The Chicago Tribune has an article in its Chicago Homes section today about how difficult it has become to get mortgages.
As we’ve chattered about, the banks are requiring larger downpayments, among other things. Even the rich are having more difficulty getting loans and have to come up with more cash.
This raises questions regarding the new construction condo market (not to mention the re-sale market as well.)
There are 6,000 new units coming on the market in the next 6-months. How many buyers will even qualify for loans?
From the Tribune:
Those with high incomes buying in prime locations are having an easier time getting financing and anyone rejected by one lender can shop for another, advised James Kinney, president of Rubloff Residential Properties.
“If you’re downtown and have good credit, you’ll get a loan,” he said. “Most affected are subprime borrowers, overbuilt suburbs and prices that don’t represent market conditions.”
Meanwhile, lenders often require borrowers to make down payments of 5 percent to 20 percent or more compared to zero percent to 5 percent down payments a year ago.
They ask for credit scores of about 700 out of a possible 850 points, up from about 600, and may limit monthly payments to 28 percent of the buyer’s gross monthly income rather than 33 percent, said Gaby Jury, a Realtor with ERA Jensen Feinstein Realtors LLC in Hinsdale.
Detrice Loyd, 24, had to put down nearly 40 percent, $65,000, on a $169,000 condominium in Hyde Park to secure her mortgage in May. The process was time consuming and “difficult,” said the day-care teacher.
The affluent may be getting more loans, but they’re also jumping through hoops.
With values declining or not appreciating as anticipated, pre-construction buyers of prime luxury housing are finding lenders with outstretched hands at the closing.
For instance, at the One Museum Park high rise in Chicago’s South Loop, “lenders are saying the unit isn’t appraising out at the level we thought and we’d like you to put in another $50,000,” said Jerry Ferstman, a vice president at Forest City Commercial Group who has been part of the development team. “Often, our buyers can do that.”
A skittish lender’s demands for reams of documents surprised Bob Archer, 69, a real estate investor seeking 30 percent financing on a luxury Gold Coast condominium at 30 Chestnut St. for which he was paying 70 percent in cash.
His lender wanted financial statements from his accountant and two investment brokers in addition to two years of tax returns. “It was a given that I’d be able to make the monthly payment,” he said. “It’s so difficult to buy or sell, that’s why the market isn’t moving.”
Buyers jump through hoops for a mortgage [Chicago Tribune, Aug 15, 2008]
