The media clucking about lower interest rates has brought on a rash of refinances, mostly with folks trying to lower their rates, but some trying to pull equity out of their homes. With unemployment on the rise, the employed are fearful of becoming the unemployed. In light of that, the mindful are taking note of their current financial situation to see what they have, what they need and what they should do.

 

Part of the plan is to tap equity (still available) in the home while they can. This is something I have been so against for so long. “Your home is your castle” or “make sure where your family sleeps at night is a safe haven financially”. Well, now I ask people if they have enough money to last 12-18 months in case they lose a job and are unemployed. If they are in fear of losing a job, now is the time to act. Mortgages take over 30-45 days to process and close now, so you can’t get the money in a week.

 

With unemployment in the rise and home values decreasing, banks are becoming stricter in their guidelines for lending.  A few things they look at with big eyes are:

 

·        Is the home in a neighborhood with good sales?

·        Are values declining?

·        Is the borrower in a recession proof industry?

·        What is continued job probability?

·        What are the reserves available in case of future job loss?

 

With all this to ponder and worry about, it is no wonder the banks are not approving anybody’s mortgages!

Dale Siegel