What is the “meltdown’ that I’m reading about in the headlines?

This refers to a culmination of factors that has led to massive tightening in credit standars among lenders. This tightening is due to an excessive number of mortgages that are both delinquent and in default. As a result of tighter credit standards and the devaluation of mortgage-backed securities global investors are shying away from purchasing additional pools of loans,causing over 100 lenders to close and leaving many homebuyers unable to locate financing alternatives.

The pool of potential buyers will shrink as many find it difficult, if not impossible, to obtain mortgage financing. Experts have speculated that the number of potential buyers will contract anywhere from 15% to

30%. Sellers should also be aware that increased foreclosures can depress community values and result in a glut of local inventories, which could further drive down home prices.

Why should a home BUYER be concerned about this?

Buyers need to get pre-approved before entering the market. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it’s taking longer and longer to complete a transaction. What you qualify for today could change tomorrow in this volatile market.What types of loans have been most impacted by credit tightening?

Sub-prime and Alt-A have suffered the greatest setback because these borrowers are at greater risk for defaulting. Sub prime loans are those loans which have typically been taken by borrowers with poor credit. Alt-A type loans are for borrowers that typically have good or excellent credit but are unable or unwilling to provide documentation for income and/orassets.

The National Association of Realtors estimates that home sales nationally will decline by nearly 13% in 2007. Median home prices nationally are projected to fall by 1.2% in 2007. According to the PMI Group, Inc., however, many local markets are experiencing price declines well in excess of that.