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More money down

JOHN GARDNERGlenwood Springs, CO Colorado

If high housing costs and lack of affordable housing weren’t enough to deter home buyers from attempting to break into Garfield County’s real estate market, qualifying for a home loan may now be the highest hurdle, right out of the gate.With the nation’s housing market in the tank and most of the country in a strong buyer’s market, lenders are tightening the purse strings on who gets qualified nowadays.”Basically what’s happening is the pool is being decreased,” said Bill Dillon, co-owner of Family Home Loans in Glenwood Springs. “The number of people that are qualifying today is shrinking.”A year ago where 50 people would qualify for a certain loan, today maybe only 40 of those same people would qualify for the same loan, Dillon said.”It’s the borrowers that are feeling the affects more than the lenders really,” he said.Lenders may be qualifying fewer buyers but Dillon said that they’re not seeing a decrease in the number of applications. Family Home Loans is a relatively new business to the area and Dillon indicated that he didn’t have enough historical data to get an accurate representation of the market.”Talking to some of the lending account representatives, they are seeing more applications now, but it’s probably people simply trying to hedge their bets,” he said.The thing that is affecting most buyers in Garfield and surrounding counties is the higher interest rates on the loans. Interest rates are hanging around 7 percent, up about half a percent from a year ago. That half percent may not sound like much but on a $500,000 loan, that could change the monthly payment by a substantial amount, Dillon said.”The same home for the same price a year ago compared to now is harder to get a loan for with the higher rate,” Dillon said. “What lenders were willing to get 6 percent return on a loan a year ago, they are now charging a 7 percent return.”A lot of it’s coming down to credit score, more and more, Dillon said. He said that what people were getting qualified for with a credit score of 640 a year ago, now need a 680 for the same loan. And people that were qualifying with a 680 now need a 720 for the same loan.”The lenders are reducing the loan to value ratio,” Dillon said. “Less and less will you be able to find a loan at 100 percent loan to value.”In a 100 percent loan to value deal the lender loans the entire home price to the buyer. These loans were more popular in the past, especially with first-time home buyers who didn’t have a lot of money to put into a down payment on a new home. And while these loans are still available today, they come at a greater price.”Those types of loans are still available,” Dillon said. “But it’s just not attractive anymore and it’s not practical for people. It’s going to mean a much larger monthly payment for the same house because they are going to have a much higher rate.”Lenders today are more likely to lend at an 80 or 90 percent loan to value ratio, Dillon said. What lenders are looking for is people that will have more invested in the home, providing the lenders with a bit more security.”Lenders are looking for the best case scenario,” Dillon said. “You’re going to be less likely to pick up and leave, the more you have personally invested in the property.”Contact John Gardner: 384-9114jgardner@postindependent.comPost Independent, Glenwood Springs, Colorado CO


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