Mortgage loans toughest to get in 17 years

Still available, but restrictions much tighter

by Dave Young, News2

February 27, 2008

DENVER (KWGN) — Just a year ago it was easy, too easy in fact to get a home loan. That's a major part of the problem. But there are still good loans out there, if you qualify.

The good news is, real estate markets are local. And Denver's local market is not as bad off as many others right now, because we never had the over inflated home prices experienced in many cities. The bad news, sales here are lagging.

Mainly because as banks tighten up their credit requirements, it's much harder for border line applicants to get loans. "And maybe you shouldn't," said Dr. Jeff Engelstad a Denver University Economics Professor. "I think that this all stemmed from borrowers who didn't really deserve the credit or didn't deserve as a high a loans as they were getting."

"They invented the bad loans, just to get people into homes," said Ed Machado, a Castle Rock Real Estate Broker, "and these bad loans are now coming back to haunt all of us."

As home values continue dropping, and adjustable rate mortgages reset up, a new study shows even people with good credit histories are starting to fall behind on house payments, auto loans and credit cards. That can further weaken the economy and squeeze credit even tighter.

"New home sales are down, existing home sales are down, if new home buyers are finding it harder to get financing then that just complicates the problem," said Engelstad.

Both our experts say things will start to turn around late next year. "There's money out there for people who can justify their income," said Machado. "So it's a good time for people to be buying homes they're buying them now at lower prices, but have we hit the bottom yet? No, in my opinion no, he said. "

If you're looking to buy, lower your expectations. "If I have a family income of $60,000, said Engelstad, "that does not mean I should be buying a $450,000 home. "

The days of getting more house than we can afford are gone for good. But at the same time, interest rates are some of the best they've been in years. And once again buying a home becomes a motivation for people to save money. Instead of using a home as an ATM, for easy money, like so many were doing.