Market Update

The Return of the Loan Contingency?

In the East Bay's go-go-market of the last few years, loan approvals happened without a second thought. And, since buyers have to be competitive in that market climate, they often dropped the loan contingency from their offers. Well, the credit market is tightening up--especially with American Home Mortgage and others like them closing their doors--and loans won't be so easy to come by.

I think this means we'll start seeing the return of the loan contingency. Buyers are going to have to cover themselves, as in the past, when it comes to getting their loans funded. Firms like AHM stopped funding new loans last week, and then closed their doors. What happened to buyers who were ready to close escrow last week, but their lender disappeared on them? I hope they had loan contingencies in place.

We'll also start to see a return to conforming loans--aka those loans that conform to federal Fannie Mae and Freddie Mac standards--and fewer and fewer jumbo loans. I also think we might start seeing more seller financing, which could be very interesting. What do you think? Comment below or drop me a line at Msmartt@jps.net.