Category: General

what happens to my mortgage if the housing market crashes

What Happens to My Mortgage If the Housing Market Crashes?

Residents who share homeownership with their banks often wonder what would happen if the housing market were to crash. Would it leave them in debt or without a home? 

Priority Lending LLC includes some of the best mortgage brokers in Tuscon, AZ, willing to offer advice on what happens in these seemingly hopeless times. Also, we’ll explain how to track where the housing market is heading and how to protect your greatest investment.

Do Mortgages Remain the Same During Housing Market Crashes?

Recessions and housing market crashes may cause your house’s value to decrease. However, your set mortgage rates won’t lower, meaning your monthly payments will be higher than your home’s worth. While many may dip into their savings to help pay the steep bills, others may need outside assistance.

What Should I Do if I Can’t Afford Mortgage Payments?

During these hardships, ask your mortgage provider about forbearance, allowing a temporary alternate payment plan to reduce monthly costs. Some lenders suspend payments to prevent foreclosure, but you’ll have to make up the amount later. Also, foreclosure relief deters repossession from backed mortgages during economic hardships.

Even if these aren’t an option, a housing market crash affects an entire region of residents. Therefore, there’s likely a government plan to keep you from wondering, “what happens to my mortgage if the housing market crashes?” As with the pandemic, new government measures offer relief from high payment costs and foreclosure.

Refinancing is a final option in a poor real estate market. By replacing your old mortgage loan with a new one during a recession, you’re opting for lower interest rates that’ll minimize your monthly payments and mortgage costs. However, you must have a good credit score, credit history, steady income, and no outstanding debt. 

What Causes Housing Prices to Rise?

Many options are available to homeowners to keep them from wondering, “what happens to my mortgage if the housing market crashes?” However, most residents prefer to save rather than borrow funds or refinance. If you’re one of them, budget to create an emergency fund before you notice the following signs housing prices are declining during a housing market crash:

  • Rising housing prices cause down payments and mortgage rates to seem unaffordable to many with unwavering wage earnings. 
  • Inflation equals higher interest rates, making loans more expensive.
  • A shortage of homes in a high-demand economy causes higher housing prices.
  • Higher foreclosure activity lowers housing values.

Protection During a Recession Means Choosing the Right Lenders Now!

When disaster strikes, you need lenders that’ll understand your strife and the current state of the economy. While most are reluctant to lower or suspend payments, our sympathetic team has over 25 years of experience helping homebuyers find and keep the perfect home. If you live in Tuscon, AZ, or surrounding areas and want to know, “what happens to my mortgage if the housing market crashes?” ask Priority Lending LLC. We answer your questions, help you work through higher mortgage rates and inflation, and assist with pre-approvals. Call 520-531-1119 for a free consultation today!

what factors affect credit score

What Factors Affect Your Credit Score?

Have you struggled to get the money you need for a home, car, or other necessary expenses? Is a low credit score forcing you to live month-to-month?  Understanding what factors affect credit score changes can help homebuyers and other loan applicants develop better credit scores.

At Priority Lending, LLC, Tucson’s trusted mortgage brokers, we provide opportunities for borrowers, even if they have imperfect credit. We’re sharing these credit-building tips so that hardworking Americans can build their financial future responsibly and increase their chances of qualifying for the loans they need. 

The three credit bureaus, Equifax, Experian, and TransUnion, gather information about borrowers. The Fair Isaac Corporation uses a computer algorithm to calculate a credit score called the FICO score for each borrower. Lenders use credit reports and FICO scores to decide whether to accept an applicant and what terms to offer.

Below are the primary factors affecting your credit score.

Time

Credit rating organizations give more credence to established relationships with credit card companies, so it can take some time to build a solid credit rating. If you do not have an established credit history, applying for new credit cards and paying off balances can increase your credit score over months or years.

Debt-to-Credit Ratio

Knowing what factors affect credit scores can involve understanding some abstract concepts and math. One mathematical concept you have to know is the debt-to-credit ratio.

People in financial trouble often maintain high balances or max out their credit cards because they lack the resources to pay their balances. One metric of credit card debt that credit reporting organizations use is the debt-to-credit ratio or credit utilization ratio. A borrower who has used 100% of their available credit would pose a high risk, while 10% usage would be a positive indicator.

Late Payments

Late payments are a red flag on your credit rating. Make at least the minimum payment on all your credit cards each month to prevent a dip in your credit score.

The Credit Mix

Credit mix means having different types of credit, including installment credit and revolving credit. Installment credit, such as mortgages and car loans, involves borrowing money and paying it back in monthly payments. Revolving credit, including credit card debt, allows borrowers to draw upon a credit line as needed.

A good credit mix is an asset because it demonstrates that the borrower is familiar with the borrowing and repayment process.

New Credit Applications

Recent credit applications can lower your credit rating because they could indicate financial instability.

Get the Loan You Need with Help From Priority Lending, LLC

Speak to a loan officer to better understand what factors affect credit score and loan eligibility. Our experts at Priority Lending, LLC, can help you improve your financial situation to increase your eligibility for loans and help you manage your loan payments.

At Priority Lending, LLC, we know that maintaining a high credit score can be difficult. Call 520-531-1119 to speak with a loan officer about your financial situation or learn how to choose the right type of housing loans and other loan options that can put money in your hands.

Time for a New York-Style Housing Fix

Street signs for W 125 st.

 

Previously, I’ve written about a man who works in our office who lived in New York City back in the late ‘80s and early ‘90s – let me assure you that while that does seem like a very long time ago, it’s not nearly as far back as when the wheel was invented and humankind learned to harness the power of fire. If you’ve been to New York City recently and blissfully walked around Harlem to get chicken and waffles at Sylvia’s on Malcolm X Boulevard between 126th and 127th Streets or stopped in at Keybar on 13th Street between First Avenue and Avenue A to wedge yourself into a cozy corner next to their notable fireplace, you wouldn’t get a sense that these areas were once . . . not as welcoming and glitzy as you now see them. Our office mate has told some fairly interesting stories of living in those and other areas of New York City that give a much different sense.

In the late ‘80s/early ‘90s, no matter how many great things you heard about Sylvia’s food, 127th Street and Malcolm X Boulevard (back then, it was Lenox Avenue) wasn’t a place you popped up to for Sunday brunch – it was an area you didn’t visit unless you had . . . official business. At that same time, between 14th Street to the north and Houston (pronounced HOW-STUN) to the south and east of First Avenue – known as Alphabet City (still is) – that was an area full of very hard-living folks who would sell their right arm (or yours, it didn’t matter to them) to get their next fix, and I’m not talking about an appliance repair. The Lower East Side (of which Alphabet City is a part) was full of tenements and government projects that tucked itself into the shadows of the bright and shiny skyscrapers that surrounded it – A LOT of bad stuff happened in the darkness of those shadows.

Anytime he tells one of his New York stories, they all seem to end with him saying, “Back when I lived there, I NEVER would have thought many of those areas would be safe to go back to and show my family.” And whenever he says that, he gets a bit of a far-off gaze fixed on his face: one that could mean he’s momentarily transported himself back to an earlier time (or he needs to get back on his medications).

Between the late ‘80s and today, New York City has continued to grow, population wise. Sure, the city has improved and become safer, but there were many years before those improvements and that safety came about, and the city’s population STILL grew. There was something that kept them there and attracted more people.

Recently, I read an article that said an end to the housing shortage is in sight. Granted, the article went on to say that it’s still probably about eighteen months out, but it does cite a number of reasons for being optimistic. There are many of you who have been saddened or depressed because you feel you’ve been priced out of the market as a result of this housing shortage. Well, now is not the time to give up. In fact, NOW is the time to formulate, implement, and execute a plan that will enable you to seize the moment when the right house at the right price becomes available. There are many things that you’ll want to look at like your current spending habits versus your current saving habits (or lack thereof) and how much debt you currently hold (credit card balances, car payments, student loans, etc.), just to name two. If you wait until the housing shortage abates before you work on a game plan, you’ll be even further behind the eight ball.

If you’re a real estate agent, may I suggest seeking out and marketing to folks who need to do a little work in anticipation of the housing shortage letting up? You’ll fill a great pipeline that will be a constant source of leads as conditions continue to improve inventory availability. If you’re someone who feels like you’ve been forced on the sidelines, get with a lender TODAY and have them help you formulate that plan because when you’ve found the right house at the right price, you’re going to want to have enough for a down payment – relying on the option of selling your right arm isn’t wise.

Size Can Be Deceiving

On a recent episode of a podcast I follow (I won’t tell you which one in case it would lower your opinion of me – if that’s even possible), the host was chatting away with the show’s supporting cast, and he made a comment about cars that struck me: the Ferrari that Tom Selleck’s character (and mustache) drove in the television series Magnum, P.I. takes longer to go from 0-60 than the latest model of the Mini Cooper S. They thought he was pulling their legs, so one of his staff Googled the info while the host nattered on about some other things and quickly came back with confirmation that the 1983 Ferrari 308 GT goes from 0-60 mph in 6.9 seconds while the 2017 Mini Cooper S can do it in 5.3 seconds. Get out of town!

The host of this podcast is a huge car aficionado (although that’s not the theme of his podcast), so he obviously knows his stuff. However, I’d be willing to bet if you walked up to random people on the street and asked them to place a small wager on which of the two cars would win in a drag race (1,000 feet), more than the majority would place their money on the sleek and sexy Ferrari 308 GT. It looks like it eats Mini Coopers for breakfast, right?

With that little lesson planted firmly in your minds, I’m sure you can see where I’m going with this, but since I love to state the obvious, I’ll go ahead and say it. Isn’t that EXACTLY what so many people do when it comes time to purchase a house: they let their preconceived notions guide them in their decision-making process, and quite often, that costs them money (and/or a great deal of time). I can hear some of you now, though, protesting, “Not me! I do a lot of research myself and make sure I know all my options before I make a big decision like a mortgage.” I’m not looking to pick a fight, but I’m going to call bull on that for most people.

The reality is that the “research” most people conduct covers one subject, and one subject only: can I afford to buy a house? Now, that’s the most fundamental subject you SHOULD research, and one that you should have down cold before you borrow a large chunk of money over a long period of time. And once that research is complete, you toddle off to find a company that will loan you that money. All done, right?

A mortgage lender worth a hoot (yes, I said “hoot”) isn’t going to let you walk into her office and start applying for a mortgage. What do you mean? Isn’t it sort of hard for a lender to make any money if he’s keeping borrowers from applying for a mortgage? Calm down, I’m getting to that. The hoot-worthy (you’re going to start using that term, I know it) loan originator SHOULD ask a few questions like what are your short-term and long-term goals with this property, and how do those goals play into your other goals with your family, career, etc. The answers to those questions should prompt new questions that start off with “Have you considered . . . ?” As an example, a little over a year ago, we had a young single guy come to us, and one of our LOs (all of our LOs are hoot-worthy, of course) asked those questions. Because of those questions, the young man went from his preconceived notion of a single-family residence to purchasing a duplex. He lived in the duplex for a year, rented out the other side, had the tenants basically paying his mortgage the whole time, and has now moved out (while keeping the duplex as a rental – both sides of it) and purchased a single-family residence for himself. All of this happened because we asked some questions and listened.

A duplex, of course, isn’t nearly as glamorous as a house, just as a Mini Cooper S isn’t going to turn as many heads as a Ferrari 308 GT. However, when you’ve TRULY done your research (assisted by someone worth a hoot), you’re going to reach your real estate goal a lot faster by picking the right vehicle (and you can still sport the ‘80s mustache regardless of what you choose).

From the Jersey Shore: an Olympic Lesson

statue of Olympic symbol 

There’s an old saying: “A bird in the hand is worth two in the bush.” Personally, if I’m being honest, I believe the bird in the hand is worth a lot more than the two in the bush because, let’s be honest, we have no idea what those birds are doing in the bush and whether they’ve been taking care of themselves (working out and eating a healthy diet v. binge watching “Jersey Shore” and eating gluten). I’ll just add this to the old saying: “But one that’s been plucked, roasted, and served up on a silver platter is worth the most.”

There’s an old saying: “A bird in the hand is worth two in the bush.” Personally, if I’m being honest, I believe the bird in the hand is worth a lot more than the two in the bush because, let’s be honest, we have no idea what those birds are doing in the bush and whether they’ve been taking care of themselves (working out and eating a healthy diet v. binge watching “Jersey Shore” and eating gluten). I’ll just add this to the old saying: “But one that’s been plucked, roasted, and served up on a silver platter is worth the most.”

When submitting an offer on a house, there are generally three types of offers:
1. Based on a pre-qualification (two in the bush)
2. Cash (bird in the hand)
3. Based on a qualified approval (plucked, roasted, and served)
Let me describe how the seller sees each type of offer (using “Jersey Shore” as my backdrop):
1. Based on a pre-qualification: the buyer is basically saying, “C’mon. You can trust me. I’m good for it.”
2. Cash: the buyer is saying, “Tree hunnerd is too high, you know. I got two-fiddy right heah, right now. Let’s doooo this!”
3. Based on a qualified approval: “Here’s a cashier’s check for your asking price.”

Allow me explain and define a Qualified Approval. Underwriting a home loan is made up of two major parts: the home and the borrower(s). Most people overestimate the amount of information needed regarding the “home” portion. In reality, all that’s required is Title Work, an Appraisal, an Inspection, and a Contract – very minimal but very important. However, those are all things that have to be done with limited involvement from the borrower.

The “borrower” portion can be complicated, taking Underwriters down a road full of twists and turns, which translates into time. We are required to verify current income, job history, credit scores, any negative credit history, rent history, large deposits, and the list goes on. By doing all of this up front to obtain a Qualified Approval, we can issue you an “all clear” to show the potential Seller that you, the Borrower, are fully underwritten and ready to purchase their home – this gets your home loan 85% complete before you even start looking for and finding the house of your dreams.

Going the Qualified Approval route is like Usain Bolt’s journey to his first gold medal. The actual race that won him that medal sped by in mere seconds, but he spent THOUSANDS OF HOURS preparing for the moment he would have his chance to run THAT ONE RACE. It paid off, right? THAT is the essence of a Qualified Approval. Getting a pre-qualification is like starting the race with your eye on the prize and being held up in the middle while the officials decide if you’re qualified – and you’re forced to watch someone else claim what you’ve wanted for so long. At that point, the only bird you’re eating is crow. Ouch!

Contact Priority Lending

Priority Lending, LLC

8035 N Oracle Rd
Tucson, AZ 85704

520-531-1119

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