The following article is courtesy of Gary Thomas of CCB Mortgage:

Often, first-time homebuyers are faced with a challenge in that their credit scores are not as high as a mortgage lender might need to write them a loan. In the recent years, lenders competed for this segment of business termed the “subprime market”, subprime referring to customers with lower scores than normally acceptable. These mortages offered low or no down payments, and easier qualifying numbers. Experts estimate that 40% of mortgages written last year were of the subprime variety.

The subprime mortgage market has all but collapsed. As a result lenders will once again require down payments, potentially increasing the number of unsold homes and driving down prices on a national level. The sub prime mortgage industry, which lends to consumers with credit issues, along with the “Alt A” lenders comprise almost 40% of the market. Of the top 25 sub prime lenders, only a handful are still operating. If it was true that almost 40% of the past mortgages written over the last two years were from the sub-prime lenders, then we indeed have some problems down the road. A lot of homes suited for first-timers will be sitting on the sidelines looking for a buyer since the tight credit standards have denied credit to lower rated borrowers. Home inventories are going to increase and prices could eventually drop rather dramatically as the cycle feeds on itself.

That’s the national outlook. Now do I believe this will happen in Lancaster? NO! Lancaster county never approached the 40% level. It looks like it was closer to 10% of all loans. So, we can expect the effect to be more muted here. Now, we do have our share of “doom & gloom” for people who borrowed more than they could afford. The counties foreclosure rate will increase by about 10% and sales for 2007 may be down by about 3% if projections prove correct.

I would recommend that anyone that is unsure about their mortgage situation, or want to know if they should be looking at a refinance, or just to check on their credit, have a free mortgage review completed. We will pull your credit and give you a free copy along with a free mortgage review. I can be reached at www.lancastermortgagelender.com or 717-880-7678.

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