Page 47 - Carol LeBeau

Unintended Consequences
San Diego
Woman The holiday displays will be up in stores any time now and other expenses might affect your ability to qualify when
By Anna M. Smith, RFC

the time comes. These challenging times will pass, but in
signaling that 2008 is in the home stretch. Normally, I’m
the interim, its time to protect yourself, get the facts, and un-
like everyone else at this time of year, shocked and amazed
at the date on the calendar wondering where the time has
gone. This year though, I’m glad that time is flying because
picture.
it also means we’re moving through the housing crisis – even derstand how this credit crisis affects your personal financial
though it feels like we’re standing still. Anna M. Smith is a Registered Financial Consultant with
Pacific Capital Private Client Services. For more information
It has been a year of “unintended consequences”, a phrase contact Anna at anna@sandiegomortgageplanning.com.
being bandied about in the financial print and electronic
media. “The unintended consequences” of giving people too
much credit is that they not only hung them-
selves, but everyone else as well. The “unin-
tended consequences” of restricting credit so
consumers can’t hang themselves is that now
high quality borrowers can’t get a loan either.
The unintended consequence of labeling this a
sub-prime crisis is that it has given many con-
sumers the mistaken assumption that applying
for a mortgage loan is business as usual, if
your credit score is high enough.

Alas, that is not the case. An unintended
consequence of the public’s outrage against San Diego
“liars” loans and “no documentation” loans is Woman
(Surprise!) now you have to prove and docu-
ment more than you’ve ever proved and docu-
mented before. New borrowers who qualify for 47
loans under today’s restrictive lending guide-
lines are very qualified, and barring illness, job
loss, or divorce (the three biggest causes for
bankruptcy, by the way), they will be making
their mortgage payments on time and living
the American Dream, not the American Night-
mare. The bone chilling unintended conse-
quence that isn’t being talked about is how the
credit tightening is going to affect you if you’re
already a homeowner. Here’s the dirty secret
that no one’s talking about: they changed the
game on you. The credit score requirements
are much higher; the savings you are required
to have is higher; the amount of debt you’re
allowed to have is lower – much lower. Most
people realize that a job loss is a deal killer
come refinance time, but buying that car, or
having your hours cut back at work may knock
you out of qualification. Bottom line: even if
you have a couple of years to go on your inter-
est only or adjustable rate loan, it’s time to sit
down with a quality mortgage professional to
determine your debt ratio, look at your credit,
and understand how job changes, job chal-
lenges, new cars, unanticipated health issues
Sep/Oct2008