Is credit really that tight?

User Forum Topic
Submitted by TheBreeze on November 15, 2008 - 10:01am

I hear all the time on TV how credit is supposedly "tight". Some on this blog also say the same thing. But is it true? Has the credit market really tightened up that much?

I still get credit card offers all the time. Conforming mortgage rates are at 6% and jumbo is only at 7.5%. With FHA, a buyer would only need to put 5% down. Where is this imaginary "tightness" that people speak of? Is there even a single credit-worthy person out there who can't get a loan?

My impression is that the only people who can't get loans now are those who never should have gotten them in the first place. Those people who were almost 100%-guaranteed to default are the only people who now can't get loans. It appears that even most marginally credit-worthy people can still get loans. I would be surprised if credit has gone back to even being as tight as it was in the early 2000s/late '90s.

Would any of us here feel comfortable writing a mortgage at 6% even if the buyer put 20% down? Is that such "tight" credit that the lender is guaranteed to make a profit? I don't think so.

Personally, I wouldn't feel comfortable writing a mortgage at less than a 10% rate. 15% with 30% down would make me feel even better. I just don't see how anyone can call this market tight when morons can still get loans on overpriced houses at a 6% interest rate with only 5% down. Who in their right mind would write such a loan in this market? And yet, the government is still backing such loans. In my opinion, the credit market is nowhere near being "tight" and is still so loose that most mortgages written today will end up being money-losers in the long run.

‹ oops - duplicate. Most subprime lenders weren't subject to federal lending law ›
Not too sure about the
Submitted by peterb on November 15, 2008 - 12:15pm.

Not too sure about the mortgage rates right now. But I've heard it now takes a higher FICO score and more down to get a loan than it did a year ago. But I dont know the details.

I do know that corp debt is getting very expensive. Even AAA debt is getting too expensive for anyone to get. This will ripple out to all of us.

I agree with TheBreeze that
Submitted by patientrenter on November 15, 2008 - 5:14pm.

I agree with TheBreeze that the so-called "tight" credit for home buyers today is laughably loose. I don't care what your credit score is, lending more than 80% of the cost of a home is ridiculously risky in an overpriced and declining market like the one we have in many places today.

If you think house prices might drop as much as another 30%, then that should be the minimum down payment for a loan with a single digit interest rate. Government agencies enabling anything more aggressive than this are throwing away taxpayers' money. Only in incredibly stable markets, over periods of 20-30 years, would a downpayment of 10% make any sense, and then only for enforceable recourse loans to people with excellent credit records buying inexpensive homes.

Absolutely spot-on! Credit is
Submitted by CA renter on November 15, 2008 - 6:06pm.

Absolutely spot-on!

Credit is very loose right now, even if it is somewhat tighter than a couple of years ago. Just because a borrower can't walk in and get a $500K loan -- with a 550 FICO score, no assets and unverified income -- does not mean credit is unavailable.

We've bought a few expensive things in the past couple of months, including a new vehicle (all paid off, but we use credit for the initial purchase), and credit was never a problem.

Agree with you about loan pricing too, BTW. We should be seeing double-digits for medium-risk loans, especially when you consider all the financial turmoil going on right now.

I think they just check to
Submitted by j on November 15, 2008 - 8:57pm.

I think they just check to see if somebody is qualified for a loan now. Remember you could get a loan without a job, down payment, or any assets about a year ago. Of course some standards is tighter than no standards.

Of course your new car was
Submitted by paramount on November 15, 2008 - 11:31pm.

Of course your new car was paid off in a couple of months - this is Piggy Fantasy Island.

I would expect nothing less.

Just bought a car for 0 down
Submitted by tc on November 16, 2008 - 7:49am.

Just bought a car for 0 down with 0% interest for 3 years. Could have paid in full for it. But I like the fact that I can keep my money and let it earn interest for me.

What of income would I need
Submitted by sd_matt on November 16, 2008 - 6:49pm.

What of income would I need to qualify for a VA or FHA loan of $250K? My fico is 760.

If you're in California don't
Submitted by threadkiller on November 16, 2008 - 9:16pm.

If you're in California don't forget about Calvet loans. Just like conventional loans debt/income ratio is right up there with FICO. Thank goodness for my wife's student loans, kept us from buying more than we could afford in the last 5 years. If you are debt free then about 57,000 should do it, that's about 4.4 times income,which means rice and beans. If you want to have a life then 83k/yr if you have no debt should do it. So ultimately you should focus on what you can afford comfortably, not what you qualify for. That has been the most common mistake of the last 5-6 years.

on 97.1 house calls show they
Submitted by kev374 on November 16, 2008 - 11:35pm.

on 97.1 house calls show they were saying financing is available for anyone whos score is 580 and above and can put 3% down. That doesn't seem tight to me.

I don't use credit cards
Submitted by ibjames on November 17, 2008 - 12:19pm.

I don't use credit cards hardly at all.. so I had one notice that my credit card has been canceled due to inactivity, and another threaten to cancel if I didn't use it :shrug:

So now I have to periodically use it so it doesn't get cancelled.. boooo