Brother, Can You Spare a Trillion Bucks?

You know, a trillion dollars is a lot of money with a lot of zeros in the number – $1,000,000,000,000!  That is probably the minimum that’s going to be needed from the American taxpayer, if the government — our government – get its way. You don’t have to have skills in higher math to figure out that with the bailout of Bear Stearns (remember Bear Stearns?), Fannie Mae and Freddie Mac, AIG and, now, virtually every company that speculated in the mortgage-backed securities business that a trillion bucks may just be the tip of the iceberg.

What, you may ask might this have to do with real estate?

Well, as we all know by now, the real core of the issue is what the financial gurus on Wall Street did with all those sub-prime mortgages.  They re-packaged them and prettied them up so that people actually thought they would be good investments with high returns.  That’s one thing.

Will this current bailout of $700,000,000,000 (that’s just seven hundred billion) help people like you and me who just want to be able to sell or buy a house?  In short, no.

In my conversations with several of my loan officer buddies I have learned that mortgage guidelines are going to become even stricter. This means that the typical, middle class buyer in the MD Suburbs of DC is going to need to run the mortgage gauntlet to be able to prove beyond a shadow of a doubt that they can pay back the mortgage they receive to buy a home.  This will include proof that there is money for a down payment somewhere.

Yes, there are a couple of 100% mortgages still available.  The VA still offers 100% financing. Maryland has a program called CDA that offers 100% financing (with a grant to help with closing costs!) but credit scores have to meet a minimum standard and you’ll need documentation regarding employment and military status (in the case of the VA) and overall ability to repay the mortgage.  It won’t be a walk in the park.

FHA has a great program but as of October 1st you’ll need a minimum of 3.5% of the sales price of the house as a down payment.  For a $350,000 house that’s $12,250.  A lot of people don’t have that in the bank.  And we haven’t touched on closing costs yet!

The bottom line here is that no matter how much the government is trying to dress up this “rescue” effort as a way to free up money in the credit markets so cash will flow into things like home mortgages, it just isn’t going to be that easy.

Do I have more to say about this?  You betcha.  Stay tuned.

About Ken Montville

Ken Montville is a Realtor® and Associate Broker with RE/MAX United Real Estate in the beautiful Maryland Suburbs of Washington, DC. He has been selling nice homes since 1999. Way back in the 20th Century.

When Ken Is not doing the real estate thing he can be found all over social media in places too numerous to mention and he listens to jazz, reads a little (mostly non-fiction), hangs out with the Rotary Club of Parole (Annapolis), MD and can be found blogging at MDSuburbanHomes.com