Bridge loans, an invaluable tool when moving to a new home, are becoming less prevalent. With unemployment reaching levels not seen since the 1930's, lenders becoming more strict with the guidelines, and some incomes in decline, more people than ever are not able to qualify for bridge loans.
This is a a millstone around the neck of realtors. When potential home buyers can't carry a bridge loan while they're in the process of selling one home and buying another, they're stuck having to stay in their existing home until they can qualify.
This is a vicious circle: the bad economy is keeping people from buying new homes, and the slow market for home sales is keeping the economy depressed.
It's tempting to suggest that requirements for bridge loans be relaxed so that home sales can be stimulated. The problem with relaxing standards, though, is that we would wind up right back where we started with the collapse of the sub-prime mortgage market, when people who were not qualified for mortgages got them anyway.
It might not be a bad idea for congress to consider a way to guarantee bridge loans if the borrower is within certain limits, and the length of the loan is limited to just a few months.
If we're going to see the housing market really turn, it's going to require that home buyers be able to purchase new homes while they try to sell their existing homes. There's just no other way. This isn't just a problem for mortgage brokers and realtors in Indiana, it's a problem for everyone from California to Maryland.
Tuesday, July 21, 2009
Subscribe to:
Posts (Atom)