“Alt-A is Blowing Up Today”
Yesterday’s routine calls to lenders for properties my sellers have in escrow was anything but routine. “Alt-A is blowing up today,” the loan officer told me, similar to the unraveling of the subprime market five months ago. Fortunately for my seller, the person buying his property has a conforming loan and there are no issues. But this loan officer told me there were three other files on his desk “in panic mode.”
Simply defined, Alt-A loans are regarded as a step or so below prime. These can include stated income loans - recently made out to be the fount of all evil but in truth the only lending option available to many people on commission income - but also could include other types of loans just below the standards for prime.
The impact to buyers is fairly obvious - there are fewer loan options available now than there were a year or so ago. I’m not saying whether this is good or bad. It simply is.
And the impact to sellers should be nearly as clear. In all of my listing presentations, I discuss the availability of financing as one of the factors that determine if/when a home will sell. With the melting of Alt-A, financing isn’t nearly as available as it was and another pool of buyers have been sent to the sidelines. Again, that’s neither good nor bad. It is what it is.
One of the most common questions I am asked, both by my clients and otherwise, is about the lack of showings. People still expect to have at least a showing a day when in reality, a showing a week is about par for the course. Marketing plays an important part in selling a home (price still plays a larger part) but that marketing is less effective when there are increasingly fewer buyers to market to. And that’s where we are, again.
If you are purchasing a home, it’s more important than ever to know the details of your loan - not just the approximate rate and payment but also the type of loan for which you are being pre-qualified. Despite all the tightened standards, there still are some who will pre-qualify anyone only to “discover” late in the process that the loan program they had been banking on no longer exists.
Interview your lenders, focus on more than just the rate, and choose wisely.
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