12 Bullet Points That Matter To Every Home Buyer In America

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Let's Start With The Conclusion

If you plan to buy a new home in 2008 or 2009, give a lot of thought to moving up your timeframe. 

Mortgage approvals are about to get more scarce and more expensive for everyone.

The Supporting Evidence From The News

1. FHA is increasing its mortgage insurance premiums and up-front loan fees for a lot of borrowers
2. With IndyMac's demise, other banks should follow and Alt-A loans may go the way of Sub-Prime
3. Fannie and Freddie are in financial crisis again and may be forced to add mandatory loan fees for everyone
4. Banks are doing the unthinkable just to get suspect loans off their books
5. Wall Street is losing its appetite for "guaranteed" mortgage bonds

The Anecdotal Evidence From The Street

1. Lenders have slowed "common sense" exceptions.  Meet the guidelines or else.
2. The new Fannie Mae guidelines are much tougher on high debt ratios
3. Wall Street is scared and rumors are floating about more bank failures
4. The Fed is laying the groundwork for another market intervention.

The Relevant Thoughts From A Guy Who Lives, Eats, And Breathes This Stuff

1. It's an election year so all we're going to hear from now until November is bad news about housing, and bad news about oil prices.  That will weigh on Consumer Confidence and should negatively impact mortgage rates.
2. The purge of the Alt-A mortgage market has been a long time coming and now the window is closing.  Don't get caught watching the paint dry.
3. It doesn't matter how good mortgage rates get if products keep disappearing.

Parting Wisdom

One reason why the markets have been so volatile is because -- about a year ago -- the financial models being used by the banks failed them.  Losses followed and swaths of people got fired, but, in the end, lenders still have to lend -- it's what they do. The show must go on, after all.

So, despite the missing roadmap, the banks have still been trying to make it work.  They're still issuing new loans to mortgage applicants and they're changing their business rules on-the-fly as market conditions warrant.

However, it's dangerous to drive without a roadmap.  Every now and again, one of the mortgage lenders drives right off a cliff.  And each time it happens, everybody else on the road slows down, and that trickles down from Wall Street all the way to Main Street.

Therefore, until the path gets more clear for the banks, life as a mortgage applicant should continue to toughen.  It won't be easier to get a loan in 6 months than it is today so if you plan to buy "sometime soon", maybe "sometime soon" should be upgraded to "sometime sooner".

UPDATE: Listen to a 5-minute radio interview I gave on this post.