The Coming Credit Crunch – Last Call to Action for Tampa Real Estate

Published by Lance Mohr | Filed under Home Buying Tips, Market Update

Home buyers and investors interested in purchasing Tampa real estate should carefully examine the most recent “Senior Loan Officer Opinion Survey” released by the Federal Reserve last week.
 
While the title of most Federal Reserve reports remain as elusive as their speeches, one thing is certain – credit is positioned to undergo major restrictions….soon. As the saying goes; the devil is in the details. No truer words have been spoken. If you have been sitting on the sidelines waiting for the real estate market to recover before buying then now is the time to act – here is why…

1. Obtaining a mortgage, home equity loan or other credit is going to become much more difficult in the near future. According to the survey;

• Nearly 75 percent of banks have already tightened lending standards for prime mortgages.

• Nearly 85 percent of banks have tightened lending standards for non-traditional mortgages.

• Over 85 percent of banks have either tightened lending standards – or stopped writing – subprime mortgage loans.

• Over 80 percent of banks have tightened lending standards for HELOC’s or Home Equity Lines of Credit. HELOC’s are a favored way to secure down payments on the purchase price of a new home, home renovation or investment property.

2. Lending standards on loans are going to be more restrictive, require larger down payments and cost more. In a nutshell…

• Expect to encounter higher interest rates – higher interest rates will offset any savings on the purchase price of a Tampa condo or other Tampa real estate for years to come.

• Expect to put more money down. Zero down payment loans are quickly becoming a thing of the past as banks demand 5, 10 or even 20 percent down payment.

• Expect to have better credit to qualify for favorable rates. Lenders are requiring better credit than ever to qualify for the best terms and rates – otherwise, expect to pay higher rates and closing costs.

3. Commercial Credit Not Excluded. Those interested in purchasing larger Tampa investment property or income generating real estate are also likely to be severely impacted by the coming credit crunch. According to the same study:

• 80 percent of banks have started to tighten commercial lending standards.

• 70 percent of remaining banks expect to significantly tighten or restrict commercial lending standards and loans in the coming year.

4. Consumer Credit is also drying up. Don’t expect to use credit cards, personal lines of credit or other consumer credit for down payments, renovations or other expenses; banks expect to significantly reduce consumer credit limits and increase interest rates on everything from car loans to credit cards.

The Bottom Line

If you are planning to purchase Tampa real estate, investment properties, Tampa condos or commercial real estate concerns then now is the time to act. Significant restrictions in the availability and cost of credit will dramatically impact your bottom line for years to come.
 

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