Mortgage companies have been in the news lately: American Home Mortgage filed for bankruptcy protection, Countrywide is drawing on its lines of credit, and other companies are struggling as their creditors stop pouring money into the system.

This has significant implications for mortgage companies and for the economy as a whole, but what does it mean for individuals buying or selling houses? It seems to mean that the days of easy credit are over. People with poor credit are no longer able to get no money down loans at low rates. No document loans where you state your income but don’t have to prove it are becoming rare again.

If you are a buyer, or will be in the near future, it’s a good time to watch your credit. If your score is low, start working on it. “MyFico” is a great place to start. It lets you check your score and run scenarios to see how they would affect your score. For example, you can see which would help more, paying off the credit card, or paying it down in conjunction with your student loans. It’s also a good time to start saving. There will still be 100% financing options, but having a few percent of the purchase price you can use as a down payment or for closing costs could make the difference between getting the loan and house you want or looking in a different price bracket.

The “credit crunch” impacts sellers as well. Because there will be fewer qualified buyers, it will increase competition for them. Proper pricing, staging, and marketing of your home will become increasingly necessary. You or your agent will also need to check buyer financing to be sure the sale will go through. Sellers who accept a pre-qualification letter at face value without even a phone call may regret it when the program a buyer was approved for three months ago is no longer available and the house they thought was sold comes back on the market.

Has the mortgage shake up affected you? Please share your stories, and advice to others in the comments.

Leave a Reply

Your email address will not be published. Required fields are marked *