If it hits 7 or 8 the economy and housing will crash.
Housing market
- Thread starter simply1
- Start date
From Investopedia:
"Hard money loans have terms based mainly on the value of the property being used as collateral, not on the creditworthiness of the borrower"
And
"Lenders spend less time combing through a loan application verifying income and reviewing financial documents....
.
...Hard loan investors aren't as concerned with receiving repayment..."
It’s not like 5% is some historically high rate. The housing market has been “normal” in this interest rate range in the past.
Prices surged under historically low rates, though.
I wonder how many people locked in the low rates and as rates go up, will be less likely to sell keeping inventory low.
As rates continue to go up, people will start looking for adjustable rate mortgages to get any short term edge they can. Seen it a million times. These type of actions could also create or add to a bubble. It really depends on how things play out with rates/home prices (and Inflation).
Tons of questions.
Why wouldn't every mortgage loan be this way? The bank can always get the house back, correct? What's the trade-off for the borrower vs. a conventional loan? Why wouldn't everyone use these loans? Finally, banks do appraisals of houses. Isn't that judging the loan based on the asset itself?
Aren’t hard money loans essentially for wealthy people that don’t use credit to build a credit score and just use cash for everything? My mortgage guy told me that he’s been able to get people these loans without a credit history.
Think thats the bigger issue. Everyone thinks impending crash coming w/ higher rates, but your likely wiping half the available inventory off the market as no one is going to move or upgrade housing in market where they have to pay up 3% versus their mortgage. Cutting a significant amount of supply off market in already tight market.
Be nice if you could purchase a transferable security - 30 yr fixed mortage that you could keep if you moved (subject to appraisals).
Lenders want to make sure they aren’t loaning too much so the borrower doesn’t just take the loan live there, and let the house go back because they owe more than it’s worth.
Lenders now are more concerned about repayment ability. Cash lending basis instead of capital lending. Do you have the cash and inflows to pay your bills? Lenders are in the lending business, not the realtor business, they don’t want the house back.
Honestly 5% is going to get the ball rolling. There will be a lot of people upside-down in a "starter home", just think of how bad it will be in the 325-500k range. So many people are house poor, it won't take much to upset the cart. I live in a mid 80's good size 2 story home and if I listed it today it would be north of $325,000. Families aren't buying homes in my neighborhood, it "too old". This is now a starter home which is just insane to me.
It's not the rate, it's the prices people paid for their homes because of the rate.
The price people pay for their home is dictated by the market, not rates. Assuming lenders are following the rules they should only be lending to people that can afford the home and that includes the interest rate the loan is financed at. They don’t just say “oh well if the interest rates were X you would be able to afford this house so we’ll give you the money”
The problems come when jobs start getting lost, or other necessities become so expensive that people can’t pay anymore. .
Reputational risk can be a ***** too
Lender ABC lends to an old lady who can't make the payments. Then the old woman is evicted and she goes to the local news to say how awful ABC is.
The no income, no asset days need to be a relic of a disastrous past.
In this situation it was a play to try and buy a property and beat out all cash offers. A quick approval based on an estimated home value.
Just a symptom of a market getting a bit aggressive in my humble opinion. We don't want the days of 80-20, 530 FICO, stated income to even remotely come back.
You should have just used the Homestead Act if you were buying a house that long ago, old timer!
Isn't the point that guy was making that a 5% loan of 150k (say 2003) is different than a 5% loan on the 150k house that now costs 300k. There's going to be a group of people priced out by housing price inflation. I don't think his point was related to lender tendency.
If the interest rates are higher, you may have to drop out of the price point of the house you “want”, and move in to a lower price point (or come up with more money). They aren’t “priced out”, they just don’t get to buy something they can’t afford now.
But 150k homes don't really exist in most places
You seriously don't think rates aren't dictating the market?