t have the down payment saved up.  Last year, these home buyers could have gotten financing and bought a home.  This year, not so.  One place you can still find 100% financing is on the Internet.  Do a Google search and you’ll get pages of results, but try to find one of those loans is not as easy as it used to be. 

Our economy will rebound at some point.  The lenders will loosen their lending standards at some point.  But right now, where does it leave us?  It leaves us with higher inventory levels and slower sales.  One day, 100% financing will return.  Today, 100% is not an option.