Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score News > Prices of Vacation Homes Dropped but Lending Standards Remain High

Prices of Vacation Homes Dropped but Lending Standards Remain High

By Sally Maison
Published: Saturday, January 16th, 2010

Creditors appear to be more willing now to refinance second homes, but experts say this is not a sign that they are lowering their standards. The recent lending trend is largely caused by the changes in the housing industry and consumers still have to get better credit scores if they want to qualify for loans or avail of lower interest rates.

Prices of Vacation Homes Dropped but Lending Standards Remain HighJohn Walsh says homebuyers need to remain strong borrowers even if there are more opportunities available at present. Last year, people found it difficult to get homes because of the mortgage crisis. The president of Total Mortgage Services in Milford, Conn., remarked that lenders have not really relaxed their standards. More borrowers are getting second homes simply because the prices of vacation homes have gone down. With lower loan amounts, lenders are more confident that borrowers can pay them back.

Industry specialists note that instead of going down, mortgage lending standards have gone up in the last few months. Fannie Mae and Freddie Mac, the two federal companies which practically dictate the mortgage market, have actually increased requirements for second homes.
Buyers are now required to have at least credit ratings of 660 and down payments of 20 percent. Just one year ago, borrowers are only required to have credit scores of at least 620. Moreover, they only had to pay down 10 percent of the total home price.

Despite the increase in lending requirements, experts note that creditors are now more willing to take chances on second homes. Their cautiousness is largely caused by the flux of new lending rules last year. Ellen Bitton, chief executive of Manhattan’s Park Avenue Mortgage, explains that creditors were afraid of being forced by Freddie Mac and Fannie Mae to buy back the loans if they do not follow the standards for mortgage underwriting that they have outlined.
Ms. Bitton says the market has improved for second-time homebuyers, as more vacation homes have been processed since October.

Also, federal mortgage securers Fannie and Freddie are currently allowing homebuyers to purchase second homes even if they do not meet the 20 percent down payment. Mr. Walsh said people do not need to have 20 percent down payment if they are applying for smaller mortgages on vacation homes and if they have private mortgage insurance.

However, Mr. Walsh warned that getting such insurance is quite difficult and is impossible in places like Michigan, Arizona, Nevada, and California because of their high home foreclosure rates.

Finance advisers suggest getting high credit scores and preparing higher down payment for consumers who want to purchase second-home mortgages at lower rates.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.