Credit Crunch

The credit crunch continues.  It seems that now all real estate loans are credit driven.  The better your credit score the lower the interest rate the banks will give you.  If you have a lower score your interest rates are higher.

The logic behind this is the "risk factor."  The lower your credit score the more likely you are to default on the loan.  So, what do they do?  They raise your interest rate and thereby increase your monthly payments and yes increase even further the likelihood of a default.  Go figure!

Many of the lending institutions and also terminating or reducing the maximum loan amount on HELOCs (Home Equity Line of Credit).  It seems that credit scores are partially based on the percentage of money a person has borrowed as compared to the amount of available credit.

I have had a HELOC with a maximum loan amount of $220,000 for the past 3 years.  Without any notice Washington Mutual cut that limit in half.  My credit score was a little over 800 prior to that.  Now it's 792.  I have friends and clients who have had their lines of credit completely closed without notice.

Even with all of this turmoil in the credit markets there is still 100% financing available for lower end homes.  These are FHA loans where the seller can pay the buyers closing costs and "donate" the 3% down payment to a non-profit that turns around and "gives" it to the buyer.

The bottom line does remain the same.  If you have a job and good credit money is still available to buy a home.  Prices are down and now is a good time to buy!

Jim Johnson has lived in Bend Oregon since 1981. Call 541-389-4511 or see his web site http://www.bendoregonrealestateexpert.com .  To see more information on Bend Oregon click on the link below. http://bendoregonrealestateexpert.com/bendoregon.asp

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